Registration No. 2-34393
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /__/
Post-Effective Amendment No. 84 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 67 /X/
(Check appropriate box or boxes.)
JANUS INVESTMENT FUND
(Exact Name of Registrant as Specified in Charter)
100 Fillmore Street, Denver, Colorado 80206-4928
Address of Principal Executive Offices (Zip Code)
Registrant's Telephone No., including Area Code: 303-333-3863
Thomas A. Early - 100 Fillmore Street, Denver, Colorado 80206-4928
(Name and Address of Agent for Service)
Approximate Date of Proposed Offering: February 17, 1998
It is proposed that this filing will become effective (check appropriate line):
X immediately upon filing pursuant to paragraph (b) of Rule 485.
___ on (date) pursuant to paragraph (b) of Rule 485.
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
___ on (date) pursuant to paragraph (a)(1) of Rule 485.
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following line:
___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
JANUS INVESTMENT FUND
Cross Reference Sheet
Between the Prospectuses and Statements of
Additional Information and Form N-1A Item
FORM N-1A ITEM CAPTION IN PROSPECTUS
PART A
1. Cover Page Cover Page
2. Synopsis Cover Page; Fund(s) at a Glance
(Combined Income, Combined Equity and
Venture Prospectuses only); Expense
Information
3. Condensed Financial Financial Highlights; Understanding the
Information Financial Highlights (not included in
Money Market Funds - Institutional
Shares Prospectus or Money Market Funds
- Service Shares Prospectus);
Performance Terms (Combined Income,
Combined Equity and Venture Prospectuses
only); Performance (Money Market Fund -
Institutional Shares and Service Shares
Prospectuses only)
4. General Description of Fund(s) at a Glance (Combined Income,
Registrant Combined Equity and Venture Prospectuses
only); The Fund(s) in Detail (Combined
Income, Combined Equity and Venture
Prospectuses only); Investment
Objectives and Policies (Combined Income
and Combined Equity Prospectuses only);
Investment Objective and Types of
Investments (Venture Prospectus only)
and Investment Objectives, Policies and
Techniques (Money Market Fund -
Institutional Shares and Service Shares
Prospectuses only); General Portfolio
Policies (Combined Income, Combined
Equity and Venture Prospectuses only);
Common Investment Policies (Money Market
Fund - Institutional Shares and Service
Shares Prospectuses only); Additional
Risk Factors (not included in Money
Market Fund -
<PAGE>
Institutional Shares Prospectus and
Money Market Fund - Service Shares
Prospectus); Appendix A - Glossary of
Investment Terms (Combined Income,
Combined Equity and Venture Prospectuses
only); Appendix B - Explanation of
Rating Categories (Combined Income
Prospectus only)
5. Management of the Fund Management of the Fund(s) (Combined
Income, Combined Equity and Venture
Prospectuses only); Investment Adviser
and Administrator (Money Market Fund -
Institutional Shares, Service Shares and
Combined Income Prospectuses only)
5A. Management's Discussion of Not Applicable
of Fund Performance
6. Capital Stock and Other Distributions and Taxes; Shareholder's
Securities Manual (Combined Income, Combined
Equity, and Venture Prospectuses only);
Shareholder's Guide (Money Market Funds
- Institutional Shares and Service
Shares Prospectuses only)
7. Purchase of Securities Being Shareholder's Manual (Combined Income,
Offered Combined Equity, and Venture
Prospectuses only); Shareholder's Guide
(Money Market Funds - Institutional
Shares and Service Shares Prospectuses
only)
8. Redemption or Repurchase Shareholder's Manual (Combined Income,
Combined Equity, and Venture
prospectuses only); Shareholder's Guide
(Money Market Funds - Institutional
Shares and Service Shares Prospectuses
only)
9. Pending Legal Proceedings Not Applicable
<PAGE>
FORM N-1A ITEM CAPTION IN STATEMENT OF
ADDITIONAL INFORMATION
PART B
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Miscellaneous Information
History
13. Investment Objectives and Investment Policies, Restrictions and
Policies Techniques (Combined Equity and Income
and Venture Statements of Additional
Information only); Investment Policies
and Restrictions (Money Market Funds
Statements of Additional Information
only); Types of Securities and
Investment Techniques; Appendix A -
Description of Securities Ratings (Money
Market Funds Statements of Additional
Information only); Appendix B -
Description of Municipal Securities
(Money Market Funds Statements of
Additional Information only); Appendix A
- Explanation of Rating Categories
(Combined Equity and Income and Venture
Statements of Additional Information
only)
14. Management of the Fund Investment Adviser (Combined Equity and
Income and Venture Statements of
Additional Information only); Investment
Adviser and Administrator (Money Market
Funds Statements of Additional
Information only); Officers and Trustees
15. Control Persons and Principal Principal Shareholders
Holders of Securities
16. Investment Advisory and Investment Adviser (Combined Equity and
Other Services Income and Venture Statements of
Additional Information only); Investment
Adviser and Administrator (Money Market
Funds Statements of Additional
Information only); Custodian, Transfer
Agent and Certain Affiliations;
Portfolio Transactions and Brokerage;
Officers and Trustees; Miscellaneous
Information
<PAGE>
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices
18. Capital Stock and Other Purchase of Shares; Redemption of
Securities Shares; Miscellaneous Information
19. Purchase, Redemption and Purchase of Shares; Redemption of
Pricing of Securities Being Shares; Shareholder Accounts
Offered
20. Tax Status Income Dividends, Capital Gains
Distributions and Tax Status (Combined
Equity and Income and Venture Statements
of Additional Information only);
Dividends and Tax Status (Money Market
Funds Statements of Additional
Information only)
21. Underwriters Custodian, Transfer Agent and Certain
Affiliations
22. Calculation of Performance Performance Information (Combined Equity
Data and Income and Venture Statements of
Additional Information only);
Performance Data (Money Market Funds
Statements of Additional Information
only)
23. Financial Statements Financial Statements
<PAGE>
JANUS INVESTMENT FUND
JANUS EQUITY FUNDS
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713
http://www.Janus.com
FEBRUARY 17, 1998
This Prospectus describes eleven mutual funds that emphasize growth of capital
or a combination of growth and income (the "Funds"). Janus Capital Corporation
("Janus Capital") serves as investment adviser to each Fund. Janus Capital has
been in the investment advisory business for over 27 years and currently manages
approximately $70 billion in assets.
Each Fund is a series of Janus Investment Fund (the "Trust"). The Trust is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains information about the
Funds that you should consider before investing. Please read it carefully and
keep it for future reference.
Additional information about the Funds is contained in a Statement of Additional
Information ("SAI") filed with the SEC. The SAI dated February 17, 1998, is
incorporated by reference into this Prospectus. For a copy of the SAI, write or
call the Funds at the address or phone number listed above. The SEC maintains a
Web site located at http://www.sec.gov that contains the SAI, material
incorporated by reference, and other information regarding the Funds.
THE FUNDS' SHARES ARE NOT BANK DEPOSITS, ARE NOT ENDORSED OR GUARANTEED BY ANY
BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
FUNDS AT A GLANCE
Brief description of each Fund............... 2
EXPENSE INFORMATION
Each Fund's annual operating expenses........ 6
Financial Highlights - a summary of financial
data....................................... 7
THE FUNDS IN DETAIL
Investment Objectives and Policies........... 16
General Portfolio Policies................... 23
Additional Risk Factors...................... 25
SHAREHOLDER'S MANUAL
Minimum Investments.......................... 29
Types of Account Ownership................... 29
How to Open Your Janus Account............... 31
How to Purchase Shares....................... 31
How to Exchange Shares....................... 33
How to Redeem Shares......................... 34
Shareholder Services and Account Policies.... 36
MANAGEMENT OF THE FUNDS
Investment Adviser and Investment
Personnel................................. 39
Personal Investing........................... 41
Management Expenses.......................... 41
Portfolio Transactions....................... 42
Other Service Providers...................... 42
Other Information............................ 42
DISTRIBUTIONS AND TAXES
Distributions................................ 43
Taxes........................................ 45
PERFORMANCE TERMS
An Explanation of Performance Terms.......... 45
APPENDIX A
Glossary of Investment Terms................. 47
</TABLE>
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 1
<PAGE>
FUNDS AT A GLANCE
This section is designed to provide you with a brief overview of the Funds and
their investment emphasis. A more detailed discussion of the Funds' investment
objectives and policies begins on page 16.
All Janus funds are no-load investments. This means you may purchase and sell
shares in any of our mutual funds without incurring any sales charges. If you
enroll in our low minimum initial investment program, you can open your account
for as little as $500 and a $100 subsequent purchase per month. Otherwise, the
minimum initial investment is $2,500 ($500 minimum for Individual Retirement
Accounts). For complete information on how to purchase, exchange and sell
shares, please see the Shareholder's Manual beginning on page 29.
GROWTH FUNDS
THE JANUS GROWTH FUNDS ARE DESIGNED FOR LONG-TERM INVESTORS WHO SEEK GROWTH OF
CAPITAL AND WHO CAN TOLERATE THE GREATER RISKS ASSOCIATED WITH COMMON STOCK
INVESTMENTS.
DOMESTIC GROWTH FUNDS
JANUS FUND
Fund Focus: A diversified fund that seeks long-term growth of capital by
investing primarily in common stocks, with an emphasis on companies with larger
market capitalizations.
Fund Inception: February 1970
Fund Manager: James P. Craig, III
Assistant Fund Managers: David C. Decker
Blaine P. Rollins
JANUS ENTERPRISE FUND
Fund Focus: A nondiversified fund that seeks long-term growth of capital by
investing primarily in common stocks, with an emphasis on securities issued by
medium-sized companies.
Fund Inception: September 1992
Fund Manager: James P. Goff
JANUS MERCURY FUND
Fund Focus: A diversified fund that seeks long-term growth of capital by
investing primarily in common stocks of companies of any size.
Fund Inception: May 1993
Fund Manager: Warren B. Lammert
2 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
JANUS OLYMPUS FUND
Fund Focus: A nondiversified fund that seeks long-term growth of capital by
investing primarily in common stocks of issuers of any size.
Fund Inception: December 1995
Fund Manager: Claire Young
JANUS SPECIAL SITUATIONS FUND
Fund Focus: A nondiversified fund that seeks capital appreciation by investing
primarily in common stocks that its portfolio manager believes have been
overlooked or undervalued by other investors.
Fund Inception: December 1996
Fund Manager: David C. Decker
JANUS TWENTY FUND
Fund Focus: A nondiversified fund that seeks long-term growth of capital by
normally concentrating its investments in a core position of 20-30 common
stocks.
Fund Inception: April 1985
Fund Manager: Scott W. Schoelzel
INTERNATIONAL/GLOBAL GROWTH FUNDS
JANUS WORLDWIDE FUND
Fund Focus: A diversified fund that seeks long-term growth of capital by
investing primarily in common stocks of foreign and domestic issuers.
Fund Inception: May 1991
Fund Manager: Helen Young Hayes
Assistant Fund Manager: Laurence J. Chang
JANUS OVERSEAS FUND
Fund Focus: A diversified fund that seeks long-term growth of capital by
investing primarily in common stocks of foreign companies.
Fund Inception: May 1994
Fund Manager: Helen Young Hayes
Assistant Fund Manager: Laurence J. Chang
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 3
<PAGE>
COMBINATION FUNDS
THE JANUS COMBINATION FUNDS ARE DESIGNED FOR INVESTORS WHO PRIMARILY SEEK GROWTH
OF CAPITAL WITH VARYING DEGREE OF EMPHASIS ON INCOME. THESE FUNDS ARE NOT
DESIGNED FOR INVESTORS WHO DESIRE A CONSISTENT LEVEL OF INCOME.
JANUS BALANCED FUND
Fund Focus: A diversified fund that seeks long-term growth of capital, balanced
by current income. The Fund normally invests 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its assets in
securities selected primarily for their income potential.
Fund Inception: September 1992
Fund Manager: Blaine P. Rollins
JANUS EQUITY INCOME FUND
Fund Focus: A diversified fund that seeks current income and long-term growth of
capital by investing primarily in income-producing equity securities.
Fund Inception: June 1996
Fund Manager: Blaine P. Rollins
JANUS GROWTH AND INCOME FUND
Fund Focus: A diversified fund that seeks long-term growth of capital with a
limited emphasis on income. Although the Fund normally invests at least 25% of
its assets in securities that the portfolio manager believes have income
potential, it emphasizes equity securities selected for their growth potential.
Fund Inception: May 1991
Fund Manager: David J. Corkins
4 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
EXPENSE INFORMATION
The following tables and example are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Shareholder Transaction Expenses are fees charged
directly to your individual account when you buy, sell or exchange shares. The
table below shows that you pay no such fees. Annual Fund Operating Expenses are
paid out of each Fund's assets and include fees for portfolio management,
maintenance of shareholder accounts, shareholder servicing, accounting and other
services. Expenses may vary among the Funds for a number of reasons, including
Fund size, differences in management fees, average shareholder account size, the
frequency of dividend payments, and the extent of foreign investments which
entail greater transaction costs.
SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)
<TABLE>
<S> <C>
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested
dividends None
Deferred sales charges on redemptions None
Redemption fee* None
Exchange fee None
</TABLE>
* There is an $8 service fee for redemptions by wire.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 5
<PAGE>
ANNUAL OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL FUND
FEE EXPENSES OPERATING EXPENSES
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Fund 0.65% 0.22% 0.87%
Janus Enterprise Fund 0.72% 0.35% 1.07%
Janus Mercury Fund 0.67% 0.31% 0.98%
Janus Olympus Fund 0.71% 0.33% 1.04%
Janus Special Situations Fund 0.74% 0.43%(2) 1.17%
Janus Twenty Fund 0.66% 0.27% 0.93%
Janus Worldwide Fund 0.65% 0.31% 0.96%
Janus Overseas Fund 0.66% 0.36% 1.02%
Janus Balanced Fund 0.74% 0.36% 1.10%
Janus Equity Income Fund 0.75% 0.62% 1.37%
Janus Growth and Income Fund 0.67% 0.30% 0.97%
</TABLE>
- --------------------------------------------------------------------------------
(1) Management Fees reflect a reduced fee schedule effective July 1, 1997. The
management fee for each Fund reflects the new rate applied to net assets as
of October 31, 1997. Other expenses are based on expenses before expense
offset arrangements for the fiscal year or period ended October 31, 1997.
(2) Based on expenses incurred during the initial fiscal period.
EXAMPLE
Assume you invest $1,000, the Funds return 5% annually and each Fund's expense
ratio remains as listed above. The example below shows the operating expenses
that you would indirectly bear as an investor in the Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Fund $ 9 $28 $48 $107
Janus Enterprise Fund $11 $34 $59 $131
Janus Mercury Fund $10 $31 $54 $120
Janus Olympus Fund $11 $33 $57 $127
Janus Special Situations Fund $12 $37 $64 $142
Janus Twenty Fund $ 9 $30 $51 $114
Janus Worldwide Fund $10 $31 $53 $118
Janus Overseas Fund $10 $32 $56 $125
Janus Balanced Fund $11 $35 $61 $134
Janus Equity Income Fund $14 $43 $75 $165
Janus Growth and Income Fund $10 $31 $54 $119
</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.
6 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
FINANCIAL HIGHLIGHTS
Unless otherwise noted, the information below is for fiscal periods ending on
October 31st of each year. The accounting firm of Price Waterhouse LLP has
audited the Funds' financial statements beginning with the year ended October
31, 1990. Their report is included in the Funds' Annual Reports, which are
incorporated by reference into the SAI. A DETAILED EXPLANATION OF THE FINANCIAL
HIGHLIGHTS CAN BE FOUND ON PAGE 15.
<TABLE>
<CAPTION>
JANUS FUND
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $26.65 $23.37 $19.62 $20.81 $18.86
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.15 0.31 0.16 0.17 0.26
3. Net gains or (losses) on securities (both
realized and unrealized) 5.69 4.23 3.99 (0.03) 2.88
- ----------------------------------------------------------------------------------------------
4. Total from investment operations 5.84 4.54 4.15 0.14 3.14
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.21) (0.13) (0.01) (0.39) (0.29)
6. Distributions (from capital gains) (2.92) (1.13) (0.39) (0.94) (0.90)
- ----------------------------------------------------------------------------------------------
7. Total distributions (3.13) (1.26) (0.40) (1.33) (1.19)
- ----------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $29.36 $26.65 $23.37 $19.62 $20.81
- ----------------------------------------------------------------------------------------------
9. Total return 24.18% 20.31% 21.62% 0.75% 17.41%
- ----------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $19,029 $15,313 $11,963 $9,647 $9,098
11. Average net assets for the period (in
millions) $17,515 $13,753 $10,560 $9,339 $7,336
12. Ratio of gross expenses to average net
assets 0.87% 0.86% 0.87% N/A N/A
13. Ratio of net expenses to average net assets 0.86% 0.85% 0.86% 0.91% 0.92%
14. Ratio of net investment income to average
net assets 0.85% 0.91% 1.25% 1.12% 1.55%
15. Portfolio turnover rate 132% 104% 118% 139% 127%
16. Average commission rate $.0500 $.0558 N/A N/A N/A
- ----------------------------------------------------------------------------------------------
</TABLE>
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 7
<PAGE>
<TABLE>
<CAPTION>
JANUS FUND
(CONTINUED) 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $18.27 $13.25 $16.36 $12.11 $12.39
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.23 0.25 0.25 0.22 0.60
3. Net gains or (losses) on securities (both
realized and unrealized) 1.46 5.09 (0.67) 4.59 1.05
- -------------------------------------------------------------------------------------------
4. Total from investment operations 1.69 5.34 (0.42) 4.81 1.65
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.19) (0.31) (0.19) (0.56) (0.32)
6. Distributions (from capital gains) (0.91) (0.01) (2.50) -- (1.61)
- -------------------------------------------------------------------------------------------
7. Total distributions (1.10) (0.32) (2.69) (0.56) (1.93)
- -------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $18.86 $18.27 $13.25 $16.36 $12.11
- -------------------------------------------------------------------------------------------
9. Total return 9.35% 40.95% (3.68%) 41.67% 15.83%
- -------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $4,989 $2,598 $1,049 $673 $391
11. Average net assets for the period (in
millions) $3,871 $1,785 $930 $487 $382
12. Ratio of gross expenses to average net
assets N/A N/A N/A N/A N/A
13. Ratio of net expenses to average net assets 0.97% 0.98% 1.02% 0.92% 0.98%
14. Ratio of net investment income to average
net assets 1.54% 1.77% 2.11% 1.68% 4.99%
15. Portfolio turnover rate 153% 132% 307% 205% 175%
16. Average commission rate N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ENTERPRISE FUND
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $31.19 $27.14 $24.43 $21.87 $17.09 $15.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (loss) -- -- 0.52 (0.06) 0.04 --
3. Net gains or (losses) on securities
(both realized and unrealized) 0.95 5.85 3.09 3.18 4.76 2.09
- ----------------------------------------------------------------------------------------------
4. Total from investment operations 0.95 5.85 3.61 3.12 4.80 2.09
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) -- -- (0.52) (0.02) (0.02) --
6. Distributions (from capital gains) (1.28) (1.80) (0.38) (0.54) -- --
- ----------------------------------------------------------------------------------------------
7. Total distributions (1.28) (1.80) (0.90) (0.56) (0.02) --
- ----------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $30.86 $31.19 $27.14 $24.43 $21.87 $17.09
- ----------------------------------------------------------------------------------------------
9. Total return* 3.31% 22.43% 15.46% 14.56% 28.09% 13.93%
- ----------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $552 $732 $459 $370 $239 $8
11. Average net assets for the period (in
millions) $614 $596 $408 $270 $188 $2
12. Ratio of gross expenses to average
net assets** 1.07% 1.14% 1.26% N/A N/A N/A
13. Ratio of net expenses to average net
assets** 1.04% 1.12% 1.23% 1.25% 1.36% 2.50%
14. Ratio of net investment income/(loss)
to average net assets** (0.61%) (0.78%) 0.02% (0.32%) 0.14% (0.81%)
15. Portfolio turnover rate** 111% 93% 194% 193% 201% 53%
16. Average commission rate $.0360 $.0333 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from September 1, 1992 (inception) to October 31, 1992.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
8 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
JANUS MERCURY FUND
1997 1996 1995 1994 1993(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $18.20 $17.38 $14.12 $11.70 $10.00
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.01) 0.14 0.16 0.02 (0.01)
3. Net gains or (losses) on securities
(both realized and unrealized) 2.82 2.74 3.37 2.40 1.71
- ---------------------------------------------------------------------------------------------
4. Total from investment operations 2.81 2.88 3.53 2.42 1.70
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.08) -- (0.16) -- --
6. Distributions (from capital gains) (2.28) (2.06) (0.11) -- --
- ---------------------------------------------------------------------------------------------
7. Total distributions (2.36) (2.06) (0.27) -- --
- ---------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $18.65 $18.20 $17.38 $14.12 $11.70
- ---------------------------------------------------------------------------------------------
9. Total return* 17.07% 18.18% 25.53% 20.68% 17.00%
- ---------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $1,971 $2,002 $1,521 $596 $113
11. Average net assets for the period (in
millions) $2,046 $1,839 $1,116 $258 $67
12. Ratio of gross expenses to average net
assets** 0.98% 1.02% 1.14% N/A N/A
13. Ratio of net expenses to average net
assets** 0.96% 1.00% 1.12% 1.33% 1.75%
14. Ratio of net investment income/(loss) to
average net assets** 0.21% 0.45% 0.50% 0.25% (0.40%)
15. Portfolio turnover rate** 157% 177% 201% 283% 151%
16. Average commission rate $.0441 $.0383 N/A N/A N/A
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from May 3, 1993 (inception) to October 31, 1993.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS OLYMPUS FUND
1997 1996(1)
<S> <C> <C>
- ------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $14.86 $12.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (loss) 0.04 0.13
3. Net gains or (losses) on securities (both realized and
unrealized) 3.64 2.73
- ------------------------------------------------------------------------------------
4. Total from investment operations 3.68 2.86
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.13) --
6. Distributions (from capital gains) -- --
- ------------------------------------------------------------------------------------
7. Total distributions (0.13) --
- ------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $18.41 $14.86
- ------------------------------------------------------------------------------------
9. Total return* 24.98% 23.83%
- ------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $616 $432
11. Average net assets for the period (in millions) $517 $276
12. Ratio of gross expenses to average net assets** 1.06% 1.17%
13. Ratio of net expenses to average net assets** 1.03% 1.15%
14. Ratio of net investment income/(loss) to average net
assets** 0.26% 1.64%
15. Portfolio turnover rate** 244% 303%
16. Average commission rate $.0496 $.0336
- ------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from December 29, 1995 (inception) to October 31, 1996.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 9
<PAGE>
<TABLE>
<CAPTION>
JANUS SPECIAL SITUATIONS FUND
1997(1)
<S> <C>
- ----------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income --
3. Net gains or (losses) on securities (both realized
and unrealized) 4.08
- ----------------------------------------------------------------------------------------
4. Total from investment operations 4.08
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) --
6. Distributions (from capital gains) --
- ----------------------------------------------------------------------------------------
7. Total distributions --
- ----------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $14.08
- ----------------------------------------------------------------------------------------
9. Total return* 40.80%
- ----------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $334
11. Average net assets for the period (in millions) $168
12. Ratio of gross expenses to average net assets** 1.20%
13. Ratio of net expenses to average net assets** 1.18%
14. Ratio of net investment income to average net
assets** (0.08%)
15. Portfolio turnover rate** 146%
16. Average commission rate $.0417
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from December 31, 1996 (inception) to October 31, 1997.
* Total return is not annualized.
** Annualized.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS TWENTY FUND
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $31.90 $30.12 $24.24 $25.85 $22.75 $22.17
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.09) 0.37 0.01 0.16 0.17 0.09
3. Net gains or (losses) on securities
(both realized and unrealized) 8.85 6.68 5.94 (1.07) 3.31 0.49
- -------------------------------------------------------------------------------------------------
4. Total from investment operations 8.76 7.05 5.95 (0.91) 3.48 0.58
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.18) -- (0.07) (0.25) (0.18) --
6. Distributions (from capital gains) (5.32) (5.27) -- (0.45) (0.20) --
- -------------------------------------------------------------------------------------------------
7. Total distributions (5.50) (5.27) (0.07) (0.70) (0.38) --
- -------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $35.16 $31.90 $30.12 $24.24 $25.85 $22.75
- -------------------------------------------------------------------------------------------------
9. Total return* 31.65% 27.59% 24.67% (3.52%) 15.39% 2.62%
- -------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $5,871 $3,937 $2,996 $2,743 $3,749 $2,434
11. Average net assets for the period (in
millions) $4,990 $3,386 $2,716 $3,051 $3,546 $2,221
12. Ratio of gross expenses to average net
assets** 0.93% 0.93% 1.00% N/A N/A N/A
13. Ratio of net expenses to average net
assets** 0.91% 0.92% 0.99% 1.02% 1.05% 1.12%
14. Ratio of net investment income to
average net assets** 0.33% 0.67% 0.62% 0.57% 0.87% 1.27%
15. Portfolio turnover rate** 123% 137% 147% 102% 99% 79%
16. Average commission rate $.0567 $.0571 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from June 1, 1992 to October 31, 1992.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
10 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
JANUS TWENTY FUND
(CONTINUED) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $18.88 $16.01 $13.05 $9.66 $13.69
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.11 0.16 0.05 0.46 0.42
3. Net gains or (losses) on securities (both
realized and unrealized) 3.62 2.90 3.35 3.73 (2.86)
- --------------------------------------------------------------------------------------------------
4. Total from investment operations 3.73 3.06 3.40 4.19 (2.44)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.02) (0.19) (0.02) (0.80) (0.41)
6. Distributions (from capital gains) (0.42) -- (0.42) -- (1.18)
- --------------------------------------------------------------------------------------------------
7. Total distributions (0.44) (0.19) (0.44) (0.80) (1.59)
- --------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $22.17 $18.88 $16.01 $13.05 $9.66
- --------------------------------------------------------------------------------------------------
9. Total return* 19.60% 19.43% 26.36% 45.89% (17.13%)
- --------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $2,081 $556 $175 $20 $13
11. Average net assets for the period (in
millions) $1,188 $294 $64 $10 $16
12. Ratio of gross expenses to average net
assets** N/A N/A N/A N/A N/A
13. Ratio of net expenses to average net assets** 1.01% 1.07% 1.32% 1.88% 1.70%
14. Ratio of net investment income to average net
assets** 1.08% 1.30% 1.28% 0.68% 3.35%
15. Portfolio turnover rate** 83% 163% 228% 220% 317%
16. Average commission rate N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal year ended on May 31st of each year.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS WORLDWIDE FUND
1997 1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $34.60 $27.65 $27.00 $24.16 $18.95 $17.45 $15.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
2. Net investment income (0.08) 0.49 0.81 0.15 0.14 0.16 --
3. Net gains or (losses) on
securities (both realized and
unrealized) 7.73 7.79 1.39 3.34 5.29 1.39 2.45
- ----------------------------------------------------------------------------------------------------
4. Total from investment operations 7.65 8.28 2.20 3.49 5.43 1.55 2.45
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.15) (0.26) (0.54) (0.27) (0.22) -- --
6. Distributions (from capital
gains) (2.05) (1.07) (1.01) (0.38) -- (0.05) --
- ----------------------------------------------------------------------------------------------------
7. Total distributions (2.20) (1.33) (1.55) (0.65) (0.22) (0.05) --
- ----------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $40.05 $34.60 $27.65 $27.00 $24.16 $18.95 $17.45
- ----------------------------------------------------------------------------------------------------
9. Total return* 23.34% 31.00% 8.89% 14.76% 28.79% 9.20% 16.00%
- ----------------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $10,358 $4,467 $1,804 $1,587 $755 $161 $18
11. Average net assets for the
period (in millions) $7,784 $2,953 $1,622 $1,244 $379 $80 $7
12. Ratio of gross expenses to
average net assets** 0.97% 1.02% 1.24% N/A N/A N/A N/A
13. Ratio of net expenses to average
net assets** 0.95% 1.01% 1.23% 1.12% 1.32% 1.73% 2.50%
14. Ratio of net investment income
to average net assets** 0.65% 0.73% 0.99% 0.42% 0.92% 1.74% 0.02%
15. Portfolio turnover rate** 79% 80% 142% 158% 124% 147% 40%
16. Average commission rate $.0561 $.0311 N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from May 15, 1991 (inception) to October 31, 1991.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 11
<PAGE>
<TABLE>
<CAPTION>
JANUS OVERSEAS FUND
1997 1996 1995 1994(1)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $14.81 $11.58 $10.36 $10.00
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (loss) 0.04 0.10 0.12 (0.02)
3. Net gains or (losses) on securities (both realized
and unrealized) 3.39 3.34 1.10 0.38
- -------------------------------------------------------------------------------------------
4. Total from investment operations 3.43 3.44 1.22 0.36
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.04) (0.11) -- --
6. Distributions (from capital gains) (0.26) (0.10) -- --
- -------------------------------------------------------------------------------------------
7. Total distributions (0.30) (0.21) -- --
- -------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $17.94 $14.81 $11.58 $10.36
- -------------------------------------------------------------------------------------------
9. Total return* 23.56% 30.19% 11.78% 3.60%
- -------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $3,205 $773 $111 $64
11. Average net assets for the period (in millions) $2,093 $335 $78 $37
12. Ratio of gross expenses to average net assets** 1.03% 1.26% 1.76% N/A
13. Ratio of net expenses to average net assets** 1.01% 1.23% 1.73% 2.16%
14. Ratio of net investment income/(loss) to average
net assets** 0.81% 0.73% 0.36% (0.64%)
15. Portfolio turnover rate** 72% 71% 188% 181%
16. Average commission rate $.0329 $.0234 N/A N/A
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from May 2, 1994 (inception) to October 31, 1994.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS BALANCED FUND
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $15.20 $13.72 $12.17 $12.23 $10.64 $10.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.36 0.33 0.61 0.27 0.19 --
3. Net gains or (losses) on securities
(both realized and unrealized) 2.88 2.22 1.52 (0.09) 1.56 0.64
- --------------------------------------------------------------------------------------------------
4. Total from investment operations 3.24 2.55 2.13 0.18 1.75 0.64
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.36) (0.26) (0.58) (0.24) (0.16) --
6. Distributions (from capital gains) (1.35) (0.81) -- -- -- --
- --------------------------------------------------------------------------------------------------
7. Total distributions (1.71) (1.07) (0.58) (0.24) (0.16) --
- --------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $16.73 $15.20 $13.72 $12.17 $12.23 $10.64
- --------------------------------------------------------------------------------------------------
9. Total return* 23.38% 19.39% 18.26% 1.51% 16.54% 6.40%
- --------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $360 $207 $125 $94 $73 $2
11. Average net assets for the period (in
millions) $283 $159 $107 $86 $44 $1
12. Ratio of gross expenses to average net
assets** 1.12% 1.23% 1.35% N/A N/A N/A
13. Ratio of net expenses to average net
assets** 1.10% 1.21% 1.32% 1.42% 1.70% 2.50%
14. Ratio of net investment income to
average net assets** 2.63% 2.35% 2.52% 2.28% 2.15% (0.12%)
15. Portfolio turnover rate** 139% 151% 185% 167% 131% 130%
16. Average commission rate $.0468 $.0428 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from September 1, 1992 (inception) to October 31, 1992.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
12 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
JANUS EQUITY INCOME FUND
1997 1996(1)
<S> <C> <C>
- --------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $11.29 $10.00
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.09 0.07
3. Net gains or (losses) on securities (both realized and
unrealized) 3.11 1.25
- --------------------------------------------------------------------------------------
4. Total from investment operations 3.20 1.32
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.12) (0.03)
6. Distributions (from capital gains) (0.39) --
- --------------------------------------------------------------------------------------
7. Total distributions (0.51) (0.03)
- --------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $13.98 $11.29
- --------------------------------------------------------------------------------------
9. Total return* 29.46% 13.20%
- --------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $74 $30
11. Average net assets for the period (in millions) $46 $21
12. Ratio of gross expenses to average net assets** 1.48% 1.79%
13. Ratio of net expenses to average net assets** 1.45% 1.71%
14. Ratio of net investment income to average net assets** 0.62% 3.09%
15. Portfolio turnover rate** 180% 325%
16. Average commission rate $.0437 $.0350
- --------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from June 28, 1996 (inception) to October 31, 1996.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 13
<PAGE>
<TABLE>
<CAPTION>
JANUS GROWTH AND INCOME FUND
1997 1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $20.05 $18.13 $14.69 $15.24 $12.95 $12.13 $10.00
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.01 0.16 0.11 0.19 0.14 0.17 0.02
3. Net gains or (losses) on securities
(both realized and unrealized) 6.98 4.01 3.43 (0.31) 2.29 0.80 2.13
- ------------------------------------------------------------------------------------------------------
4. Total from investment operations 6.99 4.17 3.54 (0.12) 2.43 0.97 2.15
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.11) (0.08) (0.10) (0.10) (0.14) (0.15) (0.02)
6. Distributions (from capital gains) (1.86) (2.17) -- (0.33) -- -- --
- ------------------------------------------------------------------------------------------------------
7. Total distributions (1.97) (2.25) (0.10) (0.43) (0.14) (0.15) (0.02)
- ------------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $25.07 $20.05 $18.13 $14.69 $15.24 $12.95 $12.13
- ------------------------------------------------------------------------------------------------------
9. Total return* 37.78% 25.56% 24.20% (0.76%) 18.81% 7.98% 21.50%
- ------------------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $1,889 $1,033 $583 $490 $519 $244 $56
11. Average net assets for the period
(in millions) $1,416 $773 $498 $500 $404 $157 $21
12. Ratio of gross expenses to average
net assets** 0.98% 1.05% 1.19% N/A N/A N/A N/A
13. Ratio of net expenses to average
net assets** 0.96% 1.03% 1.17% 1.22% 1.28% 1.52% 2.33%
14. Ratio of net investment income to
average net assets** 0.30% 0.70% 1.11% 1.26% 1.13% 1.61% 0.76%
15. Portfolio turnover rate** 127% 153% 195% 123% 138% 120% 14%
16. Average commission rate $.0588 $.0520 N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from May 15, 1991 (inception) to October 31, 1991.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
14 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
UNDERSTANDING THE
FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights tables. The tables contain important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Funds' Annual
Reports contain additional information about each Fund's performance, including
a comparison to an appropriate securities index. For a copy of your Fund's
Annual Report, call 1-800-525-8983.
NET ASSET VALUE ("NAV") is the value of a single share of a Fund. It is computed
by adding the value of all of a Fund's investments and other assets, subtracting
any liabilities and dividing the result by the number of shares outstanding. The
difference between line 1 and line 8 in the Financial Highlights tables
represents the change in value of a share of a Fund over the fiscal period, but
not its total return.
NET INVESTMENT INCOME is the per share amount of dividends and interest income
earned on securities held by a Fund, less Fund expenses. DIVIDENDS (FROM NET
INVESTMENT INCOME) are the per share amount that a Fund paid from net investment
income.
NET GAINS OR (LOSSES) ON SECURITIES is the per share increase or decrease in
value of the securities a Fund holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. DISTRIBUTIONS (FROM CAPITAL GAINS) are the
per share amount that a Fund paid from net realized gains.
TOTAL RETURN is the percentage increase or decrease in the value of an
investment over a stated period of time. Total return 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.
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS is the total of a Fund's operating
expenses before expense offset arrangements divided by its average net assets
for the stated period. The Funds were not required to disclose the ratio of
gross expenses to average net assets prior to 1995. RATIO OF NET EXPENSES TO
AVERAGE NET ASSETS reflects reductions in a Fund's expenses through the use of
brokerage commissions and uninvested cash balances earning interest or balance
credits.
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS is a Fund's net investment
income divided by its average net assets for the stated period.
PORTFOLIO TURNOVER RATE is a measure of the amount of a Fund's buying and
selling activity. It is computed by dividing total purchases or sales, whichever
is less, by the average monthly market value of a Fund's portfolio securities.
AVERAGE COMMISSION RATE is the total of a Fund's agency commissions paid on
equity securities trades divided by the number of shares purchased and sold.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 15
<PAGE>
THE FUNDS IN DETAIL
This section takes a closer look at the Funds' investment objectives, policies
and the securities in which they invest. Policies that are noted as
"fundamental" cannot be changed without a shareholder vote. All other policies,
including each Fund's investment objective, are not fundamental and may be
changed by the Funds' Trustees without a shareholder vote. You will be notified
of any material changes.
You should carefully consider your own investment goals, time horizon (the
amount of time you plan to hold your shares of a Fund) and risk tolerance before
investing in a Fund. If there is a material change in a Fund's objective or
policies, you should consider whether that Fund remains an appropriate
investment for you. There is no guarantee that any Fund will meet its investment
objective.
You should also carefully review the "Additional Risk Factors" section of this
Prospectus for a more detailed discussion of the risks associated with certain
investment techniques. Appendix A includes more detailed descriptions of
investment terms used throughout this Prospectus.
- --------------------------------------------------------------------------------
GROWTH FUNDS
<TABLE>
<S> <C>
Investment Objective:............................... Growth of Capital
Primary Holdings:................................... Common Stocks
Shareholder's Investment Horizon:................... Long-Term
</TABLE>
- --------------------------------------------------------------------------------
DOMESTIC GROWTH FUNDS
JANUS FUND
The investment objective of this Fund is long-term growth of capital in a manner
consistent with the preservation of capital. It is a diversified fund that
pursues its objective by investing primarily in common stocks of issuers of any
size. Janus Fund was first offered to the public in 1970 and has the largest
asset base of the Funds. This Fund generally invests in larger, more established
issuers.
JANUS ENTERPRISE FUND
The investment objective of this Fund is long-term growth of capital. It is a
nondiversified fund that pursues its objective by normally investing at least
50% of its equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall within the
range of companies in the S&P MidCap 400 Index (the "MidCap Index"). Companies
whose capitalization falls outside this range after the Fund's initial purchase
continue to be considered medium-sized companies for the purpose of this policy.
As of December 31, 1997, the MidCap Index included companies with
capitalizations between approximately $213 million and $13.7 billion. The range
of the MidCap Index is expected to change on a regular basis. Subject to the
above policy, the Fund may also invest in smaller or larger issuers.
16 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
JANUS MERCURY FUND
The investment objective of this Fund is long-term growth of capital. It is a
diversified fund that pursues its objective by investing primarily in common
stocks of issuers of any size, which may include larger well-established issuers
and/or smaller emerging growth companies.
JANUS OLYMPUS FUND
The investment objective of this Fund is long-term growth of capital. It is a
nondiversified fund that pursues its objective by investing primarily in common
stocks of issuers of any size, which may include larger well-established issuers
and/or smaller emerging growth companies.
JANUS SPECIAL SITUATIONS FUND
The investment objective of this Fund is capital appreciation. It is a
nondiversified fund that pursues its objective by investing primarily in common
stocks of domestic and foreign issuers. The Fund seeks investments in issuers
that its portfolio manager believes have been overlooked or undervalued by other
investors in connection with a significant change or development affecting the
issuer's business ("special situations"). The Fund places particular emphasis on
issuers that have, or that the portfolio manager believes will have, higher free
cash flows. Although the Fund emphasizes these types of companies, it may invest
in other companies that the portfolio manager believes have the potential for
significant capital appreciation.
JANUS TWENTY FUND
The investment objective of this Fund is long-term growth of capital. It is a
nondiversified fund that pursues its objective by normally concentrating its
investments in a core position of 20-30 common stocks.
INTERNATIONAL/GLOBAL GROWTH FUNDS
JANUS WORLDWIDE FUND
The investment objective of this Fund is long-term growth of capital in a manner
consistent with the preservation of capital. It is a diversified fund that
pursues its objective primarily through investments in common stocks of foreign
and domestic issuers. The Fund has the flexibility to invest on a worldwide
basis in companies and other organizations of any size, regardless of country of
organization or place of principal business activity. Janus Worldwide Fund
normally invests in issuers from at least five different countries, including
the United States. The Fund may at times invest in fewer than five countries or
even a single country.
JANUS OVERSEAS FUND
The investment objective of this Fund is long-term growth of capital. It is a
diversified fund that pursues its objective primarily through investments in
common stocks of issuers located outside the United States. The Fund has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. The Fund normally invests at least 65% of its total assets in
securities of issuers from at least five different countries,
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 17
<PAGE>
excluding the United States. Although the Fund intends to invest substantially
all of its assets in issuers located outside the United States, it may at times
invest in U.S. issuers and it may at times invest all of its assets in fewer
than five countries or even a single country.
GROWTH FUNDS - TYPES OF INVESTMENTS
The Growth Funds invest primarily in common stocks of foreign and domestic
companies. However, the percentage of each Fund's assets invested in common
stocks will vary and each Fund may at times hold substantial positions in cash
equivalents or interest bearing securities. See "General Portfolio Policies" on
page 23. Each Fund may invest to a lesser degree in other types of securities
including preferred stock, warrants, convertible securities and debt securities
when its portfolio manager perceives an opportunity for capital growth from such
securities or to receive a return on idle cash. The Funds may purchase
securities on a when-issued, delayed delivery or forward commitment basis. The
Funds may invest up to 25% of their assets in mortgage- and asset-backed
securities, up to 10% of their assets in zero coupon, pay-in-kind and step
coupon securities, and without limit in indexed/structured securities. No Fund
will invest 35% or more of its assets in high-yield/high-risk securities. Each
of the Growth Funds may use futures, options and other derivatives for hedging
purposes or for non-hedging purposes such as seeking to enhance return. See
"Additional Risk Factors" on pages 25-28 for a discussion of the risks
associated with derivatives.
Although the International/Global Growth Funds are committed to foreign
investing, all of the Growth Funds may invest without limit in foreign equity
and debt securities. The Funds may invest directly in foreign securities
denominated in a foreign currency and not publicly traded in the United States.
Other ways of investing in foreign securities include depositary receipts or
shares, and passive foreign investment companies. See "Additional Risk Factors"
on pages 25-28 for a discussion of the risks associated with foreign investing.
Although Janus Special Situations Fund emphasizes investments in "special
situations," each of the Growth Funds may invest in such issuers from time to
time. A special situation arises when, in the opinion of a Fund's portfolio
manager, the securities of a particular issuer will be recognized and appreciate
in value due to a specific development with respect to that issuer. Investments
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. Special situations are discussed in more detail in the questions
below.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE JANUS GROWTH FUNDS.
Q: HOW ARE COMMON STOCKS SELECTED?
A: Each of the Growth Funds invests substantially all of its assets in common
stocks to the extent its portfolio manager believes that the relevant market
environment favors profitable investing in those securities. Portfolio managers
generally take a "bottom up" approach to building their portfolios. In other
words, they seek to identify
18 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
individual companies with earnings growth potential that may not be recognized
by the market at large. Although themes may emerge in any Fund, securities are
generally selected without regard to any defined industry sector or other
similarly defined selection procedure. Realization of income is not a
significant investment consideration for the Growth Funds. Any income realized
on the Growth Funds' investments will be incidental to their objectives.
Q: ARE THE SAME CRITERIA USED
TO SELECT FOREIGN SECURITIES?
A: Generally, yes. Portfolio managers seek companies that meet their selection
criteria regardless of country of organization or place of principal business
activity. Foreign securities are generally selected on a stock-by-stock basis
without regard to any defined allocation among countries or geographic regions.
However, certain factors such as expected levels of inflation, government
policies influencing business conditions, the outlook for currency
relationships, and prospects for economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign
securities. See "Additional Risk Factors" on pages 25-28.
Q: WHAT IS A "SPECIAL SITUATION"?
A: A special situation arises when a portfolio manager believes that the
securities of an issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Special situations may include
significant changes in a company's allocation of its existing capital, a
restructuring of assets, or a redirection of free cash flows. For example,
issuers undergoing significant capital changes may include companies involved in
spin-offs, sales of divisions, mergers or acquisitions, companies emerging from
bankruptcy, or companies initiating large changes in their debt to equity ratio.
Companies that are redirecting cash flows may be reducing debt, repurchasing
shares or paying dividends. Special situations may also result from (i)
significant changes in industry structure through regulatory developments or
shifts in competition; (ii) a new or improved product, service, operation or
technological advance; (iii) changes in senior management; or (iv) significant
changes in cost structure. As noted above, Janus Special Situations Fund
emphasizes this type of investment.
Q: WHAT IS THE MAIN RISK OF INVESTING
IN A GROWTH FUND?
A: Since the Growth Funds usually invest heavily in common stocks, the
fundamental risk is that the value of the stocks a Fund holds might decrease.
Stock values may fluctuate in response to the activities of an individual
company or in response to general market and/or economic conditions.
Historically, common stocks have provided greater long-term returns and have
entailed greater short-term risks than other investment choices. Smaller or
newer issuers are more likely to realize more substantial growth as well as
suffer more significant losses than larger or more established issuers.
Investments in such companies can be both more volatile and more speculative.
See "Additional Risk Factors" on pages 25-28.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 19
<PAGE>
Q: WHAT IS MEANT BY
"MARKET CAPITALIZATION"?
A: Market capitalization is the most commonly used measure of the size and
value of a company. It is computed by multiplying the current market price of a
share of the company's stock by the total number of its shares outstanding. As
noted previously, market capitalization is an important investment criteria for
Janus Enterprise Fund. Although the other Growth Funds offered by this
Prospectus do not emphasize companies of any particular size, Funds with a
larger asset base (e.g., Janus Fund) are more likely to invest in larger, more
established issuers.
Q: HOW DOES A DIVERSIFIED FUND
DIFFER FROM A NONDIVERSIFIED FUND?
A: Diversification is a means of reducing risk by investing a fund's assets in
a broad range of stocks or other securities. A "nondiversified" fund has the
ability to take larger positions in a smaller number of issuers. Because the
appreciation or depreciation of a single stock may have a greater impact on the
share price of a nondiversified fund, it can be expected to fluctuate more than
a comparable diversified fund. Janus Enterprise Fund, Janus Olympus Fund, Janus
Special Situations Fund, and Janus Twenty Fund are nondiversified funds. See
"General Portfolio Policies" on page 23.
Q: HOW DO THE GROWTH FUNDS
TRY TO REDUCE RISK?
A: Diversification of a Fund's assets reduces the effect of any single holding
on its overall portfolio value. A Fund may also use futures, options and other
derivative instruments to protect its portfolio from movements in securities
prices and interest rates. The Funds may use a variety of currency hedging
techniques, including forward currency contracts, to manage exchange rate risk.
See "Additional Risk Factors" on pages 25-28. In addition, to the extent that a
Fund holds a larger cash position, it might not participate in market declines
to the same extent as if the Fund remained more fully invested in common stocks.
20 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- --------------------------------------------------------------------------------
COMBINATION FUNDS
<TABLE>
<S> <C>
Investment Objective:........ Growth of Capital; Some Emphasis on Income
Primary Holdings:............ Common Stocks and Income-Producing Securities
Shareholder's Investment
Horizon:................... Long-Term
</TABLE>
- --------------------------------------------------------------------------------
JANUS BALANCED FUND
The investment objective of this Fund is long-term capital growth, consistent
with preservation of capital and balanced by current income. It is a diversified
fund that, under normal circumstances, pursues its objective by investing 40-60%
of its assets in securities selected primarily for their growth potential and
40-60% of its assets in securities selected primarily for their income
potential. This Fund normally invests at least 25% of its assets in fixed-income
senior securities, which include debt securities and preferred stocks.
JANUS EQUITY INCOME FUND
The investment objective of this Fund is current income and long-term growth of
capital. It is a diversified fund that pursues its objective by normally
investing at least 65% of its invested assets in income-producing equity
securities. Equity securities include common stocks, preferred stocks, warrants
and securities convertible into common or preferred stocks. Growth potential is
a significant investment consideration and the Fund may hold securities selected
solely for their growth potential.
JANUS GROWTH AND INCOME FUND
The investment objective of this Fund is long-term capital growth and current
income. It is a diversified fund that, under normal circumstances, pursues its
objective by investing up to 75% of its assets in equity securities selected
primarily for their growth potential and at least 25% of its assets in
securities that the portfolio manager believes have income potential. The Fund
normally emphasizes the growth component. However, in unusual circumstances
(such as those described under "Cash Position" on page 23), this Fund may reduce
the growth component of its portfolio to 25% of its assets.
COMBINATION FUNDS - TYPES OF INVESTMENTS
All of the Combination Funds may invest in a combination of common stocks,
preferred stocks, convertible securities, debt securities and other fixed-income
securities. The Combination Funds may invest in the types of investments
previously described under "Growth Funds - Types of Investments" on page 18.
Although each of the Combination Funds places some emphasis on the income
objective, investors should keep in mind that the Combination Funds are not
designed to produce a consistent level of income.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 21
<PAGE>
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE JANUS COMBINATION FUNDS.
Q: HOW DO THE COMBINATION FUNDS
DIFFER FROM EACH OTHER?
A: Janus Growth and Income Fund places a greater emphasis on aggressive growth
stocks and may derive a greater portion of its income from dividend-paying
common stocks. Because of these factors, its share price can be expected to
fluctuate more than the other Combination Funds. Janus Equity Income Fund
emphasizes investments in dividend-paying common stocks and other equity
securities characterized by relatively greater price stability, and thus may be
expected to be less volatile than Janus Growth and Income Fund, as discussed in
more detail below. Janus Balanced Fund places a greater emphasis on the income
component of its portfolio and invests to a greater degree in debt securities
and preferred stock. As a result it is the least volatile of the Combination
Funds.
Q: HOW DOES JANUS EQUITY INCOME
FUND TRY TO LIMIT PORTFOLIO VOLATILITY?
A: Janus Equity Income Fund seeks to provide a lower level of volatility than
the stock market at large, as measured by the S&P 500. The lower volatility
sought by this Fund is expected to result primarily from investments in
dividend-paying common stocks and other equity securities characterized by
relatively greater price stability. The greater price stability sought by Janus
Equity Income Fund may be characteristic of companies that generate above
average free cash flows. A company may use free cash flows for a number of
purposes including commencing or increasing dividend payments, repurchasing its
own stock or retiring outstanding debt. The portfolio manager also considers
growth potential in selecting this Fund's securities and may hold securities
selected solely for their growth potential.
Q: HOW ARE EQUITY SECURITIES SELECTED?
A: The growth component of Janus Balanced Fund and Janus Growth and Income
Fund is expected to consist primarily of common stocks and Janus Equity Income
Fund invests substantially all of its assets in common stocks. The selection
criteria for common stocks are described on page 18. Because income is a part of
the investment objective of the Combination Funds, a portfolio manager may
consider dividend-paying characteristics to a greater degree in selecting equity
securities for these Funds. The Combination Funds may also find opportunities
for capital growth from debt securities because of anticipated changes in
interest rates, credit standing, currency relationships or other factors.
Q: HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME
COMPONENT OF JANUS BALANCED FUND'S AND JANUS GROWTH AND INCOME FUND'S
PORTFOLIOS?
A: Janus Balanced Fund and Janus Growth and Income Fund shift assets between
the growth and income components of their portfolios based on the portfolio
22 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
managers' analysis of relevant market, financial and economic conditions. If a
portfolio manager believes that growth securities will provide better returns
than the yields then available or expected on income-producing securities, that
Fund will place a greater emphasis on the growth component.
Q: WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT
OF JANUS BALANCED FUND'S AND JANUS GROWTH AND INCOME FUND'S PORTFOLIOS?
A: The income component of Janus Balanced Fund and Janus Growth and Income
Fund will consist of securities that a portfolio manager believes have income
potential. Such securities may include equity securities, convertible securities
and all types of debt securities. Equity securities may be included in the
income component of a Fund if they currently pay dividends or a portfolio
manager believes they have the potential for either increasing their dividends
or commencing dividends, if none are currently paid.
GENERAL PORTFOLIO POLICIES
Unless otherwise stated, each of the following policies applies to all of the
Funds. The percentage limitations included in these policies and elsewhere in
this Prospectus apply at the time of purchase of the security. For example, if a
Fund exceeds a limit as a result of market fluctuations or the sale of other
securities, it will not be required to dispose of any securities.
CASH POSITION
When a Fund's portfolio manager believes that market conditions are not
favorable for profitable investing or when the portfolio manager is otherwise
unable to locate favorable investment opportunities, a Fund's investments may be
hedged to a greater degree and/or its cash or similar investments may increase.
In other words, the Funds do not always stay fully invested in stocks and bonds.
Cash or similar investments are a residual - they represent the assets that
remain after a portfolio manager has committed available assets to desirable
investment opportunities. Partly because the portfolio managers act
independently of each other, the cash positions of the Funds may vary
significantly. Larger hedged positions and/or larger cash positions may serve as
a means of preserving capital in unfavorable market conditions.
Securities that the Funds may invest in as a means of receiving a return on idle
cash include high-grade commercial paper, certificates of deposit, repurchase
agreements or other short-term debt obligations. The Funds may also invest in
money market funds (including funds managed by Janus Capital). When a Fund is
hedged or its investments in cash or similar investments increase, it may not
participate in stock or bond market advances or declines to the same extent that
it would if the Fund was not hedged or remained more fully invested in stocks or
bonds.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. All of the Funds (except
Janus Enterprise Fund, Janus Olympus Fund, Janus Special Situations Fund and
Janus Twenty Fund) qualify as
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 23
<PAGE>
diversified funds under the 1940 Act, and are subject to the following
diversification requirements:
- - As a fundamental policy, no Fund may own more than 10% of the outstanding
voting shares of any issuer.
- - As a fundamental policy, with respect to 50% of the total assets of Janus
Enterprise Fund, Janus Olympus Fund, Janus Special Situations Fund and Janus
Twenty Fund and 75% of the total assets of the other Funds, no Fund will
purchase a security of any issuer (other than cash items and U.S. government
securities, as defined in the 1940 Act) if such purchase would cause a Fund's
holdings of that issuer to amount to more than 5% of that Fund's total assets.
- - No Fund will invest more than 25% of its total assets in a single issuer
(other than U.S. government securities).
- - Janus Enterprise Fund, Janus Olympus Fund, Janus Special Situations Fund and
Janus Twenty Fund reserve the right to become diversified funds by limiting
the investments in which more than 5% of their total assets are invested.
INDUSTRY CONCENTRATION
As a fundamental policy, no Fund will invest 25% or more of its total assets in
any particular industry (excluding U.S. government securities).
PORTFOLIO TURNOVER
Each Fund generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective, changes
in interest rates or the credit standing of an issuer, or by reason of economic
or other developments not foreseen at the time of the initial investment
decision. Changes are made in a Fund's portfolio whenever its portfolio manager
believes such changes are desirable. Portfolio turnover rates are generally not
a factor in making buy and sell decisions.
To a limited extent, a Fund may purchase securities in anticipation of
relatively short-term price gains. A Fund may also sell one security and
simultaneously purchase the same or 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.
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments,
including restricted securities or private placements that are not deemed to be
liquid by Janus Capital. If illiquid securities exceed 15% of a Fund's net
assets after the time of purchase, the Fund will take steps to reduce in an
orderly fashion its holdings of illiquid securities. 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 will follow guidelines
established by the Funds' Trustees in making liquidity determinations for Rule
144A securities and certain other securities, including privately placed
commercial paper and municipal lease obligations.
24 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
BORROWING AND LENDING
Each Fund may borrow money and lend securities or other assets, as follows:
- - Each Fund may borrow money for temporary or emergency purposes in amounts up
to 25% of its total assets.
- - Each Fund may mortgage or pledge securities as collateral for borrowings in
amounts up to 15% of its net assets.
- - As a fundamental policy, each Fund may lend securities or other assets if, as
a result, no more than 25% of its total assets would be lent to other parties.
Under the terms of an exemptive order received from the SEC, each of the Funds
may borrow money from or lend money to each other and other funds that permit
such transactions and for which Janus Capital serves as investment adviser. All
such borrowing and lending will be subject to the above percentage limits.
ADDITIONAL RISK FACTORS
FOREIGN SECURITIES
Investments in foreign securities, including those of foreign governments, may
involve greater risks than investing in comparable domestic securities.
Securities of some foreign companies and governments may be traded in the United
States, but many foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
- - CURRENCY RISK. A Fund may buy the local currency when it buys a foreign
currency denominated security and sell the local currency when it sells the
security. As long as a Fund holds a foreign security, its value will be
affected by the value of the local currency relative to the U.S. dollar. When
a Fund sells a foreign denominated 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.
- - POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to heightened
political and economic risks, particularly in underdeveloped or developing
countries which may have relatively unstable governments and economies based
on only a few industries. In some countries, there is the risk that the
government may take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of a Fund's assets from
that country. The Funds may invest in emerging market countries. Emerging
market countries involve greater risks such as immature economic structures,
national policies restricting investments by foreigners, and different legal
systems.
- - 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.
- - 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
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 25
<PAGE>
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.
- - 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.
Foreign securities purchased indirectly (e.g., depositary receipts) are subject
to many of the above risks, including currency risk, because their values depend
on the performance of a foreign security denominated in its home currency.
INVESTMENTS IN SMALLER COMPANIES
Smaller or newer companies may suffer more significant losses as well as realize
more substantial growth than larger or more established issuers. Smaller or
newer companies may lack depth of management, they may be unable to generate
funds necessary for growth or potential development, or they may be developing
or marketing new products or services for which markets are not yet established
and may never become established. In addition, such companies may be
insignificant factors in their industries and may become subject to intense
competition from larger or more established companies. Securities of smaller or
newer companies may have more limited trading markets than the markets for
securities of larger or more established issuers, and may be subject to wider
price fluctuations. Investments in such companies tend to be more volatile and
somewhat more speculative.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Each Fund may enter into futures contracts on securities, financial indices and
foreign currencies and options on such contracts ("futures contracts") and may
invest in options on securities, financial indices and foreign currencies
("options"), forward contracts and interest rate swaps and swap-related products
(collectively "derivative instruments"). The Funds intend to use most derivative
instruments primarily to hedge the value of their portfolios against potential
adverse movements in securities prices, foreign currency markets or interest
rates. To a limited extent, the Funds may also use derivative instruments for
non-hedging purposes such as seeking to increase a Fund's income or otherwise
seeking to enhance return. Please refer to Appendix A to this Prospectus and the
SAI for a more detailed discussion of these instruments.
The use of derivative instruments exposes the Funds to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include:
- - the risk that interest rates, securities prices and currency markets will not
move in the direction that a portfolio manager anticipates;
- - imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies being
hedged;
- - the fact that skills needed to use these strategies are different from those
needed to select portfolio securities;
- - inability to close out certain hedged positions to avoid adverse tax
consequences;
26 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - 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;
- - leverage risk, that is, the risk that adverse price movements in an instrument
can result in a loss substantially greater than a Fund's initial investment in
that instrument (in some cases, the potential loss is unlimited); and
- - particularly in the case of privately-negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave a
Fund worse off than if it had not entered into the position.
Although the Funds believe the use of derivative instruments will benefit the
Funds, a Fund's performance could be worse than if the Fund had not used such
instruments if a portfolio manager's judgement proves incorrect.
When a Fund invests in a derivative instrument, it may be required to segregate
cash and other liquid assets or certain portfolio securities with its custodian
to "cover" the Fund's position. Assets segregated or set aside generally may not
be disposed of so long as the Fund maintains the positions requiring segregation
or cover. Segregating assets could diminish the Fund's return due to the
opportunity losses of foregoing other potential investments with the segregated
assets.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are debt securities rated
below investment grade by the primary rating agencies such as Standard & Poor's
Ratings Services ("Standard & Poor's") and Moody's Investors Service, Inc.
("Moody's").
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. The market for lower quality securities is generally less liquid
than the market for higher quality securities. 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.
No Fund will invest 35% or more of its assets in high-yield/high-risk
securities. Janus Balanced Fund's percentage of securities holdings by rating
category (based on a weighted monthly average) during the fiscal year ended
October 31, 1997, is set out in the following chart. During such period, no
other Fund held 5% or more of its assets in bonds rated below investment grade.
Please refer to the SAI for a description of bond rating categories.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 27
<PAGE>
<TABLE>
<S> <C>
BONDS - S&P RATING JANUS BALANCED FUND
- ---------------------------------------------------------------------
AAA 18%
AA 0%
A 4%
BBB 3%
BB 1%
B 6%
CCC 0%
CC 0%
C 0%
Foreign Bond 1%
Preferred Stock 11%
Common Stock 52%
Cash and Options 4%
- ---------------------------------------------------------------------
TOTAL 100%
- ---------------------------------------------------------------------
</TABLE>
SHORT SALES
Each Fund may engage in "short sales against the box." This technique involves
selling either a security that a Fund owns, or a security equivalent in kind and
amount to the security sold short that the Fund has the right to obtain, for
delivery at a specified date in the future. A Fund may enter into a short sale
against the box to hedge against anticipated declines in the market price of
portfolio securities. If the value of the securities sold short increases prior
to the scheduled delivery date, a Fund loses the opportunity to participate in
the gain.
SPECIAL SITUATIONS
Each Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of a Fund's portfolio manager, the
securities of a particular issuer will be recognized and appreciate in value due
to a specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
See Appendix A for risks associated with certain other investments.
28 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SHAREHOLDER'S MANUAL
This section will help you become familiar with the different types of accounts
you can establish with Janus. It also explains in detail the wide array of
services and features you can establish on your account, as well as account
policies and fees that may apply to your account. Account policies (including
fees), services and features may be modified or discontinued without shareholder
approval or prior notice.
MINIMUM INVESTMENTS*
<TABLE>
<S> <C>
To open a new account.............................. $2,500
To open a new retirement, education, 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+
</TABLE>
* The Funds reserve 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.
** An Automatic Investment Program requires a $100 minimum automatic
investment per month until the account balance reaches $2,500.
+ The minimum subsequent investment for IRA or UGMA/UTMA accounts is
$50.
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.-8:00
p.m., and Saturday: 10:00 a.m.-4:00 p.m., New York time. The Quick Address and
Telephone Reference below includes other ways to get in touch with Janus.
QUICK ADDRESS AND TELEPHONE REFERENCE
<TABLE>
<S> <C>
MAILING ADDRESS JANUS XPRESS LINE 1-888-979-7737
Janus For 24-hour access to account and
P.O. Box 173375 fund information, exchanges and
Denver, CO 80217-3375 purchases, automated daily quotes on
fund share prices, yields and total
FOR OVERNIGHT CARRIER returns.
Janus TDD 1-800-525-0056
Suite 101 A telecommunications device for our
3773 Cherry Creek North Drive hearing- and speech-impaired
Denver, CO 80209-3811 shareholders.
JANUS INTERNET ADDRESS JANUS LITERATURE LINE 1-800-525-8983
http://www.Janus.com To request a prospectus, shareholder
reports or marketing materials.
</TABLE>
TYPES OF ACCOUNT OWNERSHIP
If you are investing in the Funds for the first time, you will need to establish
an account. You can establish the following types of accounts by completing a
New Account Application. To request an application, call 1-800-525-3713.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 29
<PAGE>
- - INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one person.
Joint accounts have two or more owners.
- - 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.
- - 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.
- - 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.
TAX-DEFERRED ACCOUNTS
If you are eligible, you may set up one or more tax-deferred accounts. A
tax-deferred account allows you to shelter your investment income and capital
gains from current income taxes. A contribution to certain of these plans may
also be tax deductible. Tax deferred accounts include retirement plans and the
Education IRA. Distributions from these plans are generally subject to income
tax and may be subject to an additional tax if withdrawn prior to age 59 1/2 or
used for a nonqualifying purpose. Investors should consult their tax advisor or
legal counsel before selecting a tax-deferred account.
Investors Fiduciary Trust Company serves as custodian for the tax-deferred
accounts offered by the Funds. You will be charged an annual account maintenance
fee of $12 for each Fund account, up to a maximum of $24 for two or more Fund
accounts registered under the same taxpayer identification number. Each Janus
fund you own under your IRA account number is considered a separate "Fund
account." You may pay the fee by check or have it automatically deducted from
your account (usually in December). The Funds reserve the right to change the
amount of this fee or to waive it in whole or in part for certain types of
accounts.
The following plans require a special application. For an application and more
details about our Retirement Plans, call 1-800-525-3713.
- - REGULAR AND ROTH INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"): Both types of IRAs
allow most individuals with earned income to contribute up to the lesser of
$2,000 ($4,000 for most married couples) or 100% of compensation annually.
Please refer to the Janus IRA booklet for more complete information regarding
the different types of IRAs.
- - EDUCATION IRA: This plan allows individuals, subject to certain income
limitations, to contribute up to $500 annually on behalf of any child under
the age of 18. Please refer to the Janus IRA booklet for more complete
information regarding the Education IRA.
- - 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.
30 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - PROFIT SHARING OR MONEY PURCHASE PENSION PLAN: These plans are open to
corporations, partnerships and sole proprietors to benefit their employees and
themselves.
- - SECTION 403(B)(7) PLAN: Employees of educational organizations or other
qualifying, tax-exempt organizations may be eligible to participate in a
Section 403(b)(7) Plan.
HOW TO OPEN YOUR JANUS ACCOUNT
Complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application and make
your check payable to Janus. The Funds are available only to U.S. citizens or
residents, and your application will be returned if you do not meet these
criteria. Send all items to one of the following addresses:
For Overnight Carrier
- --------------------
Janus
Suite 101
3773 Cherry Creek North Drive
Denver, CO 80209-3811
For All Other Inquiries
- ---------------------
Janus
P.O. Box 173375
Denver, CO 80217-3375
INVESTOR SERVICE CENTERS
Janus 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: Monday-Friday 7:00 a.m. to 6:00
p.m. Mountain time and Saturday 9:00 a.m. to 1:00 p.m. Mountain time.
100 Fillmore Street, Suite 100
Denver, CO 80206
3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209
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:
- - Cash, credit cards, third party checks and credit card checks will not be
accepted.
- - All purchases must be made in U.S. dollars.
- - Checks must be drawn on U.S. banks and made payable to Janus.
- - If a check does not clear your bank, the Funds reserve the right to cancel the
purchase.
- - If the Funds are unable to debit your predesignated bank account on the day of
purchase, they may make additional attempts or cancel the purchase.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 31
<PAGE>
- - The Funds reserve the right to reject any specific purchase request.
If your purchase is cancelled, you will be responsible for any losses or fees
imposed by your bank and losses that may be incurred as a result of any decline
in the value of the cancelled purchase. The Funds (or their agents) have the
authority to redeem shares in your account(s) to cover any losses due to
fluctuations in share price. Any profit on such cancellation will accrue to the
Fund.
ONCE YOU HAVE OPENED YOUR JANUS ACCOUNT, THE MINIMUM AMOUNT FOR AN ADDITIONAL
INVESTMENT IS $100 ($50 FOR IRAS OR UGMA/UTMA ACCOUNTS). 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. To purchase shares by telephone, call
an Investor Service Representative at 1-800-525-3713 during normal business
hours or call the Janus Xpress Line, 1-888-979-7737, for access to this option
24 hours a day. When you make an additional purchase by telephone, Janus will
automatically debit your predesignated bank account for the desired amount. To
establish the telephone purchase option on your new account, complete the
"Telephone Purchase of Shares Option" section on the application and attach a
"voided" check or deposit slip from your bank account. If your account is
already established, call 1-800-525-3713 to request the appropriate form. This
option will become effective ten business days after the form is received.
BY WIRE
Purchases may also be made by wiring money from your bank account to your Janus
account. Call 1-800-525-3713 to receive wiring instructions.
AUTOMATIC INVESTMENT PROGRAMS
Janus offers several automatic investment programs to help you achieve your
financial goals as simply and conveniently as possible. You may open a new
account with a $500 initial purchase and $100 automatic subsequent investments.
- - AUTOMATIC MONTHLY INVESTMENT PROGRAM
You select the day each month that your money ($100 minimum) will be
electronically transferred from your bank account to your Fund account. To
establish this option, complete the "Automatic Monthly Investment Program"
section on the application and attach a "voided" check or deposit slip from
your bank account. If your Fund account is already established, call
1-800-525-3713 to request the appropriate form.
- - PAYROLL DEDUCTION
If your employer can initiate an automatic payroll deduction, you may have all
or a portion of your paycheck ($100 minimum) invested directly into your Fund
account. To obtain information on establishing this option, call
1-800-525-3713.
32 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - 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 35.
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 Xpress Line,
1-888-979-7737, for access to this option 24 hours a day.
BY SYSTEMATIC EXCHANGE
As noted above, you may establish a Systematic Exchange for as little as $100
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
- - Except for Systematic Exchanges, new accounts established by exchange must be
opened with $2,500 or the total account value if the value of the account you
are exchanging from is less than $2,500.
- - Exchanges between existing accounts must meet the $100 subsequent investment
requirement.
- - You may make four exchanges out of each Fund during a calendar year (exclusive
of Systematic Exchanges). Exchanges in excess of this limit may be subject to
an exchange fee or may result in termination of the exchange privilege.
- - The Funds reserve the right to reject any exchange request and to modify or
terminate the exchange privilege at any time. For example, the Funds may
reject exchanges from accounts engaged in or known to engage in excessive
trading (including market timing transactions).
- - Exchanges between accounts will be accepted only if the registrations are
identical.
- - If the shares you are exchanging are held in certificate form, you must return
the certificate to your Fund prior to making any exchanges.
- - Be sure that you read the prospectus for the fund into which you are
exchanging.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 33
<PAGE>
- - An exchange represents the sale of shares from one fund and the purchase of
shares of another fund, which may produce a taxable gain or loss in a non-tax
deferred account.
HOW TO REDEEM SHARES
On any business day, you may redeem all or a portion of your shares. If the
shares are held in certificate form, the certificate must be returned with or
before your redemption request. Your transaction will be processed at the next
NAV calculated after your order is received and accepted.
IN WRITING
To request a redemption in writing, please follow the instructions for written
requests on page 35.
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 request redemptions daily from your account by calling 1-800-525-3713 by the
close of the regular trading session of the New York Stock Exchange ("NYSE")
normally 4:00 p.m. New York time. You may also use Janus Xpress Line,
1-888-979-7737, for access to this option 24 hours a day. Redemption requests
received through Janus Xpress Line will be processed at the NAV next calculated
after receipt and acceptance of the request. (There is a daily limit of $100,000
per account for redemptions payable by check).
SYSTEMATIC REDEMPTION OPTION
The Systematic Redemption Option allows you to redeem a specific dollar amount
from your account on a regular basis. For more information or to request the
appropriate form, please call 1-800-525-3713.
PAYMENT OF REDEMPTION PROCEEDS
- - 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.
- - BY ELECTRONIC TRANSFER
If you have established the electronic redemption option, your redemption
proceeds can be electronically transferred to your predesignated bank account
on the next bank business day after receipt of your redemption request (wire
transfer) or the second bank business day after receipt of your redemption
request (ACH transfer). Wire transfers will be charged an $8 fee per wire and
your bank may charge an additional fee to receive the wire. ACH transfers are
made free of charge. Wire redemptions are not available for retirement
accounts.
If you would like to establish the electronic redemption option on an existing
account, please call 1-800-525-3713 to request the appropriate form.
IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE
AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUNDS MAY DELAY THE PAYMENT OF YOUR
REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE TO ALLOW THE
PURCHASE TO CLEAR. Unless you provide alternate instructions,
34 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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 31 and must include the following
information:
- - the name of the Fund(s)
- - the account number(s)
- - the amount of money or number of shares being redeemed
- - the name(s) on the account
- - the signature(s) of all registered account owners
- - your daytime telephone number
SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE
- - INDIVIDUAL, JOINT TENANTS, TENANTS IN COMMON: Written instructions must be
signed by each shareholder, exactly as the names appear in the account
registration.
- - UGMA OR UTMA: Written instructions must be signed by the custodian in
his/her capacity as it appears in the account registration.
- - SOLE PROPRIETOR, GENERAL PARTNER: Written instructions must be signed by an
authorized individual in his/her capacity as it appears on the account
registration.
- - 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.
- - TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear in the account registration, a
certificate of incumbency dated within 60 days must also be submitted.
- - IRA: Written instructions must be signed by the account owner. If you do
not want federal income tax withheld from your redemption, you must state that
you elect not to have such withholding apply. In addition, your instructions
must state whether the distribution is normal (after age 59 1/2) or premature
(before age 59 1/2) and, if premature, whether any exceptions such as death or
disability apply with regard to the 10% additional tax on early distributions.
SIGNATURE GUARANTEE
In addition to the signature requirements, a signature guarantee is also
required if any of the following is applicable:
- - You request a redemption that exceeds $100,000.
- - You would like the check made payable to anyone other than the shareholder(s)
of record.
- - You would like the check mailed to an address which has been changed within 10
days of the redemption request.
- - You would like the check mailed to an address other than the address of
record.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 35
<PAGE>
THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713.
HOW TO OBTAIN A SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized account transfers. The
following financial institutions may guarantee signatures: banks, savings and
loan associations, trust companies, credit unions, broker-dealers, and member
firms of a national securities exchange. Call your financial institution to see
if they have the ability to guarantee a signature. A signature guarantee may not
be provided by a notary public.
If you live outside the United States, a foreign bank properly authorized to do
business in your country of residence or a U.S. consulate may be able to
authenticate your signature.
PRICING OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the NAV next
calculated after your request is received and approved by a Fund (or its
designated agent). A Fund's NAV is calculated at the close of the regular
trading session of 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. 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.
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
JANUS XPRESS LINE(TM)
Janus Xpress Line, our electronic telephone service, offers you 24-hour access
by TouchTone(TM) telephone to obtain information on account balances, Fund
performance or dividends. You can also make exchanges, purchases, redemptions
and electronic transfers in existing accounts, request literature about any
Janus fund, or order duplicate statements. Janus Xpress Line is accessed by
calling 1-888-979-7737. Calls are limited to five minutes.
JANUS WEB SITE
Janus maintains a Web site located at http://www.Janus.com. You can access
information such as your account balance and the Funds' NAVs through the Web
site. In addition, you may request and/or download a prospectus for any Janus
fund.
ACCOUNT MINIMUMS
Due to the proportionately higher costs of maintaining small accounts, Janus
reserves the right to deduct a $10 minimum balance fee (or the value of the
account if less than $10) from accounts with values below the minimums described
on page 29 or to close such accounts. This policy will apply to accounts
participating in the Automatic
36 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Monthly Investment Program only if your account balance does not reach the
required minimum initial investment or falls below such minimum and you have
discontinued monthly investments. This policy does not apply to accounts that
fall below the minimums solely as a result of market value fluctuations. It is
expected that, for purposes of this policy, accounts will be valued in
September, and the $10 fee will be 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.
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 employee benefit plans (a
"Processing Organization"). Processing Organizations may charge you a fee for
this service and may require different minimum initial and subsequent
investments than the Funds. Processing Organizations may also impose other
charges or restrictions different from those applicable to shareholders who
invest in the Funds directly. A Processing Organization, rather than its
customers, may be the shareholder of record of your shares. The Funds are not
responsible for the failure of any Processing Organization to carry out its
obligations to its customers. Certain Processing Organizations may receive
compensation from Janus Capital or its affiliates and certain Processing
Organizations may receive compensation from the Funds for shareholder
recordkeeping and similar services.
TAXPAYER IDENTIFICATION NUMBER
On the application or other appropriate form, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that you
are not subject to backup withholding for failing to report income to the IRS.
If you are subject to the 31% backup withholding or you did not certify your
taxpayer identification number, the IRS requires the Funds to withhold 31% of
any dividends paid and redemption or exchange proceeds. In addition to the 31%
backup withholding, you may be subject to a $50 fee to reimburse the Funds for
any penalty that the IRS may impose.
SHARE CERTIFICATES
Most shareholders choose not to hold their shares in certificate form because
account transactions such as exchanges and redemptions cannot be completed until
the certificate has been returned to the Funds. The Funds will issue share
certificates upon written request only. Share certificates will not be issued
until the shares have been held for at least 15 days and will not be issued for
accounts that do not meet the minimum investment requirements. Share
certificates cannot be issued for retirement accounts. In addition, if the
certificate is lost, there may be a replacement charge.
INVOLUNTARY REDEMPTIONS
The Funds reserve the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise believed to be detrimental
to the Funds.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 37
<PAGE>
TELEPHONE TRANSACTIONS
You may initiate many transactions by telephone. The Funds and their agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
It may be difficult to reach an Investor Service Representative by telephone
during periods of unusual market activity. If you are unable to reach a
representative by telephone, please consider sending written instructions,
stopping by a Service Center or, in the case of purchases, exchanges,
redemptions and electronic transfers, calling the Janus Xpress Line.
TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may, in case of emergency, temporarily suspend
telephone transactions and other shareholder services.
ADDRESS CHANGES
To change the address on your account, call 1-800-525-3713 or send a written
request signed by all account owners. Include the name of your Fund(s), the
account number(s), the name(s) on the account and both the old and new
addresses. Certain options may be suspended for 10 days following an address
change unless a signature guarantee is provided.
REGISTRATION CHANGES
To change the name on an account, the shares are generally transferred to a new
account. In some cases, legal documentation may be required. For more
information, call 1-800-525-3713.
STATEMENTS AND REPORTS
Investors participating in an automatic investment program will receive
quarterly confirmations of all transactions. In addition, the Funds will send
you an immediate transaction confirmation statement after every non-systematic
transaction. The Growth Funds distribute dividend information annually. The
Combination Funds distribute dividend information quarterly.
Financial reports for the Funds, which include a list of the Funds' portfolio
holdings, will be mailed semiannually to all shareholders. You will receive an
updated prospectus annually. To reduce expenses, only one copy of most financial
reports and prospectuses will be mailed to your household, even if more than one
person in the household has a Fund account. Please call 1-800-525-3713 if you
would like to receive additional reports or prospectuses.
38 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
MANAGEMENT OF THE FUNDS
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Fund's investment objectives and policies. The
Trustees delegate the day-to-day management of the Funds to the officers of the
Trust and meet at least quarterly to review the Funds' investment policies,
performance, expenses and other business affairs.
INVESTMENT ADVISER
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, is the
investment adviser to each of the Funds and is responsible for the day-to-day
management of the investment portfolios and other business affairs of the Funds.
Janus Capital began serving as investment adviser to Janus Fund at its inception
in 1970 and currently serves as investment adviser to all of the Janus funds, as
well as adviser or subadviser to other mutual funds and individual, corporate,
charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning each
Fund's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Funds, and may be reimbursed by the
Funds for its costs in providing those services. In addition, Janus Capital
employees serve as officers of the Trust and Janus Capital provides office space
for the Funds and pays the salaries, fees and expenses of all Fund officers and
those Trustees who are affiliated with Janus Capital.
INVESTMENT PERSONNEL
PORTFOLIO MANAGERS
DAVID J. CORKINS is Executive Vice President and portfolio manager of Janus
Growth and Income Fund which he has managed since August 1997. He previously
served as an assistant portfolio manager of Janus Mercury Fund. He joined Janus
in 1995 as a research analyst specializing in domestic financial services
companies and a variety of foreign industries. Prior to joining Janus he was the
Chief Financial Officer of Chase U.S. Consumer Services, Inc., a Chase Manhattan
mortgage business. He holds a Bachelor of Arts in English and Russian from
Dartmouth and received his Master of Business Administration from Columbia
University in 1993.
JAMES P. CRAIG, III is Chief Investment Officer of Janus Capital. He is
Executive Vice President and portfolio manager of Janus Fund, which he has
managed since 1986. He is
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 39
<PAGE>
also Executive Vice President and a co-manager of Janus Venture Fund, which he
has managed since February 1, 1997. Mr. Craig previously managed Janus Venture
Fund from its inception to December 1993 and Janus Balanced Fund from December
1993 to December 1995. He holds a Bachelor of Arts in Business from the
University of Alabama and a Master of Arts in Finance from the Wharton School of
the University of Pennsylvania.
DAVID C. DECKER is Executive Vice President and portfolio manager of Janus
Special Situations Fund, which he has managed since inception, and an assistant
portfolio manager of Janus Fund. He joined Janus in 1992 as a research analyst
and focused on companies in the automotive and defense industries prior to
managing Janus Special Situations Fund. He obtained his Master of Business
Administration in finance from the Fuqua School of Business at Duke University
and a Bachelor of Arts in Economics and Political Science from Tufts University.
He is a Chartered Financial Analyst.
JAMES P. GOFF is Executive Vice President and portfolio manager of Janus
Enterprise Fund. Mr. Goff joined Janus Capital in 1988 and has managed Janus
Enterprise Fund since its inception. Mr. Goff managed or co-managed Janus
Venture Fund from December 1993 to February 1, 1997. He holds a Bachelor of Arts
in Economics from Yale University and is a Chartered Financial Analyst.
HELEN YOUNG HAYES is Executive Vice President and portfolio manager of Janus
Worldwide Fund and Janus Overseas Fund. Ms. Hayes joined Janus Capital in 1987
and has managed or co-managed Janus Worldwide Fund and Janus Overseas Fund since
their inceptions. She holds a Bachelor of Arts in Economics from Yale University
and is a Chartered Financial Analyst.
WARREN B. LAMMERT is Executive Vice President and portfolio manager of Janus
Mercury Fund. Mr. Lammert joined Janus Capital in 1987 and has managed Janus
Mercury Fund since its inception. He previously managed Janus Balanced Fund from
its inception to December 1993 and co-managed Janus Venture Fund from December
1993 to December 1996. He holds a Bachelor of Arts in Economics from Yale
University and a Master of Science in Economic History from the London School of
Economics. He is a Chartered Financial Analyst.
BLAINE P. ROLLINS is Executive Vice President and portfolio manager of Janus
Balanced Fund, which he has managed since January 1996, and Janus Equity Income
Fund, which he has managed since inception. He is an assistant portfolio manager
of Janus Fund. Mr. Rollins joined Janus Capital in 1990 and gained experience as
a fixed-income trader and equity research analyst prior to managing Janus
Balanced Fund. He holds a Bachelor of Science in Finance from the University of
Colorado and is a Chartered Financial Analyst.
SCOTT W. SCHOELZEL is Executive Vice President and portfolio manager of Janus
Twenty Fund, which he has managed since August 1997. He previously managed Janus
Olympus Fund from its inception to August 1997. Mr. Schoelzel joined Janus
Capital in January 1994. From 1991-1993, Mr. Schoelzel was a portfolio manager
at Founders Asset Management, Denver, Colorado. He holds a Bachelor of Arts in
Business from Colorado College.
40 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CLAIRE YOUNG is Executive Vice President and portfolio manager of Janus Olympus
Fund which she has managed since August 1997. She previously served as an
assistant portfolio manager of Janus Growth and Income Fund and Janus Twenty
Fund. Ms. Young joined Janus Capital in 1992 as a research analyst. She holds a
Bachelor of Science in Electrical Engineering from Yale University and is a
Chartered Financial Analyst.
ASSISTANT PORTFOLIO MANAGER
LAURENCE J. CHANG is assistant portfolio manager of Janus Overseas Fund and
Janus Worldwide Fund. He received an undergraduate degree with honors in
religion and philosophy from Dartmouth College and a Master's Degree in
Political Science from Stanford University. He is a Chartered Financial Analyst.
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 Funds or Janus
Capital's other advisory clients. See the SAI for more detailed information.
MANAGEMENT EXPENSES
Each Fund pays Janus Capital a management fee which is calculated daily and paid
monthly. The advisory agreement with each Fund spells out the management fee and
other expenses that the Funds must pay. Each of the Growth Funds and Combination
Funds is subject to the following management fee schedule (expressed as an
annual rate):
<TABLE>
<CAPTION>
AVERAGE DAILY NET ANNUAL RATE
ASSETS OF FUND PERCENTAGE (%)
<S> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
First $300 Million 0.75
Next $200 Million 0.70
Over $500 Million 0.65
</TABLE>
- --------------------------------------------------------------------------------
Differences in the actual management fees incurred by the Funds are due
primarily to variances in the asset size of the Funds. As asset size increases,
the annual rate of the management fee declines in accordance with the above
schedule. In addition, each Fund incurs expenses not assumed by Janus Capital,
including transfer agent and custodian fees and expenses, legal and auditing
fees, printing and mailing costs of sending reports and other information to
existing shareholders, and independent Trustees' fees and expenses. This fee
schedule was effective July 1, 1997.
During the most recent fiscal year, the Funds paid the following management
fees, expressed as a percentage of average net assets: Janus Fund 0.65%; Janus
Enterprise Fund 0.72%; Janus Mercury Fund 0.67%; Janus Olympus Fund 0.73%; Janus
Special Situations Fund 0.77%; Janus Twenty Fund 0.66%; Janus Worldwide Fund
0.66%; Janus Overseas Fund 0.67%; Janus Balanced Fund 0.76%; Janus Equity Income
Fund 0.86%; and Janus Growth and Income Fund 0.68%.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 41
<PAGE>
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by
broker-dealers selected by Janus Capital. Broker-dealers are selected on the
basis of their ability to obtain best price and execution for a Fund's
transactions and recognizing brokerage, research and other services provided to
the Fund and to Janus Capital. Janus Capital may also consider payments made by
brokers effecting transactions for a Fund i) to the Fund or ii) to other persons
on behalf of the Fund for services provided to the Fund for which it would be
obligated to pay. Janus Capital may also consider sales of shares of a Janus
fund as a factor in the selection of broker-dealers to execute transactions. The
Funds' Trustees have authorized Janus Capital to place portfolio transactions on
an agency basis with a broker-dealer affiliated with Janus Capital. When
transactions for a Fund are effected with that broker-dealer, the commissions
payable by the Fund are credited against certain Fund operating expenses serving
to reduce those expenses. The SAI further explains the selection of
broker-dealers.
OTHER SERVICE PROVIDERS
The following parties provide the Funds with administrative and other services.
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 0351
Boston, Massachusetts 02117-0351
TRANSFER AGENT
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217-3375
DISTRIBUTOR
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206-4928
Janus Service Corporation and Janus Distributors, Inc. are wholly-owned
subsidiaries of Janus Capital.
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Massachusetts business
trust on February 11, 1986. A mutual fund is an investment vehicle that pools
money from numerous investors and invests the money to achieve a specified
objective.
As of the date of this Prospectus, the Trust offers 19 separate series, three of
which currently offer three classes of shares. This Prospectus describes eleven
series of the Trust; the other series are offered by separate prospectuses.
42 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called for a specific Fund or for the Trust as a whole for
purposes such as electing or removing Trustees, terminating or reorganizing the
Trust, changing fundamental policies, or for any other purpose requiring a
shareholder vote under the 1940 Act. Separate votes are taken by each Fund only
if a matter affects or requires the vote of only that Fund or that Fund's
interest in the matter differs from the interest of other portfolios of the
Trust. As a shareholder, you are entitled to one vote for each share that you
own.
SIZE OF FUNDS
The Funds have no present plans to limit their size. However, any Fund may
discontinue sales of its shares if management believes that continued sales may
adversely affect the Fund's ability to achieve its investment objective. If
sales of a Fund are discontinued, it is expected that existing shareholders of
that Fund would be permitted to continue to purchase shares and to reinvest any
dividends or capital gains distributions, absent highly unusual circumstances.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve any Fund's investment objective by
investing all of that Fund's assets in another investment company having the
same investment objective and substantially the same investment policies and
restrictions as those applicable to that Fund. Unless otherwise required by law,
this policy may be implemented by the Trustees without shareholder approval.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which has
established a dedicated group to address this issue. Janus Capital has entered
into a consulting arrangement with one of the foremost experts in Year 2000
compliance to help Janus Capital successfully achieve Year 2000 compliance.
Janus Capital does not anticipate that the move to Year 2000 will have a
material impact on its ability to continue to provide the Funds with service at
current levels.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES EACH FUND TO DISTRIBUTE
NET INCOME AND ANY NET CAPITAL GAINS REALIZED ON ITS INVESTMENTS ANNUALLY. A
FUND'S INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM
CAPITAL GAINS ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET
REALIZED LONG-TERM GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS
DISTRIBUTIONS.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 43
<PAGE>
DISTRIBUTION SCHEDULE
<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
<S> <C> <C>
Growth Funds Declared and paid in December Declared and paid in December
- ------------------------------------------------------------------------------------
Combination Declared and paid in March, June, Declared and paid in December
Funds September and December
</TABLE>
HOW DISTRIBUTIONS AFFECT A FUND'S NAV
Distributions are paid to shareholders as of the record date of a distribution
of a Fund, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in each Fund's daily NAV. The
share price of a Fund drops by the amount of the distribution, net of any
subsequent market fluctuations. As an example, assume that on December 31, Janus
Fund declared a dividend in the amount of $0.25 per share. If Janus Fund's share
price was $10.00 on December 30, the Fund's share price on December 31 would be
$9.75, barring market fluctuations. Shareholders should be aware that
distributions from a taxable mutual fund are not value-enhancing and may create
income tax obligations.
"BUYING A DIVIDEND"
If you purchase shares of a Fund just before the distribution, you will pay the
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. This is referred to as "buying a dividend." In the above
example, if you bought shares on December 30, you would have paid $10.00 per
share. On December 31, the Fund would pay you $0.25 per share as a dividend and
your shares would now be worth $9.75 per share. Unless your account is set up as
a tax-deferred account, dividends paid to you would be included in your gross
income for tax purposes even though you may not have participated in the
increase in NAV of the Fund, whether or not you reinvested the dividends.
DISTRIBUTION OPTIONS
When you open an account, you must specify on your application how you want to
receive your distributions. You may change your distribution option at any time
by writing the Funds at one of the addresses on page 31 or calling
1-800-525-3713. The Funds offer the following options:
1. REINVESTMENT OPTION. You may reinvest your income dividends and capital gains
distributions in additional shares. This option is assigned automatically if
no other choice is made.
2. CASH OPTION. You may receive your income dividends and capital gains
distributions in cash.
3. REINVEST AND CASH OPTION. You may receive either your income dividends or
capital gains distributions in cash and reinvest the other in additional
shares.
4. REDIRECT OPTION. You may direct your dividends or capital gains to purchase
shares of another Janus fund.
44 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
The Funds reserve the right to reinvest into your account undeliverable and
uncashed dividend and distribution checks that remain outstanding for six months
in shares of the applicable Fund at the NAV next computed after the check is
cancelled. Subsequent distributions may also be reinvested.
TAXES
As with any investment, you should consider the tax consequences of investing in
the Funds. The following discussion does not apply to tax-deferred accounts, nor
is it a complete analysis of the federal tax implications of investing in the
Funds. You may wish to consult your own tax adviser. Additionally, state or
local taxes may apply to your investment, depending upon the laws of your state
of residence.
TAXES ON DISTRIBUTIONS
Dividends and distributions of the Funds are subject to federal income tax,
regardless of whether the distribution is made in cash or reinvested in
additional shares of a Fund. In certain states, a portion of the dividends and
distributions (depending on the sources of a Fund's income) may be exempt from
state and local taxes. Information regarding the tax status of income dividends
and capital gains distributions will be mailed to shareholders on or before
January 31st of each year. Account tax information will also be sent to the IRS.
TAXATION OF THE FUNDS
Dividends, interest, and some capital gains received by the Funds on foreign
securities may be subject to tax withholding or other foreign taxes. The Funds
may from year to year make the election permitted under section 853 of the
Internal Revenue Code to pass through such taxes to shareholders as a foreign
tax credit. If such an election is not made, any foreign taxes paid or accrued
will represent an expense to the Funds which will reduce their investment
income.
The Funds do not expect to pay any federal income or excise taxes because they
intend to meet certain requirements of the Internal Revenue Code. It is
important that the Funds meet these requirements so that any earnings on your
investment will not be taxed twice.
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe a Fund's performance. You may see references to these terms in our
newsletters, advertisements and in media articles. Our newsletters and
advertisements may include comparisons of the Fund's performance to the
performance of other mutual funds, mutual fund averages or recognized stock
market indices. The Growth and Combination Funds generally measure performance
in terms of total return.
CUMULATIVE TOTAL RETURN represents the actual rate of return on an investment
for a specified period. The Financial Highlights tables beginning on page 7 show
total return for a single fiscal period. Cumulative total return is generally
quoted for more than one year (e.g., the life of the Fund). A cumulative total
return does not show interim fluctuations in the value of an investment.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 45
<PAGE>
AVERAGE ANNUAL TOTAL RETURN represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in a Fund's return and are not the
same as actual annual results.
THE FUNDS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN
COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET
VALUE WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
46 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<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 Funds may invest. The Funds may
invest in these instruments to the extent permitted by their investment
objectives and policies. The Funds are not limited by this discussion and may
invest in any other types of instruments not precluded by the policies discussed
elsewhere in this Prospectus. Please refer to the SAI for a more detailed
discussion of certain instruments.
I. EQUITY AND DEBT SECURITIES
BONDS are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value of the bond) at a specified maturity and to make
scheduled interest payments.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The Funds may purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933.
COMMON STOCK represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stock are not fixed but are declared at the discretion of the issuer's board of
directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
FIXED-INCOME SECURITIES are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time, and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
HIGH-YIELD/HIGH-RISK SECURITIES are securities that are rated below investment
grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower by Moody's). Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and "junk bonds."
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,
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 47
<PAGE>
which is the risk that the underlying mortgages or other debt may be refinanced
or paid off prior to their maturities during periods of declining interest
rates. In that case, a portfolio manager may have to reinvest the proceeds from
the securities at a lower rate. Potential market gains on a security subject to
prepayment risk may be more limited than potential market gains on a comparable
security that is not subject to prepayment risk.
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. To avoid taxes and interest that the Funds must
pay if these investments are profitable, the Funds may make various elections
permitted by the tax laws. These elections could require that the Funds
recognize taxable income, which in turn must be distributed, before the
securities are sold and before cash is received to pay the distributions.
PAY-IN-KIND BONDS are debt securities that normally give the issuer an option to
pay cash at a coupon payment date or give the holder of the security a similar
bond with the same coupon rate and a face value equal to the amount of the
coupon payment that would have been made.
PREFERRED STOCK is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights.
REPURCHASE AGREEMENTS involve the purchase of a security by a Fund and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Fund at a specified date or upon demand. This technique
offers a method of earning income on idle cash. These securities involve the
risk that the seller will fail to repurchase the security, as agreed. In that
case, a Fund will bear the risk of market value fluctuations until the security
can be sold and may encounter delays and incur costs in liquidating the
security.
REVERSE REPURCHASE AGREEMENTS involve the sale of a security by a Fund to
another party (generally a bank or dealer) in return for cash and an agreement
by the Fund to buy the security back at a specified price and time. This
technique will be used primarily to provide cash to satisfy unusually high
redemption requests, or for other temporary or emergency purposes.
RULE 144A SECURITIES are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
STANDBY COMMITMENTS are obligations purchased by a Fund from a dealer that give
the Fund the option to sell a security to the dealer at a specified price.
STEP COUPON BONDS are debt securities that trade at a discount from their face
value and pay coupon interest. The discount from the face value depends on the
time remaining until cash payments begin, prevailing interest rates, liquidity
of the security and the perceived credit quality of the issuer.
48 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
STRIP BONDS 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.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations and others are supported only by
the credit of the sponsoring agency.
VARIABLE AND FLOATING RATE SECURITIES have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
WARRANTS are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD TRANSACTIONS generally involve the
purchase of a security with payment and delivery at some time in the
future -- i.e., beyond normal settlement. The Funds do not earn interest on such
securities until settlement and bear the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
ZERO COUPON BONDS are debt securities that do not pay regular interest at
regular intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. 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 a
financial instrument for an agreed upon price at a specified time. Forward
contracts are not currently exchange traded and are typically negotiated on an
individual basis. The Funds may enter into forward currency contracts to hedge
against declines in the value of securities denominated in, or whose value is
tied to, a currency other than the U.S. dollar or to reduce the impact of
currency appreciation on purchases of such securities. They may also enter into
forward contracts to purchase or sell securities or other financial indices.
JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 49
<PAGE>
FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Funds may buy and sell futures contracts on foreign currencies,
securities and financial indices including interest rates or an index of U.S.
government, foreign government, equity or fixed-income securities. The Funds may
also buy options on futures contracts. An option on a futures contract gives the
buyer the right, but not the obligation, to buy or sell a futures contract at a
specified price on or before a specified date. Futures contracts and options on
futures are standardized and traded on designated exchanges.
INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices or other financial
indicators. Such securities may be positively or negatively indexed (i.e. their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments. A Fund bears the market risk of an
investment in the underlying instruments, as well as the credit risk of the
issuer.
INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
OPTIONS are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Funds may purchase and write put and call options on securities,
securities indices and foreign currencies.
50 JANUS EQUITY FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
JANUS EQUITY FUNDS
PROSPECTUS
Janus Fund
Janus Enterprise Fund
Janus Mercury Fund
Janus Olympus Fund
Janus Special Situations Fund
Janus Twenty Fund
Janus Worldwide Fund
Janus Overseas Fund
Janus Balanced Fund
Janus Equity Income Fund
Janus Growth and Income Fund
[JANUS LOGO]
P.O. Box 173375 * Denver, CO 80217-3375 * 1-800-525-3713
Janus Distributors, Inc. Member NASD. (2/98)
<PAGE>
JANUS INVESTMENT FUND
JANUS INCOME FUNDS
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713
http://www.Janus.com
FEBRUARY 17, 1998
This prospectus describes four mutual funds that invest primarily in
income-producing securities (the "Fixed-Income Funds") and three money market
funds that seek current income consistent with stability of capital (the "Money
Market Funds"). This prospectus offers only the Investor Shares of the Money
Market Funds, a separate class of shares (collectively, the "Shares"). Janus
Capital Corporation ("Janus Capital") serves as investment adviser to each Fund.
Janus Capital has been in the investment advisory business for over 27 years and
currently manages approximately $70 billion in assets.
JANUS FLEXIBLE INCOME FUND AND JANUS HIGH-YIELD FUND MAY INVEST ALL OF THEIR
ASSETS IN HIGH-YIELD CORPORATE DEBT SECURITIES, COMMONLY KNOWN AS "JUNK BONDS."
SEE "ADDITIONAL RISK FACTORS" ON PAGE 19 FOR THE RISKS ASSOCIATED WITH INVESTING
IN THESE SECURITIES.
AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Each Fund is a series of Janus Investment Fund (the "Trust"). The Trust is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. This Prospectus contains information about the
Funds that you should consider before investing. Please read it carefully and
keep it for future reference.
Additional information about the Funds is contained in a Statement of Additional
Information ("SAI") filed with the SEC. The SAI dated February 17, 1998, is
incorporated by reference into this Prospectus. For a copy of the SAI, write or
call the Funds at the address or phone number listed above. The SEC maintains a
Web site located at http://www.sec.gov that contains the SAI, material
incorporated by reference, and other information regarding the Funds.
THE FUNDS' SHARES ARE NOT BANK DEPOSITS, ARE NOT ENDORSED OR GUARANTEED BY ANY
BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
FUNDS AT A GLANCE
Brief description of the Funds............... 2
EXPENSE INFORMATION
Each Fund's annual operating expenses........ 5
Financial Highlights - a summary of financial
data....................................... 6
THE FIXED-INCOME FUNDS IN DETAIL
Investment Objectives and Policies........... 12
General Portfolio Policies................... 17
Additional Risk Factors...................... 19
THE MONEY MARKET FUNDS IN DETAIL
Investment Objectives, Policies and
Techniques................................ 22
SHAREHOLDER'S MANUAL
Minimum Investments.......................... 30
Types of Account Ownership................... 30
How to Open Your Janus Account............... 32
How to Purchase Shares....................... 32
How to Exchange Shares....................... 34
How to Redeem Shares......................... 35
Shareholder Services and Account Policies.... 38
MANAGEMENT OF THE FUNDS
Investment Adviser, Administrator and
Investment Personnel...................... 41
Personal Investing........................... 43
Management Expenses.......................... 43
Portfolio Transactions....................... 44
Other Service Providers...................... 44
Other Information............................ 44
DISTRIBUTIONS AND TAXES
Distributions................................ 46
Taxes........................................ 48
PERFORMANCE TERMS
An Explanation of Performance Terms.......... 49
APPENDIX A
Glossary of Investment Terms................. 50
APPENDIX B
Explanation of Rating Categories............. 55
</TABLE>
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 1
<PAGE>
FUNDS AT A GLANCE
This section is designed to provide you with a brief overview of the Funds and
their investment emphasis. A more detailed discussion of the Funds' investment
objectives and policies begins on page 12.
All Janus funds are no-load investments. This means you may purchase and sell
shares in any of our mutual funds without incurring any sales charges. If you
enroll in our low minimum initial investment program, you can open your account
for as little as $500 and a $100 subsequent purchase per month. Otherwise, the
minimum initial investment is $2,500 ($500 minimum for Individual Retirement
Accounts). For complete information on how to purchase, exchange and sell
shares, please see the Shareholder's Manual beginning on page 30.
FIXED-INCOME FUNDS
THE JANUS FIXED-INCOME FUNDS ARE DESIGNED FOR THOSE INVESTORS WHO PRIMARILY SEEK
CURRENT INCOME.
JANUS FLEXIBLE INCOME FUND
Fund Focus: A diversified fund that seeks to maximize total return from a
combination of income and capital appreciation by investing in income-producing
securities.
Fund Inception: July 1987
Fund Manager: Ronald V. Speaker
JANUS HIGH-YIELD FUND
Fund Focus: A diversified fund that seeks high current income as its primary
objective. Capital appreciation is a secondary objective when consistent with
the primary objective. The Fund seeks to achieve these objectives by investing
primarily in high-yield/high-risk fixed-income securities.
Fund Inception: December 1995
Fund Manager: Sandy R. Rufenacht
JANUS FEDERAL TAX-EXEMPT FUND
Fund Focus: A diversified fund that seeks a high level of current income exempt
from federal income tax by normally investing at least 80% of its assets in
municipal obligations whose interest is exempt from federal income taxes,
including the federal alternative minimum tax.
Fund Inception: May 1993
Fund Manager: Darrell W. Watters
2 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
JANUS SHORT-TERM BOND FUND
Fund Focus: A diversified fund that seeks a high level of current income while
minimizing interest rate risk by investing in shorter term fixed-income
securities. Its average-weighted effective maturity is normally less than three
years.
Fund Inception: September 1992
Fund Manager: Sandy R. Rufenacht
MONEY MARKET FUNDS
JANUS MONEY MARKET FUND
Fund Focus: A money market mutual fund that seeks maximum current income to the
extent consistent with stability of capital. The Fund seeks to achieve this
objective by investing primarily in high quality debt obligations and
obligations of financial institutions.
Fund Inception: February 1995
Fund Manager: Sharon S. Pichler
JANUS GOVERNMENT MONEY MARKET FUND
Fund Focus: A money market mutual fund that seeks maximum current income to the
extent consistent with stability of capital. The Fund seeks to achieve this
objective by investing exclusively in obligations issued and/or guaranteed as to
principal and interest by the United States government or its agencies and
instrumentalities and repurchase agreements secured by such obligations.
Fund Inception: February 1995
Fund Manager: Sharon S. Pichler
JANUS TAX-EXEMPT MONEY MARKET FUND
Fund Focus: A money market mutual fund that seeks maximum current income that is
exempt from federal income taxes to the extent consistent with stability of
capital. The Fund seeks to achieve this objective by investing primarily in
municipal securities whose interest is exempt from federal income taxes,
including the federal alternative minimum tax.
Fund Inception: February 1995
Fund Manager: Sharon S. Pichler
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 3
<PAGE>
EXPENSE INFORMATION
The following tables and example are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Funds. Shareholder Transaction Expenses are fees charged
directly to your individual account when you buy, sell or exchange shares. The
table below shows that you pay no such fees. Annual Operating Expenses are paid
out of each Fund's assets and include fees for portfolio management, maintenance
of shareholder accounts, shareholder servicing, accounting and other services.
Expenses may vary among the Funds for a number of reasons, including Fund size,
differences in management fees, average shareholder account size, and the extent
of foreign investments which entail greater transaction costs.
SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)
<TABLE>
<S> <C>
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested
dividends None
Deferred sales charges on redemptions None
Redemption fee* None
Exchange fee None
</TABLE>
* There is an $8 service fee for redemptions by wire.
4 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
ANNUAL OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL OPERATING
FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Flexible Income Fund 0.60% 0.27% 0.87%
Janus High-Yield Fund(1) 0.74% 0.29% 1.03%
Janus Federal Tax-Exempt Fund(1) 0.16% 0.50% 0.66%
Janus Short-Term Bond Fund(1) 0.12% 0.55% 0.67%
Janus Money Market Fund - Investor
Shares(1) 0.10% 0.50% 0.60%
Janus Government Money Market
Fund - Investor Shares(1) 0.10% 0.50% 0.60%
Janus Tax-Exempt Money Market
Fund - Investor Shares(1) 0.10% 0.50% 0.60%
</TABLE>
- --------------------------------------------------------------------------------
(1) Annual Operating Expenses are based on expenses before expense offset
arrangements for the fiscal year ended October 31, 1997. When applicable,
all expenses are stated net of waivers by Janus Capital. Waivers for the
Fixed-Income Funds are first applied against the management fee and then
against other expenses. Without such waivers, the Management Fee, Other
Expenses and Total Operating Expenses would have been 0.75%, 0.29% and
1.04%, respectively, for Janus High-Yield Fund; 0.61%, 0.50% and 1.11%,
respectively, for Janus Federal Tax-Exempt Fund; 0.65%, 0.55% and 1.20%,
respectively, for Janus Short-Term Bond Fund; and 0.20%, 0.50% and 0.70%,
respectively, for each of the Money Market Funds - Investor Shares. Janus
Capital may modify or terminate the waivers at any time upon at least 90
days' notice to the Trustees.
EXAMPLE
Assume you invest $1,000, the Funds return 5% annually and each Fund's expense
ratio remains as listed above. The example below shows the operating expenses
that you would indirectly bear as an investor in the Funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Flexible Income Fund $ 9 $28 $48 $107
Janus High-Yield Fund $10 $33 $57 $126
Janus Federal Tax-Exempt Fund $ 7 $21 $37 $ 82
Janus Short-Term Bond Fund $ 7 $21 $37 $ 83
Janus Money Market Fund - Investor Shares $ 6 $19 $33 $ 75
Janus Government Money Market
Fund - Investor Shares $ 6 $19 $33 $ 75
Janus Tax-Exempt Money Market
Fund - Investor Shares $ 6 $19 $33 $ 75
</TABLE>
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 5
<PAGE>
FINANCIAL HIGHLIGHTS
Unless otherwise noted, the information below is for fiscal periods ending on
October 31st of each year. The accounting firm of Price Waterhouse LLP has
audited the Funds' financial statements beginning with the year ended October
31, 1990. Their report is included in the Funds' Annual Reports, which are
incorporated by reference into the SAI. A detailed explanation of the Financial
Highlights can be found on page 11.
<TABLE>
<CAPTION>
JANUS FLEXIBLE INCOME FUND
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $9.65 $9.55 $8.96 $10.03 $9.26 $9.09
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.69 0.73 0.72 0.74 0.77 0.68
3. Net gains or (losses) on securities (both
realized and unrealized) 0.37 0.10 0.59 (0.86) 0.79 0.15
- ------------------------------------------------------------------------------------------------
4. Total from investment operations 1.06 0.83 1.31 (0.12) 1.56 0.83
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.69) (0.73) (0.72) (0.72) (0.77) (0.66)
6. Distributions (from capital gains) (0.02) -- -- (0.23) (0.02) --
- ------------------------------------------------------------------------------------------------
7. Total distributions (0.71) (0.73) (0.72) (0.95) (0.79) (0.66)
- ------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $10.00 $9.65 $9.55 $8.96 $10.03 $9.26
- ------------------------------------------------------------------------------------------------
9. Total return* 11.48% 9.01% 15.35% (1.26%) 17.48% 9.43%
- ------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $727 $604 $580 $377 $473 $205
11. Average net assets for the period (in
millions) $656 $604 $450 $429 $338 $144
12. Ratio of gross expenses to average net
assets** 0.87% 0.88% 0.96% N/A N/A N/A
13. Ratio of net expenses to average net
assets** 0.86% 0.87% 0.96% 0.93% 1.00%(2) 1.00%(2)
14. Ratio of net investment income to average
net assets** 7.10% 7.60% 7.91% 7.75% 7.96% 8.98%
15. Portfolio turnover rate** 207% 214% 250% 137% 201% 210%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from January 1, 1992 to October 31, 1992.
(2) The ratio of net expenses to average net assets was 1.01% in 1993 and 1.21%
in 1992 before waiver of certain Fund expenses.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
6 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
JANUS FLEXIBLE INCOME FUND
(CONTINUED) 1991(1) 1990(1) 1989(1) 1988(1)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $8.01 $9.35 $9.99 $9.92
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.68 0.95 0.97 0.92
3. Net gains or (losses) on securities (both realized
and unrealized) 1.29 (1.38) (0.56) 0.09
- ------------------------------------------------------------------------------------------------
4. Total from investment operations 1.97 (0.43) 0.41 1.01
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.72) (0.91) (0.97) (0.92)
6. Distributions (from capital gains) (0.17) -- (0.08) (0.02)
- ------------------------------------------------------------------------------------------------
7. Total distributions (0.89) (0.91) (1.05) (0.94)
- ------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $9.09 $8.01 $9.35 $9.99
- ------------------------------------------------------------------------------------------------
9. Total return* 25.98% (4.62%) 4.12% 10.70%
- ------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $72 $14 $18 $10
11. Average net assets for the period (in millions) $33 $15 $15 $7
12. Ratio of gross expenses to average net assets** N/A N/A N/A N/A
13. Ratio of net expenses to average net assets** 1.00%(2) 1.00%(2) 1.00%(2) 1.00%(2)
14. Ratio of net investment income to average net
assets** 9.38% 11.24% 10.00% 9.32%
15. Portfolio turnover rate** 88% 96% 75% 76%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal year ended on December 31st of each year.
(2) The ratio of net expenses to average net assets was 1.74% in 1991 before
waiver of certain Fund expenses. The ratio was 2% in prior years.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS HIGH-YIELD FUND
1997 1996(1)
<S> <C> <C>
- ------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $11.12 $10.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.97 0.80
3. Net gains or (losses) on securities (both realized and
unrealized) 0.82 1.12
- ------------------------------------------------------------------------------------
4. Total from investment operations 1.79 1.92
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.97) (0.80)
6. Distributions (from capital gains) (0.11) --
- ------------------------------------------------------------------------------------
7. Total distributions (1.08) (0.80)
- ------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $11.83 $11.12
- ------------------------------------------------------------------------------------
9. Total return* 16.94% 19.71%
- ------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $301 $211
11. Average net assets for the period (in millions) $266 $88
12. Ratio of gross expenses to average net assets** 1.03%(2) 1.01%(2)
13. Ratio of net expenses to average net assets** 1.00% 1.00%
14. Ratio of net investment income to average net assets** 8.45% 9.00%
15. Portfolio turnover rate** 404% 324%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from December 29, 1995 (inception) to October 31, 1996.
(2) The ratio was 1.04% in 1997 and 1.18% in 1996 before waiver of certain Fund
expenses.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 7
<PAGE>
<TABLE>
<CAPTION>
JANUS
FEDERAL TAX-EXEMPT FUND
1997 1996 1995 1994 1993(1)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $6.92 $6.88 $6.45 $7.30 $7.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.35 0.36 0.36 0.36 0.14
3. Net gains or (losses) on securities (both
realized and unrealized) 0.17 0.04 0.43 (0.83) 0.30
- -------------------------------------------------------------------------------------------------
4. Total from investment operations 0.52 0.40 0.79 (0.47) 0.44
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.35) (0.36) (0.36) (0.36) (0.14)
6. Distributions (from capital gains) -- -- -- (0.02) --
- -------------------------------------------------------------------------------------------------
7. Total distributions (0.35) (0.36) (0.36) (0.38) (0.14)
- -------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $7.09 $6.92 $6.88 $6.45 $7.30
- -------------------------------------------------------------------------------------------------
9. Total return* 7.72% 5.94% 12.60% (6.62%) 6.33%
- -------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $62 $45 $33 $26 $27
11. Average net assets for the period (in millions) $54 $36 $29 $28 $16
12. Ratio of gross expenses to average net assets** 0.66%(2) 0.68%(2)0.70%(2) N/A N/A
13. Ratio of net expenses to average net assets** 0.65% 0.65% 0.65% 0.65%(2) 0.75%(2)
14. Ratio of net investment income to average net
assets** 5.00% 5.18% 5.43% 5.20% 4.58%
15. Portfolio turnover rate** 304% 225% 164% 160% 124%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from May 3, 1993 (inception) to October 31, 1993.
(2) The ratio was 1.11% in 1997, 1.14% in 1996, 1.31% in 1995, 1.41% in 1994 and
1.60% in 1993 before waiver of certain Fund expenses.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
8 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
JANUS
SHORT-TERM BOND FUND
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $2.86 $2.84 $2.87 $3.02 $2.98 $3.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.17 0.16 0.18 0.18 0.14 0.01
3. Net gains or (losses) on securities (both
realized and unrealized) 0.04 0.02 (0.03) (0.15) 0.04 (0.02)
- --------------------------------------------------------------------------------------------------
4. Total from investment operations 0.21 0.18 0.15 0.03 0.18 (0.01)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.17) (0.16) (0.18) (0.17) (0.14) (0.01)
6. Distributions (from capital gains) -- -- -- (0.01) -- --
- --------------------------------------------------------------------------------------------------
7. Total distributions (0.17) (0.16) (0.18) (0.18) (0.14) (0.01)
- --------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $2.90 $2.86 $2.84 $2.87 $3.02 $2.98
- --------------------------------------------------------------------------------------------------
9. Total return* 7.70% 6.49% 5.55% 1.26% 6.17% (0.19%)
- --------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $58 $41 $48 $54 $76 $3
11. Average net assets for the period (in
millions) $48 $42 $47 $60 $37 $1
12. Ratio of gross expenses to average net
assets** 0.67%(2)0.67%(2)0.66%(2) N/A N/A N/A
13. Ratio of net expenses to average net
assets** 0.65% 0.65% 0.65% 0.65%(2)0.83%(2) 1.00%(2)
14. Ratio of net investment income to average
net assets** 6.03% 5.57% 6.67% 6.08% 4.86% 3.22%
15. Portfolio turnover rate** 133% 486% 337% 346% 372% 7%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from September 1, 1992 (inception) to October 31, 1992.
(2) The ratio was 1.20% in 1997, 1.23% in 1996, 1.23% in 1995, 1.15% in 1994,
1.40% in 1993 and 2.50% in 1992 before waiver of certain Fund expenses.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 9
<PAGE>
<TABLE>
<CAPTION>
JANUS
JANUS GOVERNMENT MONEY
MONEY MARKET FUND MARKET FUND
INVESTOR SHARES 1997 1996 1995(1) 1997 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income .05 .05 .04 .05 .05 .04
3. Net gains or (losses) on securities
(both realized and unrealized) -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------
4. Total from investment operations .05 .05 .04 .05 .05 .04
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (.05) (.05) (.04) (.05) (.05) (.04)
6. Distributions (from capital gains) -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------
7. Total distributions (.05) (.05) (.04) (.05) (.05) (.04)
- ---------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
9. Total return* 5.23% 5.13% 3.95% 5.11% 5.03% 3.90%
- ---------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $1,033 $774 $643 $132 $117 $119
11. Average net assets for the period (in
millions) $883 $676 $461 $123 $112 $87
12. Ratio of expenses to average net
assets** 0.60%(2)0.60%(2) 0.60%(2) 0.60%(2)0.60%(2) 0.60%(2)
13. Ratio of net investment income to
average net assets** 5.09% 5.01% 5.56% 5.42% 4.91% 5.40%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from February 15, 1995 (inception) to October 31, 1995.
(2) The ratio of expenses to average net assets was 0.70% before voluntary
reduction of fees.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS
TAX-EXEMPT MONEY
MARKET FUND
INVESTOR SHARES 1997 1996 1995(1)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income .03 .03 .02
3. Net gains or (losses) on securities (both realized and
unrealized) -- -- --
- ----------------------------------------------------------------------------------------
4. Total from investment operations .03 .03 .02
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (.03) (.03) (.02)
6. Distributions (from capital gains) -- -- --
- ----------------------------------------------------------------------------------------
7. Total distributions (.03) (.03) (.02)
- ----------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------
9. Total return* 3.20% 3.27% 2.40%
- ----------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $81 $75 $67
11. Average net assets for the period (in millions) $76 $69 $57
12. Ratio of expenses to average net assets** 0.60%(2)0.60%(2) 0.60%(2)
13. Ratio of net investment income to average net assets** 3.14% 3.22% 3.38%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal period from February 15, 1995 (inception) to October 31, 1995.
(2) The ratio of expenses to average net assets was 0.70% before voluntary
reduction of fees.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
10 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
UNDERSTANDING THE
FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights tables. The tables contain important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Funds' Annual
Reports contain additional information about each Fund's performance, including
a comparison to an appropriate securities index. For a copy of your Fund's
Annual Report, call 1-800-525-8983.
NET ASSET VALUE ("NAV") is the value of a single share of a Fund. It is computed
by adding the value of all of a Fund's investments and other assets, subtracting
any liabilities and dividing the result by the number of shares outstanding. The
difference between line 1 and line 8 in the Financial Highlights tables
represents the change in value of a share of a Fund over the fiscal period, but
not its total return. The Money Market Funds' NAV is expected to be $1.00.
NET INVESTMENT INCOME is the per share amount of dividends and interest income
earned on securities held by a Fund, less Fund expenses. DIVIDENDS (FROM NET
INVESTMENT INCOME) are the per share amount that a Fund paid from net investment
income.
NET GAINS OR (LOSSES) ON SECURITIES is the per share increase or decrease in
value of the securities a Fund holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. DISTRIBUTIONS (FROM CAPITAL GAINS) are the
per share amount that a Fund paid from net realized gains.
TOTAL RETURN is the percentage increase or decrease in the value of an
investment over a stated period of time. Total return 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.
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS is the total of a Fund's operating
expenses before expense offset arrangements divided by its average net assets
for the stated period. The Funds were not required to disclose the ratio of
gross expenses to average net assets prior to 1995. RATIO OF NET EXPENSES TO
AVERAGE NET ASSETS reflects reductions in a Fund's expenses through the use of
brokerage commissions and uninvested cash balances earning interest or balance
credits.
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS is a Fund's net investment
income divided by its average net assets for the stated period.
PORTFOLIO TURNOVER RATE is a measure of the amount of a fund's buying and
selling activity. It is computed by dividing total purchases or sales, whichever
is less, by the average monthly market value of a Fund's portfolio securities.
The Money Market Funds do not calculate portfolio turnover.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 11
<PAGE>
THE FIXED-INCOME
FUNDS IN DETAIL
This section takes a closer look at the Funds' investment objectives, policies
and the securities in which they invest. Policies that are noted as
"fundamental" cannot be changed without a shareholder vote. All other policies,
including each Fund's investment objective, are not fundamental and may be
changed by the Funds' Trustees without a shareholder vote. You will be notified
of any material changes.
You should carefully consider your own investment goals, time horizon (the
amount of time you plan to hold your shares of a Fund) and risk tolerance before
investing in a Fund. If there is a material change in a Fund's objective or
policies, you should consider whether that Fund remains an appropriate
investment for you. There is no guarantee that any Fund will meet its investment
objective.
You should also carefully review the "Additional Risk Factors" section of this
Prospectus for a more detailed discussion of the risks associated with certain
investment techniques. Appendix A includes more detailed descriptions of
investment terms used throughout this Prospectus.
- --------------------------------------------------------------------------------
FIXED-INCOME FUNDS
Investment Objective:
Janus Flexible Income Fund........................................Total Return
Others..................................................................Income
Primary Holdings:....................................Income-Producing Securities
Shareholder's Investment Horizon:
Janus Short-Term Bond Fund.........................Short- to Intermediate-Term
Others..............................................Intermediate- to Long-Term
- --------------------------------------------------------------------------------
JANUS FLEXIBLE INCOME FUND
The investment objective of this Fund is to obtain maximum total return,
consistent with preservation of capital. This Fund pursues its objective
primarily through investments in income-producing securities. Total return is
expected to result from a combination of current income and capital
appreciation, although income will normally be the dominant component of total
return. As a fundamental policy, this Fund will invest at least 80% of its
assets in income-producing securities.
Janus Flexible Income Fund may invest in a wide variety of income-producing
securities including corporate bonds and notes, government securities,
indexed/structured securities, preferred stock, income-producing common stocks,
debt securities that are convertible or exchangeable into equity securities, and
debt securities that carry with them the right to acquire equity securities as
evidenced by warrants attached to or acquired with the securities. The Fund may
invest to a lesser degree in common stocks, other equity securities or debt
securities that are not currently paying dividends or
12 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
interest. The Fund may purchase securities of any maturity and quality and the
average maturity and quality of its portfolio may vary substantially.
Janus Flexible Income Fund may invest without limit in foreign securities,
including those of corporate and government issuers. The Fund may invest without
limit in high-yield/high-risk securities and may have substantial holdings of
such securities. The Fund may invest without limit in mortgage- and asset-backed
securities and in zero coupon, pay-in-kind and step coupon securities. The risks
of foreign securities and high-yield securities are described under "Additional
Risk Factors" on pages 19-22.
The Fund may purchase defaulted debt securities if, in the opinion of Janus
Capital, it appears likely that the issuer may resume interest payments or other
advantageous developments appear likely in the near term. Defaulted debt
securities may be illiquid and subject to the Fund's limit on illiquid
investments.
JANUS HIGH-YIELD FUND
The primary investment objective of this Fund is to obtain high current income.
Capital appreciation is a secondary objective when consistent with its primary
objective. Capital appreciation may result, for example, from an improvement in
the credit standing of an issuer whose securities are held by this Fund or from
a general lowering of interest rates, or both. This Fund pursues its objectives
by investing primarily in high-yield/high-risk fixed-income securities. This
Fund will normally invest at least 65% of its total assets in those securities.
In addition, the Fund may invest in all of the types of securities previously
described under Janus Flexible Income Fund.
The high yields sought by this Fund are expected to result primarily from
investments in longer-term, lower quality corporate bonds, commonly referred to
as "junk" bonds. This Fund considers lower quality securities to be securities
rated below investment grade by established rating agencies or unrated
securities of comparable quality. Securities rated BB or lower by Standard &
Poor's Ratings Services ("Standard & Poor's") or Ba or lower by Moody's
Investors Service, Inc. ("Moody's") are below investment grade. Lower quality
securities are often considered to be more speculative and involve greater risk
of default or price changes due to changes in interest rates, economic
conditions and the issuer's credit-worthiness. As a result, their market prices
tend to fluctuate more than higher quality securities of comparable maturity.
Additional risks of lower quality securities are described under "Additional
Risk Factors" on pages 19-22.
JANUS FEDERAL TAX-EXEMPT FUND
The investment objective of this Fund is to seek as high a level of current
income exempt from federal income tax as is consistent with preservation of
capital. This Fund pursues its objective by investing primarily in municipal
obligations of any maturity whose interest is exempt from federal income tax.
Because of this emphasis, capital appreciation is not a significant investment
consideration. However, to the extent that capital gains are realized, they are
subject to federal income tax. As a fundamental policy, this Fund will normally
invest at least 80% of its net assets in securities whose interest is exempt
from federal income tax, including the federal alternative minimum
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 13
<PAGE>
tax. The Fund is designed for investors who seek a higher after-tax yield than
comparable investing in taxable securities.
Municipal securities in which the Fund may invest include general obligation
bonds, revenue bonds, industrial development bonds, municipal lease obligations,
certificates of participation (not to exceed 10% of assets), inverse floaters
(not to exceed 5% of assets), instruments with demand features, tender option
bonds and standby commitments.
At times, this Fund may invest more than 25% of its assets in tax-exempt
securities that are related in such a way that an economic, business, or
political development or change affecting one security could similarly affect
the other securities; for example, securities whose issuers are located in the
same state, or securities whose interest is derived from revenues of similar
type projects. The Fund may invest more than 25% of its assets in industrial
development bonds.
Subject to the policies above, the Fund may invest up to 25% of its assets in
mortgage-and asset-backed securities and up to 10% of its assets in zero coupon,
pay-in-kind and step coupon securities. The Fund will invest less than 35% of
its net assets in high-yield/high-risk securities.
JANUS SHORT-TERM BOND FUND
The investment objective of this Fund is to seek as high a level of current
income as is consistent with preservation of capital. This Fund pursues its
objective by investing primarily in short- and intermediate-term fixed-income
securities. Under normal circumstances, it is expected that this Fund's
dollar-weighted average portfolio effective maturity will not exceed three
years.
Effective maturity is the weighted average period over which a security's
principal is expected to be paid. It differs from stated maturity in that it
estimates the effect of expected principal prepayments and call provisions.
Targeting effective maturity provides additional flexibility in portfolio
management but, all else being equal, could result in higher volatility than a
fund targeting a stated maturity or maturity range. See the question and answer
section below for a more detailed discussion of the Fund's maturity policy.
Janus Short-Term Bond Fund will normally invest at least 65% of its assets in
debt securities. Subject to this policy and subject to its maturity limits, the
Fund may invest in the types of securities previously described under Janus
Flexible Income Fund except that the Fund will invest less than 35% of its net
assets in high-yield/high-risk securities, its investments in mortgage- and
asset-backed securities will not exceed 25% of assets and its investments in
zero coupon, pay-in-kind and step coupon securities will not exceed 10% of
assets.
TYPES OF INVESTMENTS
In addition to the investment policies described above, each Fixed-Income Fund
may purchase securities on a when-issued, delayed delivery or forward commitment
basis. In addition, each Fund may use futures, options, swaps and other
derivatives for hedging purposes or for non-hedging purposes such as seeking to
enhance return. See
14 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
"Additional Risk Factors" on pages 19-22. When its portfolio manager is unable
to locate investment opportunities with favorable risk/reward characteristics,
the cash position of any Fund may increase and the Fund may have substantial
holdings of cash or cash equivalent short-term obligations. See "General
Portfolio Policies" on page 17.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE JANUS FIXED-INCOME FUNDS.
Q: HOW DO INTEREST RATES AFFECT THE
VALUE OF MY INVESTMENT?
A: 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. High-yield bond
prices are generally less directly responsive to interest rate changes than
investment grade issues and may not always follow this pattern. A bond fund's
average-weighted effective maturity and its duration are measures of how the
fund may react to interest rate changes.
Q: WHAT IS MEANT BY A FUND'S
"AVERAGE-WEIGHTED EFFECTIVE MATURITY"?
A: 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. Some types of
bonds, such as mortgage-backed securities, which are subject to prepayment risk,
and securities with call provisions, may also have an "effective maturity" that
is shorter than the stated date. With respect to GNMA securities and other
mortgage-backed securities, effective maturity is likely to be substantially
less than the stated maturities of the mortgages in the underlying pools. With
respect to obligations with call provisions, effective maturity is typically the
next call date on which the obligation reasonably may be expected to be called.
Securities without prepayment or call provisions generally have an effective
maturity equal to their stated maturity. Dollar-weighted effective maturity is
calculated by averaging the effective maturity of bonds held by a Fund with each
effective maturity "weighted" according to the percentage of net assets that it
represents.
Q: WHAT IS MEANT BY A FUND'S "DURATION"?
A: A bond's duration indicates the time it will take an investor to recoup his
investment. Unlike average maturity, duration reflects both principal and
interest payments. Generally, the higher the coupon rate on a bond, the lower
its duration will be. The duration of a bond fund is calculated by averaging the
duration of bonds held by a fund with each duration "weighted" according to the
percentage of net assets that it represents. Because duration accounts for
interest payments, a Fund's duration is usually shorter than its average
maturity.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 15
<PAGE>
Q: HOW DO THE FIXED-INCOME FUNDS
MANAGE INTEREST RATE RISK?
A: Each Fixed-Income Fund may vary the average-weighted effective maturity of
its portfolio to reflect its portfolio manager's analysis of interest rate
trends and other factors. A Fund's average-weighted effective maturity will tend
to be shorter when its portfolio manager expects interest rates to rise and
longer when its portfolio manager expects interest rates to fall. The Funds may
also use futures, options and other derivatives to manage interest rate risk.
See "Additional Risk Factors" on pages 19-22.
Q: WHAT IS MEANT BY "CREDIT QUALITY"?
A: Credit quality measures the likelihood that the issuer will meet its
obligations on a bond. One of the fundamental risks associated with all bond
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.
Q: HOW IS CREDIT QUALITY MEASURED?
A: Ratings published by nationally recognized statistical rating agencies such
as Standard & Poor's and 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.
Q: WHAT IS A HIGH-YIELD/HIGH-RISK SECURITY?
A: A high-yield security (also called a "junk" bond) is a debt security rated
below investment grade by major rating agencies (i.e., BB or lower by Standard &
Poor's or Ba or lower by Moody's) or an unrated bond of similar quality. It
presents greater risk of default (the failure to make timely interest and
principal payments) than higher quality bonds.
Q: WHAT RISKS DO HIGH-YIELD/HIGH-RISK
SECURITIES PRESENT?
A: High-yield securities are often considered to be more speculative and
involve greater risk of default or price changes due to changes in economic and
industry conditions and the issuer's creditworthiness. Their market prices tend
to fluctuate more than higher quality securities as a result of changes in these
factors.
The default rate of lower quality debt securities is likely to be higher when
issuers have difficulty meeting projected goals or obtaining additional
financing. This could occur during economic recessions or periods of high
interest rates. In addition, there may be a smaller market for lower quality
securities than for higher quality securities, making lower quality securities
more difficult to sell promptly at an acceptable price.
16 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
The junk bond market can experience sudden and sharp price swings. Because Janus
Flexible Income Fund and Janus High-Yield Fund may invest a significant portion
of their portfolios in high-yield/high-risk securities, investors in such Funds
should be willing to tolerate a corresponding increase in the risk of
significant and sudden changes in NAV.
Q: WHAT ARE THE TAX ADVANTAGES OF INVESTING IN
JANUS FEDERAL TAX-EXEMPT FUND?
A: Most regular income dividends you receive from Janus Federal Tax-Exempt
Fund will not be subject to federal income tax. Additionally, your state may not
tax the portion of this Fund's income derived from obligations issued by your
state (if any). Capital gains distributed by this Fund are taxable to you. See
"Distributions and Taxes" on pages 46-48. The higher your income tax level is,
the more you will benefit from tax-exempt investing.
Q: HOW DO THE FIXED-INCOME FUNDS
DIFFER FROM EACH OTHER?
A: The chart below shows that the Fixed-Income Funds differ substantially in
terms of the type, credit quality and interest rate risk of the securities in
which they invest.
<TABLE>
<CAPTION>
PRIMARY INTEREST RATE
INVESTMENT TYPE CREDIT RISK RISK
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Flexible Income Fund Corporate Bonds High High
Janus High-Yield Fund Corporate Bonds Highest Moderate
Janus Federal Tax-Exempt Fund Municipal Securities Moderate High
Janus Short-Term Bond Fund Corporate Bonds Moderate Low
</TABLE>
GENERAL PORTFOLIO POLICIES
Unless otherwise stated, each of the following policies applies to all of the
Fixed-Income Funds. The percentage limitations included in these policies and
elsewhere in this Prospectus apply at the time of purchase of the security. For
example, if a Fund exceeds a limit as a result of market fluctuations or the
sale of other securities, it will not be required to dispose of any securities.
CASH POSITION
When a Fixed-Income 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 Fixed-Income Funds do not always
stay fully invested in stocks and bonds. Cash or similar investments are a
residual - they represent the assets that remain after a portfolio manager has
committed available assets to desirable investment opportunities. Partly because
the portfolio managers act independently of each other, the cash positions of
the Fixed-Income Funds may vary significantly. Larger hedged positions and/or
larger cash positions may serve as a means of preserving capital in unfavorable
market conditions.
Securities that the Fixed-Income Funds may invest in as a means of receiving a
return on idle cash include high-grade commercial paper, certificates of
deposit, repurchase
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 17
<PAGE>
agreements or other short-term debt obligations. The Fixed-Income Funds may also
invest in money market funds (including funds managed by Janus Capital). Janus
Federal Tax-Exempt Fund may invest in such securities even though they may be
federally taxable. When a Fixed-Income Fund is hedged or its investments in cash
or similar investments increase, it may not participate in stock or bond market
advances or declines to the same extent that it would if the Fund was not hedged
or remained more fully invested in stocks or bonds.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. All of the Fixed-Income Funds
qualify as diversified funds under the 1940 Act, and are subject to the
following diversification requirements:
- - As a fundamental policy, no Fixed-Income Fund may own more than 10% of the
outstanding voting shares of any issuer.
- - As a fundamental policy, with respect to 75% of the total assets of each
Fixed-Income Fund, no Fund will purchase a security of any issuer (other than
cash items and U.S. government securities, as defined in the 1940 Act) if such
purchase would cause the Fund's holdings of that issuer to amount to more than
5% of that Fund's total assets.
- - No Fund will invest more than 25% of its total assets in a single issuer
(other than U.S. government securities).
INDUSTRY CONCENTRATION
As a fundamental policy, no Fixed-Income Fund will invest 25% or more of its
total assets in any particular industry (excluding U.S. government securities
and, for Janus Federal Tax-Exempt Fund, certain municipal obligations).
PORTFOLIO TURNOVER
Each Fixed-Income Fund generally intends to purchase securities for long-term
investment rather than short-term gains. However, short-term transactions may
result from liquidity needs, securities having reached a price or yield
objective, changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the initial
investment decision. Changes are made in a Fixed-Income Fund's portfolio
whenever its portfolio manager believes such changes are desirable. Portfolio
turnover rates are generally not a factor in making buy and sell decisions.
To a limited extent, a Fixed-Income Fund may purchase securities in anticipation
of relatively short-term price gains. A Fixed-Income 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.
ILLIQUID INVESTMENTS
Each Fixed-Income 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. If illiquid securities exceed 15% of a
Fund's net assets after the time of
18 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
purchase, the Fund will take steps to reduce in an orderly fashion its holdings
of illiquid securities. 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 will follow guidelines established by the
Funds' Trustees in making liquidity determinations for Rule 144A securities and
certain other securities, including privately placed commercial paper and
municipal lease obligations.
BORROWING AND LENDING
Each Fixed-Income Fund may borrow money and lend securities or other assets, as
follows:
- - Each Fixed-Income Fund may borrow money for temporary or emergency purposes in
amounts up to 25% of its total assets.
- - Each Fixed-Income Fund may mortgage or pledge securities as collateral for
borrowings in amounts up to 15% of its net assets.
- - As a fundamental policy, each Fixed-Income 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.
Under the terms of an exemptive order received from the SEC, the Fixed-Income
Funds may borrow money from or lend money to each other and other funds that
permit such transactions and for which Janus Capital serves as investment
adviser. All such borrowing and lending will be subject to the above percentage
limits.
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 (such as Standard & Poor's
and Moody's). Please refer to Appendix B for a description of rating categories.
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
quality securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.
Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged. In the event of a default, a Fixed-Income Fund would
experience a reduction of its income and could expect a decline in the market
value of the defaulted securities.
The market for lower quality securities is generally less liquid than the market
for higher quality securities. Adverse publicity and investor perceptions as
well as new or proposed
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 19
<PAGE>
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. Sovereign debt
of foreign governments is generally rated by country. Because these ratings do
not take into account individual factors relevant to each issue and may not be
updated regularly, Janus Capital may treat such securities as unrated debt.
The market prices of high-yield securities structured as zero coupon or
pay-in-kind securities are generally affected to a greater extent by interest
rate changes and tend to be more volatile than securities which pay interest
periodically. In addition, zero coupon, pay-in-kind and delayed interest bonds
often do not pay interest until maturity. However, the Fixed-Income Funds must
recognize a computed amount of interest income and pay dividends to shareholders
even though they have received no cash. In some instances, the Fixed-Income
Funds may have to sell securities to have sufficient cash to pay the dividends.
FOREIGN SECURITIES
Investments in foreign securities, including those of foreign governments, may
involve greater risks than investing in comparable domestic securities.
Securities of some foreign companies and governments may be traded in the United
States, but many foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
- - CURRENCY RISK. A Fixed-Income Fund may buy the local currency when it buys a
foreign currency denominated security and sell the local currency when it
sells the security. As long as a Fund holds a foreign denominated security,
its value will be affected by the value of the local currency relative to the
U.S. dollar. When a Fund sells a foreign denominated 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.
- - POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to heightened
political and economic risks, particularly in underdeveloped or developing
countries which may have relatively unstable governments and economies based
on only a few industries. In some countries, there is the risk that the
government may take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of a Fixed-Income Fund's
assets from that country. The Fixed-Income Funds may invest in emerging market
countries. Emerging market countries involve greater risks such as immature
economic structures, national policies restricting investments by foreigners,
and different legal systems.
- - 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.
- - 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
20 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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.
- - 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.
Foreign securities purchased indirectly (e.g., depositary receipts) are subject
to many of the above risks, including currency risk, because their values depend
on the performance of a foreign security denominated in its home currency.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Each Fixed-Income 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 Fixed-Income
Funds intend to use most derivative instruments primarily to hedge the value of
their portfolios against potential adverse movements in securities prices,
foreign currency markets or interest rates. To a limited extent, the
Fixed-Income Funds may also use derivative instruments for non-hedging purposes
such as seeking to increase income or otherwise seeking to enhance return.
Please refer to Appendix A to this Prospectus and the SAI for a more detailed
discussion of these instruments.
The use of derivative instruments exposes the Fixed-Income Funds to additional
investment risks and transaction costs. Risks inherent in the use of derivative
instruments include:
- - the risk that interest rates, securities prices and currency markets will not
move in the direction that a portfolio manager anticipates;
- - imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies being
hedged;
- - the fact that skills needed to use these strategies are different from those
needed to select portfolio securities;
- - inability to close out certain hedged positions to avoid adverse tax
consequences;
- - 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;
- - leverage risk, that is, the risk that adverse price movements in an instrument
can result in a loss substantially greater than a Fixed-Income Fund's initial
investment in that instrument (in some cases, the potential loss is
unlimited); and
- - particularly in the case of privately-negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave a
Fixed-Income Fund worse off than if it had not entered into the position.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 21
<PAGE>
Although the Fixed-Income Funds believe the use of derivative instruments will
benefit the Funds, a Fund's performance could be worse than if the Fund had not
used such instruments if a portfolio manager's judgement proves incorrect.
When a Fixed-Income Fund invests in a derivative instrument, it may be required
to segregate cash and other 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.
SHORT SALES
Each Fixed-Income Fund may engage in "short sales against the box." This
technique involves selling either a security that a Fund owns, or a security
equivalent in kind and amount to the security sold short that the Fund has the
right to obtain, for delivery at a specified date in the future. A Fund may
enter into a short sale against the box to hedge against anticipated declines in
the market price of portfolio securities. If the value of the securities sold
short increases prior to the scheduled delivery date, a Fund loses the
opportunity to participate in the gain.
SPECIAL SITUATIONS
Each Fixed-Income Fund may invest in "special situations" from time to time. A
special situation arises when, in the opinion of a Fund's portfolio manager, the
securities of a particular issuer will be recognized and appreciate in value due
to a specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
See Appendix A for risks associated with certain other investments.
THE MONEY MARKET FUNDS
IN DETAIL
INVESTMENT OBJECTIVES
The investment objective of each of Janus Money Market Fund and Janus Government
Money Market Fund is to seek maximum current income to the extent consistent
with stability of capital. The investment objective of Janus Tax-Exempt Money
Market Fund is to seek maximum current income that is exempt from federal income
taxes to the extent consistent with stability of capital. There can be no
assurance that a Fund will achieve its investment objective or that the Shares
will be able to maintain a stable net asset value of $1.00 per share.
22 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
COMMON INVESTMENT POLICIES
The Money Market Funds will invest only in eligible high quality, short-term
money market instruments that present minimal credit risks, as determined by
Janus Capital, pursuant to procedures adopted by the Trustees. Each Money Market
Fund may invest only in U.S. dollar-denominated instruments that have a
remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7
under the 1940 Act) and will maintain a dollar-weighted average portfolio
maturity of 90 days or less.
Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities (as defined below), each Money Market Fund will not invest
more than 5% of its total assets in the securities of any one issuer. Up to 25%
of Janus Tax-Exempt Money Market Fund's total assets may be invested without
regard to this limit until July 1, 1998. Investment in demand features,
guarantees and other types of instruments or features are subject to the
diversification limits under Rule 2a-7. A Money Market Fund may not invest more
than 25% of its total assets in any one industry, except that this limit does
not apply to U.S. Government Securities, bank obligations or municipal
securities. To ensure adequate liquidity, no Money Market Fund may invest more
than 10% of its net assets in illiquid investments, including repurchase
agreements maturing in more than seven days (unless subject to a demand feature)
and certain time deposits that are subject to early withdrawal penalties and
mature in more than seven days. Because the Money Market Funds are typically
used as a cash management vehicle, they intend to maintain a high degree of
liquidity. Janus Capital determines and monitors the liquidity of portfolio
securities under the supervision of the Trustees.
RATINGS
High quality money market instruments include those that (i) are rated (or, if
unrated, are issued by an issuer with comparable outstanding short-term debt
that is rated) in one of the two highest rating categories for short-term debt
by any two nationally recognized statistical rating organizations ("NRSROs") or,
if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise
unrated and determined by Janus Capital to be of comparable quality. Each Money
Market Fund, except Janus Tax-Exempt Money Market Fund, will invest at least 95%
of its total assets in securities in the highest rating category (as determined
pursuant to Rule 2a-7). Descriptions of the rating categories of Standard &
Poor's, Moody's, and certain other NRSROs are contained in Appendix B. A further
description of the Money Market Funds' investment policies is included in the
Money Market Funds' SAI.
Although each Money Market Fund only invests in high quality money market
instruments, an investment in a Money Market Fund is subject to risk even if all
securities in a Money Market Fund's portfolio are paid in full at maturity. All
money market instruments, including U.S. Government Securities, can change in
value as a result of changes in interest rates, the issuer's actual or perceived
creditworthiness or the issuer's ability to meet its obligations.
TYPES OF INVESTMENTS
JANUS MONEY MARKET FUND
Janus Money Market Fund pursues its objective by investing primarily in high
quality debt obligations and obligations of financial institutions. The Fund may
also invest in
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 23
<PAGE>
U.S. Government Securities (as defined below) and municipal securities, although
the Fund expects to invest in such securities to a lesser degree.
DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers, including
commercial paper (short-term promissory notes issued by companies to finance
their, or their affiliates' current obligations), notes and bonds, and variable
amount master demand notes. The payment obligations on these instruments may be
backed by securities, swap agreements or other assets, by a guarantee of a third
party or solely by the unsecured promise of the issuer to make payments when
due. The Fund may invest in privately issued commercial paper or other
securities that are restricted as to disposition under the federal securities
laws. In general, sales of these securities may not be made absent registration
under the Securities Act of 1933 (the "1933 Act") or the availability of an
appropriate exemption. Pursuant to Section 4(2) of the 1933 Act or Rule 144A
adopted under the 1933 Act, however, some of these securities are eligible for
resale to institutional investors, and accordingly, Janus Capital may determine
that a liquid market exists for such a security pursuant to guidelines adopted
by the Trustees.
OBLIGATIONS OF FINANCIAL INSTITUTIONS
The Fund may invest in obligations of financial institutions. Examples of
obligations in which the Fund may invest include negotiable certificates of
deposit, bankers' acceptances, time deposits and other obligations of U.S. banks
(including savings and loan associations) having total assets in excess of one
billion dollars and U.S. branches of foreign banks having total assets in excess
of ten billion dollars. The Fund may also invest in Eurodollar and Yankee bank
obligations as discussed below and other U.S. dollar-denominated obligations of
foreign banks having total assets in excess of ten billion dollars that Janus
Capital believes are of an investment quality comparable to obligations of U.S.
banks in which the Fund may invest.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. Time deposits are non-negotiable deposits with a banking institution that
earn a specified interest rate over a given period. Fixed time deposits, which
are payable at a stated maturity date and bear a fixed rate of interest,
generally may be withdrawn on demand by the Fund but may be subject to early
withdrawal penalties that could reduce the Fund's yield. Unless there is a
readily available market for them, time deposits that are subject to early
withdrawal penalties and that mature in more than seven days will be treated as
illiquid securities.
Eurodollar bank obligations are dollar-denominated certificates of deposit or
time deposits issued outside the U.S. capital markets by foreign branches of
U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.
Foreign, Eurodollar (and to a limited extent, Yankee) bank obligations are
subject to certain sovereign risks. One such risk is the possibility that a
foreign government might prevent dollar-denominated funds from flowing across
its borders. Other risks include: adverse political and economic developments in
a foreign country; the extent and quality
24 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
of government regulation of financial markets and institutions; the imposition
of foreign withholding taxes; and expropriation or nationalization of foreign
issuers.
U.S. GOVERNMENT SECURITIES
The Fund may invest without limit in U.S. Government Securities as described
below under "Janus Government Money Market Fund."
MUNICIPAL SECURITIES
The Fund may invest in obligations of states, territories or possessions of the
United States and their subdivisions, authorities and corporations as described
below under "Janus Tax-Exempt Money Market Fund." These obligations may pay
interest that is exempt from federal income taxation.
JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund pursues its objective by investing
exclusively in obligations issued and/or guaranteed as to principal and interest
by the United States government or by its agencies and instrumentalities and
repurchase agreements secured by such obligations.
U.S. GOVERNMENT SECURITIES
U.S. Government Securities shall have the meaning set forth in the 1940 Act. The
1940 Act defines U.S. Government Securities to include securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities. U.S.
Government Securities may also include repurchase agreements collateralized by
and municipal securities escrowed with or refunded with U.S. government
securities. U.S. Government Securities in which the Fund may invest include U.S.
Treasury securities and obligations issued or guaranteed by U.S. government
agencies and instrumentalities that are backed by the full faith and credit of
the U.S. government, such as those guaranteed by the Small Business
Administration or issued by the Government National Mortgage Association. In
addition, U.S. Government Securities in which the Fund may invest include
securities supported primarily or solely by the creditworthiness of the issuer,
such as securities of the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation and the Tennessee Valley Authority. There is no
guarantee that the U.S. government will support securities not backed by its
full faith and credit. Accordingly, although these securities have historically
involved little risk of loss of principal if held to maturity, they may involve
more risk than securities backed by the full faith and credit of the U.S.
government.
JANUS TAX-EXEMPT MONEY MARKET FUND
Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily
in municipal securities whose interest is exempt from federal income taxes,
including the federal alternative minimum tax. Although the Fund will attempt to
invest substantially all of its assets in municipal securities whose interest is
exempt from federal income taxes, the Fund reserves the right to invest up to
20% of its net assets in securities whose interest is federally taxable.
Additionally, when its portfolio manager is unable to locate investment
opportunities with desirable risk/reward characteristics, the Fund may invest
without limit in cash and cash equivalents, including obligations that may be
federally taxable (See "Taxable Investments").
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 25
<PAGE>
MUNICIPAL SECURITIES
The municipal securities in which the Fund may invest include municipal notes
and short-term municipal bonds. Municipal notes are generally used to provide
for the issuer's short-term capital needs and generally have maturities of 397
days or less. Examples include tax anticipation and revenue anticipation notes,
which generally are issued in anticipation of various seasonal revenues, bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Short-term municipal bonds may include "general obligation bonds," which are
secured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest; "revenue bonds," which are generally paid from the
revenues of a particular facility or a specific excise tax or other source; and
"industrial development bonds," which are issued by or on behalf of public
authorities to provide funding for various privately operated industrial and
commercial facilities. The Fund may also invest in high quality participation
interests in municipal securities. A more detailed description of various types
of municipal securities is contained in Appendix B in the Money Market Funds'
SAI.
When the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
issuing entity and a security is backed only by the assets and revenues of the
issuing entity, that entity will be deemed to be the sole issuer of the
security. Similarly, in the case of an industrial development bond backed only
by the assets and revenues of the non-governmental issuer, the non-governmental
issuer will be deemed to be the sole issuer of the bond.
At times, the Fund may invest more than 25% of its total assets in tax-exempt
securities that are related in such a way that an economic, business, or
political development or change affecting one such security could similarly
affect the other securities; for example, securities whose issuers are located
in the same state, or securities whose interest is derived from revenues of
similar type projects. The Fund may also invest more than 25% of its assets in
industrial development bonds or participation interests therein.
Yields on municipal securities are dependent on a variety of factors, including
the general conditions of the money market and of the municipal bond and
municipal note markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The achievement of the Fund's investment
objective is dependent in part on the continuing ability of the issuers of
municipal securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due. Obligations of issuers of municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Bankruptcy
Reform Act of 1978, as amended. Therefore, the possibility exists, that as a
result of litigation or other conditions, the ability of any issuer to pay, when
due, the principal of and interest on its municipal securities may be materially
affected.
MUNICIPAL LEASES
The Fund may invest in municipal leases or participation interests therein.
Municipal leases are municipal securities which may take the form of a lease or
an installment purchase or conditional sales contract. Municipal leases are
issued by state and local governments and authorities to acquire a wide variety
of equipment and facilities. Lease obligations may not be backed by the issuing
municipality's credit and may involve risks
26 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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
payment on an annual basis, which may result in termination of the lease and
possible default. Janus Capital may determine that a liquid market exists for
municipal lease obligations pursuant to guidelines established by the Trustees.
TAXABLE INVESTMENTS
As discussed above, although the Fund will attempt to invest substantially all
of its assets in municipal securities whose interest is exempt from federal
income tax, the Fund may under certain circumstances invest in certain
securities whose interest is subject to such taxation. These securities include:
(i) short-term obligations of the U.S. government, its agencies or
instrumentalities, (ii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than one
billion dollars and whose deposits are insured by the Federal Deposit Insurance
Corporation, (iii) commercial paper and (iv) repurchase agreements as described
below.
COMMON INVESTMENT TECHNIQUES
PARTICIPATION INTERESTS
The Money Market Funds may invest in participation interests in any type of
security in which the Money Market Funds may invest. A participation interest
gives a Money Market Fund an undivided interest in the underlying securities in
the proportion that the Money Market Fund's participation interest bears to the
total principal amount of the underlying securities. Participation interests
usually carry a demand feature, as described below, backed by a letter of credit
or guarantee of the institution that issued the interests permitting the holder
to tender them back to the institution.
DEMAND FEATURES
The Money Market Funds may invest in securities that are subject to puts and
stand-by commitments ("demand features"). Demand features give the Money Market
Funds the right to resell securities at specified periods prior to their
maturity dates to the seller or to some third party at an agreed-upon price or
yield. Securities with demand features may involve certain expenses and risks,
including the inability of the issuer of the instrument to pay for the
securities at the time the instrument is exercised, non-marketability of the
instrument and differences between the maturity of the underlying security and
the maturity of the instrument. Securities may cost more with demand features
than without them. Demand features can serve three purposes: to shorten the
maturity of a variable or floating rate security, to enhance the instrument's
credit quality and to provide a source of liquidity. Demand features are often
issued by third party financial institutions, generally domestic and foreign
banks. Accordingly, the credit quality and liquidity of the Money Market Funds'
investments may be dependent in part on the credit quality of the banks
supporting the Money Market Funds' investments. This will result in exposure to
risks pertaining to the banking industry, including the foreign banking
industry. Brokerage firms and insurance companies also provide certain liquidity
and credit support. A substantial portion of the Janus Tax-Exempt Money Market
Fund's portfolio in particular may consist of securities backed by banks and
other financial institutions, and thus adverse changes in the credit quality of
these institutions could cause losses to the Fund and affect its share price.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 27
<PAGE>
VARIABLE AND FLOATING RATE SECURITIES
The securities in which the Money Market Funds invest may have variable or
floating rates of interest. 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. Securities with ultimate
maturities of greater than 397 days may be purchased only pursuant to Rule 2a-7.
Under that Rule, only those long-term instruments that have demand features
which comply with certain requirements and certain variable rate U.S. Government
Securities may be purchased. Similar to fixed rate debt instruments, variable
and floating rate instruments are subject to changes in value based on changes
in market interest rates or changes in the issuer's or guarantor's
creditworthiness. The rate of interest on securities purchased by a Money Market
Fund may be tied to short-term Treasury or other government securities or
indices on securities that are permissible investments of the Money Market
Funds, as well as other money market rates of interest. The Money Market Funds
will not purchase securities whose values are tied to interest rates or indices
that are not appropriate for the duration and volatility standards of a money
market fund.
MORTGAGE- AND ASSET-BACKED SECURITIES
Janus Money Market Fund and Janus Government Money Market Fund may purchase
fixed or adjustable rate mortgage-backed securities issued by the Government
National Mortgage Association, Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, or other governmental or
government-related entities. In addition, Janus Money Market Fund may purchase
other asset-backed securities, including securities backed by automobile loans,
equipment leases or credit card receivables. These securities directly or
indirectly represent a participation in, or are secured by and payable from,
fixed or adjustable rate mortgage or other loans which may be secured by real
estate or other assets. Unlike traditional debt instruments, payments on these
securities include both interest and a partial payment of principal. Prepayments
of the principal of underlying loans may shorten the effective maturities of
these securities and may result in a Fund having to reinvest proceeds at a lower
interest rate.
REPURCHASE AGREEMENTS
Each Money Market Fund may seek additional income by entering into
collateralized repurchase agreements. Repurchase agreements are transactions in
which a Money Market Fund purchases securities and simultaneously commits to
resell those securities to the seller at an agreed-upon price on an agreed-upon
future date. The resale price reflects a market rate of interest that is not
related to the coupon rate or maturity of the purchased securities. If the
seller of the securities underlying a repurchase agreement fails to pay the
agreed resale price on the agreed delivery date, a Money Market Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so.
REVERSE REPURCHASE AGREEMENTS
Each Money Market Fund may enter into reverse repurchase agreements. Reverse
repurchase agreements are transactions in which a Money Market Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed-upon price on an agreed-upon future date. This technique will be
used primarily for temporary or emergency purposes, such as meeting redemption
requests.
28 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
DELAYED DELIVERY SECURITIES
Each Money Market Fund may purchase securities on a when-issued or delayed
delivery basis. Securities so purchased are subject to market price fluctuation
from the time of purchase but no interest on the securities accrues to a Money
Market Fund until delivery and payment for the securities take place.
Accordingly, the value of the securities on the delivery date may be more or
less than the purchase price. Forward commitments will be entered into only when
a Money Market Fund has the intention of taking possession of the securities,
but a Money Market Fund may sell the securities before the settlement date if
deemed advisable.
BORROWING AND LENDING
Each Money Market Fund may borrow money for temporary or emergency purposes in
amounts up to 25% of its total assets. A Money Market Fund may not mortgage or
pledge securities except to secure permitted borrowings. As a fundamental
policy, a Money Market Fund will not lend securities or other assets if, as a
result, more than 25% of its total assets would be lent to other parties. The
Money Market Funds do not currently intend to engage in securities lending;
however, under the terms of an exemptive order received from the SEC, each of
the Money Market Funds may borrow money from or lend money to other funds that
permit such transactions and are advised by Janus Capital.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 29
<PAGE>
SHAREHOLDER'S MANUAL
This section will help you become familiar with the different types of accounts
you can establish with Janus. It also explains in detail the wide array of
services and features you can establish on your account, as well as account
policies and fees that may apply to your account. Account policies (including
fees), services and features may be modified or discontinued without shareholder
approval or prior notice.
MINIMUM INVESTMENTS*
<TABLE>
<S> <C>
To open a new account.............................. $2,500
To open a new retirement, education, 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+
</TABLE>
* The Funds reserve 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.
** An Automatic Investment Program requires a $100 minimum automatic
investment per month until the account balance reaches $2,500.
+ The minimum subsequent investment for IRA or UGMA/UTMA accounts is
$50.
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.-8:00
p.m., and Saturday: 10:00 a.m.-4:00 p.m., New York time. The Quick Address and
Telephone Reference below includes other ways to get in touch with Janus.
QUICK ADDRESS AND TELEPHONE REFERENCE
<TABLE>
<S> <C>
MAILING ADDRESS JANUS XPRESS LINE(TM) 1-888-979-7737
Janus For 24-hour access to account and
P.O. Box 173375 fund information, exchanges and
Denver, CO 80217-3375 purchases, automated daily quotes on
fund share prices, yields and total
FOR OVERNIGHT CARRIER returns.
Janus
Suite 101 TDD 1-800-525-0056
3773 Cherry Creek North Drive A telecommunications device for our
Denver, CO 80209-3811 hearing- and speech-impaired
JANUS INTERNET ADDRESS shareholders.
http://www.Janus.com JANUS LITERATURE LINE 1-800-525-8983
To request a prospectus, shareholder
reports or marketing materials.
</TABLE>
TYPES OF ACCOUNT OWNERSHIP
If you are investing in the Funds for the first time, you will need to establish
an account. You can establish the following types of accounts by completing a
New Account Application. To request an application, call 1-800-525-3713.
- - INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one person.
Joint accounts have two or more owners.
30 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - 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.
- - 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.
- - 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.
TAX-DEFERRED ACCOUNTS
If you are eligible, you may set up one or more tax-deferred accounts. A
tax-deferred account allows you to shelter your investment income and capital
gains from current income taxes. A contribution to certain of these plans may
also be tax deductible. Tax-deferred accounts include retirement plans and the
Education IRA. Distributions from these plans are generally subject to income
tax and may be subject to an additional tax if withdrawn prior to age 59 1/2 or
used for a nonqualifying purpose. Investors should consult their tax advisor or
legal counsel before selecting a tax-deferred account.
Investors Fiduciary Trust Company serves as custodian for the tax-deferred
accounts offered by the Funds. You will be charged an annual account maintenance
fee of $12 for each Fund account, up to a maximum of $24 for two or more Fund
accounts registered under the same taxpayer identification number. Each Janus
fund you own under your IRA account number is considered a separate "Fund
account." You may pay the fee by check or have it automatically deducted from
your account (usually in December). The Funds reserve the right to change the
amount of this fee or to waive it in whole or in part for certain types of
accounts.
The following plans require a special application. For an application and more
details about our Retirement Plans, call 1-800-525-3713.
- - REGULAR AND ROTH INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"): Both types of IRAs
allow most individuals with earned income to contribute up to the lesser of
$2,000 ($4,000 for most married couples) or 100% of compensation annually.
Please refer to the Janus IRA booklet for more complete information regarding
the different types of IRAs.
- - EDUCATION IRA: This plan allows individuals, subject to certain income
limitations, to contribute up to $500 annually on behalf of any child under
the age of 18. Please refer to the Janus IRA booklet for more complete
information regarding the Education IRA.
- - 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.
- - PROFIT SHARING OR MONEY PURCHASE PENSION PLAN: These plans are open to
corporations, partnerships and sole proprietors to benefit their employees and
themselves.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 31
<PAGE>
- - SECTION 403(B)(7) PLAN: Employees of educational organizations or other
qualifying, tax-exempt organizations may be eligible to participate in a
Section 403(b)(7) Plan.
HOW TO OPEN YOUR JANUS ACCOUNT
Complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application and make
your check payable to Janus. The Funds are available only to U.S. citizens or
residents, and your application will be returned if you do not meet these
criteria. Send all items to one of the following addresses:
For Overnight Carrier
- --------------------
Janus
Suite 101
3773 Cherry Creek North Drive
Denver, CO 80209-3811
For All Other Inquiries
- ---------------------
Janus
P.O. Box 173375
Denver, CO 80217-3375
INVESTOR SERVICE CENTERS
Janus 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 Monday-Friday 7:00 a.m. to 6:00
p.m. Mountain time and Saturday 9:00 a.m. to 1:00 p.m. Mountain time.
100 Fillmore Street, Suite 100
Denver, CO 80206
3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209
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:
- - Cash, credit cards, third party checks and credit card checks will not be
accepted.
- - All purchases must be made in U.S. dollars.
- - Checks must be drawn on U.S. banks and made payable to Janus.
- - If a check does not clear your bank, the Funds reserve the right to cancel the
purchase.
- - If the Funds are unable to debit your predesignated bank account on the day of
purchase, they may make additional attempts or cancel the purchase.
- - The Funds reserve the right to reject any specific purchase request.
32 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
If your purchase is cancelled, you will be responsible for any losses or fees
imposed by your bank and losses that may be incurred as a result of any decline
in the value of the cancelled purchase. The Funds (or their agents) have the
authority to redeem shares in your account(s) to cover any losses due to
fluctuations in share price. Any profit on such cancellation will accrue to the
Fund.
ONCE YOU HAVE OPENED YOUR JANUS ACCOUNT, THE MINIMUM AMOUNT FOR AN ADDITIONAL
INVESTMENT IS $100 ($50 FOR IRAS OR UGMA/UTMA ACCOUNTS). 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. To purchase shares by telephone, call
an Investor Service Representative at 1-800-525-3713 during normal business
hours or call the Janus Xpress Line, 1-888-979-7737, for access to this option
24 hours a day. When you make an additional purchase by telephone, Janus will
automatically debit your predesignated bank account for the desired amount. To
establish the telephone purchase option on your new account, complete the
"Telephone Purchase of Shares Option" section on the application and attach a
"voided" check or deposit slip from your bank account. If your account is
already established, call 1-800-525-3713 to request the appropriate form. This
option will become effective ten business days after the form is received.
BY WIRE
Purchases may also be made by wiring money from your bank account to your Janus
account. Call 1-800-525-3713 to receive wiring instructions.
AUTOMATIC INVESTMENT PROGRAMS
Janus offers several automatic investment programs to help you achieve your
financial goals as simply and conveniently as possible. You may open a new
account with a $500 initial purchase and $100 automatic subsequent investments.
- - AUTOMATIC MONTHLY INVESTMENT PROGRAM
You select the day each month that your money ($100 minimum) will be
electronically transferred from your bank account to your Fund account. To
establish this option, complete the "Automatic Monthly Investment Program"
section on the application and attach a "voided" check or deposit slip from
your bank account. If your Fund account is already established, call
1-800-525-3713 to request the appropriate form.
- - PAYROLL DEDUCTION
If your employer can initiate an automatic payroll deduction, you may have all
or a portion of your paycheck ($100 minimum) invested directly into your Fund
account. To obtain information on establishing this option, call
1-800-525-3713.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 33
<PAGE>
- - 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. Exchanges received and accepted prior to the close
of the regular trading session of the New York Stock Exchange ("NYSE"), normally
4:00 p.m. New York time, will be processed on that day.
IN WRITING
To request an exchange in writing, please follow the instructions for written
requests on page 36.
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 Xpress Line,
1-888-979-7737, for access to this option 24 hours a day.
BY SYSTEMATIC EXCHANGE
As noted above, you may establish a Systematic Exchange for as little as $100
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
- - Except for Systematic Exchanges, new accounts established by exchange must be
opened with $2,500 or the total account value if the value of the account you
are exchanging from is less than $2,500.
- - Exchanges between existing accounts must meet the $100 subsequent investment
requirement.
- - You may make four exchanges out of each non-Money Market Fund during a
calendar year (exclusive of Systematic Exchanges). Exchanges in excess of this
limit may be subject to an exchange fee or may result in termination of the
exchange privilege. There is currently no limit on exchanges out of the Money
Market Funds.
- - The Funds reserve the right to reject any exchange request and to modify or
terminate the exchange privilege at any time. For example, the Funds may
reject exchanges from accounts engaged in or known to engage in excessive
trading (including market timing transactions).
- - Exchanges between accounts will be accepted only if the registrations are
identical.
- - If the shares you are exchanging are held in certificate form, you must return
the certificate to your Fund prior to making any exchanges.
- - Be sure that you read the prospectus for the fund into which you are
exchanging.
34 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - 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. Because the Money Market Funds seek to maintain a stable net
asset value per share, it is not anticipated that a sale of Shares of the
Money Market Funds will produce a taxable gain or loss.
HOW TO REDEEM SHARES
On any business day, you may redeem all or a portion of your shares. If the
shares are held in certificate form, the certificate must be returned with or
before your redemption request. Your transaction will be processed at the next
NAV calculated after your order is received and accepted.
IN WRITING
To request a redemption in writing, please follow the instructions for written
requests on page 36.
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 request redemptions daily from your account by calling 1-800-525-3713 by the
close of the regular trading session of the NYSE, normally 4:00 p.m. New York
time (or until 5:00 p.m. for Janus Government Money Market Fund). You may also
use Janus Xpress Line, 1-888-979-7737, for access to this option 24 hours a day.
Redemption requests received through Janus Xpress Line will be processed at the
NAV next calculated after receipt and acceptance of the request. (There is a
daily limit of $100,000 per account for redemptions payable by check.)
SYSTEMATIC REDEMPTION OPTION
The Systematic Redemption Option allows you to redeem a specific dollar amount
from your account on a regular basis. For more information or to request the
appropriate form, please call 1-800-525-3713.
PAYMENT OF REDEMPTION PROCEEDS
- - 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.
- - BY ELECTRONIC TRANSFER
If you have established the electronic redemption option, your redemption
proceeds can be electronically transferred to your predesignated bank account
on the next bank business day after receipt of your redemption request (wire
transfer) or the second bank business day after receipt of your redemption
request (ACH transfer). Wire transfers will be charged an $8 fee per wire and
your bank may charge an additional fee to receive the wire. ACH transfers are
made free of charge. Wire redemptions are not available for retirement
accounts.
If you would like to establish the electronic redemption option on an existing
account, please call 1-800-525-3713 to request the appropriate form.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 35
<PAGE>
IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE
AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FIXED-INCOME FUNDS MAY DELAY THE
PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE
TO ALLOW THE PURCHASE TO CLEAR. Unless you provide alternate instructions, your
proceeds will be invested in Janus Money Market Fund - Investor Shares during
the 15 day hold period.
WRITTEN INSTRUCTIONS
To redeem or exchange all or part of your shares in writing, your request should
be sent to one of the addresses listed on page 32 and must include the following
information:
- - the name of the Fund(s)
- - the account number(s)
- - the amount of money or number of shares being redeemed
- - the name(s) on the account
- - the signature(s) of all registered account owners
- - your daytime telephone number
SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE
- - INDIVIDUAL, JOINT TENANTS, TENANTS IN COMMON: Written instructions must be
signed by each shareholder, exactly as the names appear in the account
registration.
- - UGMA OR UTMA: Written instructions must be signed by the custodian in his/her
capacity as it appears in the account registration.
- - SOLE PROPRIETOR, GENERAL PARTNER: Written instructions must be signed by an
authorized individual in his/her capacity as it appears in the account
registration.
- - 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.
- - TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear in the account registration, a
certificate of incumbency dated within 60 days must also be submitted.
- - IRA: Written instructions must be signed by the account owner. If you do not
want federal income tax withheld from your redemption, you must state that you
elect not to have such withholding apply. In addition, your instructions must
state whether the distribution is normal (after age 59 1/2) or premature
(before age 59 1/2) and, if premature, whether any exceptions such as death or
disability apply with regard to the 10% additional tax on early distributions.
SIGNATURE GUARANTEE
In addition to the signature requirements, A SIGNATURE GUARANTEE IS ALSO
REQUIRED if any of the following is applicable:
- - You request a redemption that exceeds $100,000.
- - You would like the check made payable to anyone other than the shareholder(s)
of record.
36 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - You would like the check mailed to an address which has been changed within 10
days of the redemption request.
- - You would like the check mailed to an address other than the address of
record.
THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713.
HOW TO OBTAIN A SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized account transfers. The
following financial institutions may guarantee signatures: banks, savings and
loan associations, trust companies, credit unions, broker-dealers, and member
firms of a national securities exchange. Call your financial institution to see
if they have the ability to guarantee a signature. A signature guarantee may not
be provided by a notary public.
If you live outside the United States, a foreign bank properly authorized to do
business in your country of residence or a U.S. consulate may be able to
authenticate your signature.
PRICING OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the NAV next
calculated after your request is received and approved by a Fund (or its
designated agent). A Fund's NAV is calculated at the close of the regular
trading session of the NYSE (normally 4:00 p.m. New York time) each day that the
NYSE is open (and, in the case of the Money Market Funds, the New York Federal
Reserve Bank is open) except that Janus Government Money Market Fund's NAV is
normally calculated at 5:00 p.m. (New York time) on such days. In order to
receive a day's price, your order must be received by the close of the regular
trading session of the NYSE. The Money Market Funds reserve the right to require
purchase, redemption and exchange requests and payments prior to this time on
days when the bond market or the NYSE close early.
The Fixed-Income Funds' portfolio 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.
The Money Market Funds' portfolio securities are valued at their amortized cost.
Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity (or such other date as
permitted by Rule 2a-7) of any discount or premium. If fluctuating interest
rates cause the market value of a Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Trustees will
consider whether any action, such as adjusting the Share's NAV to reflect
current market conditions, should be initiated to prevent any material dilutive
effect on shareholders.
See your Fund's SAI for more detailed information.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 37
<PAGE>
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
JANUS XPRESS LINE(TM)
Janus Xpress Line, our electronic telephone service, offers you 24-hour access
by TouchTone(TM) telephone to obtain information on account balances, Fund
performance or dividends. You can also make exchanges, purchases, redemptions
and electronic transfers in existing accounts, request literature about any
Janus fund, or order duplicate statements. Janus Xpress Line is accessed by
calling 1-888-979-7737. Calls are limited to five minutes.
JANUS WEB SITE
Janus maintains a Web site located at http://www.Janus.com. You can access
information such as your account balance and the Funds' NAVs through the Web
site. In addition, you may request and/or download a prospectus for any Janus
fund.
CHECK WRITING PRIVILEGE
Check writing privileges are available for all three Money Market Funds.
Checkbooks will be issued to shareholders who have completed a Signature Draft
Card, which is sent in the new account welcome package or by calling
1-800-525-3713. (There is no check writing privilege for retirement accounts.)
Your checkbook will be mailed approximately 10 days after the check writing
privilege is requested. Checks may be written for $250 or more per check.
Purchases made by check or the Automatic Monthly Investment Program may not be
redeemed by a redemption check until the 15-day hold period has passed. All
checks written on the account must be signed by all account holders unless
otherwise specified on the original application or the subsequent Signature
Draft Card. The Funds reserve the right to terminate or modify the check writing
privilege at any time.
ACCOUNT MINIMUMS
Due to the proportionately higher costs of maintaining small accounts, Janus
reserves the right to deduct a $10 minimum balance fee (or the value of the
account if less than $10) from accounts with values below the minimums described
on page 30 or to close such accounts. This policy will apply to accounts
participating in the Automatic Monthly Investment Program only if your account
balance does not reach the required minimum initial investment or falls below
such minimum and you have discontinued monthly investments. This policy does not
apply to accounts that fall below the minimums solely as a result of market
value fluctuations. It is expected that, for purposes of this policy, accounts
will be valued in September, and the $10 fee will be 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.
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 employee benefit plans (a
"Processing Organization"). Processing Organizations may charge you a fee for
this service and may require different minimum initial and subsequent
investments than the Funds. Processing Organizations may also impose other
charges or restrictions different from those applicable to shareholders who
invest in the Funds directly. A Processing Organization, rather than its
customers, may
38 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
be the shareholder of record of your shares. The Funds are not responsible for
the failure of any Processing Organization to carry out its obligations to its
customers. Certain Processing Organizations may receive compensation from Janus
Capital or its affiliates and certain Processing Organizations may receive
compensation from the Funds for shareholder recordkeeping and similar services.
TAXPAYER IDENTIFICATION NUMBER
On the application or other appropriate form, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that you
are not subject to backup withholding for failing to report income to the IRS.
If you are subject to the 31% backup withholding or you did not certify your
taxpayer identification number, the IRS requires the Funds to withhold 31% of
any dividends paid and redemption or exchange proceeds. In addition to the 31%
backup withholding, you may be subject to a $50 fee to reimburse the Funds for
any penalty that the IRS may impose.
SHARE CERTIFICATES
(FIXED-INCOME FUNDS ONLY)
Most shareholders choose not to hold their shares in certificate form because
account transactions such as exchanges and redemptions cannot be completed until
the certificate has been returned to the Funds. The Fixed-Income Funds will
issue share certificates upon written request only. Share certificates will not
be issued until the shares have been held for at least 15 days and will not be
issued for accounts that do not meet the minimum investment requirements. Share
certificates cannot be issued for retirement accounts. In addition, if the
certificate is lost, there may be a replacement charge.
Share certificates are not available for the Money Market Funds in order to
maintain the general liquidity that is representative of a money market fund and
to help facilitate transactions in shareholder accounts.
INVOLUNTARY REDEMPTIONS
The Funds reserve the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise believed to be detrimental
to the Funds.
TELEPHONE TRANSACTIONS
You may initiate many transactions by telephone. The Funds and their agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
It may be difficult to reach an Investor Service Representative by telephone
during periods of unusual market activity. If you are unable to reach a
representative by telephone, please consider sending written instructions,
stopping by a Service Center or, in the case of purchases, exchanges,
redemptions and electronic transfers, calling the Janus Xpress Line.
TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may, in case of emergency, temporarily suspend
telephone transactions and other shareholder services.
ADDRESS CHANGES
To change the address on your account, call 1-800-525-3713 or send a written
request signed by all account owners. Include the name of your Fund(s), the
account number(s),
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 39
<PAGE>
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
Investors participating in an automatic investment program will receive
quarterly confirmations of all transactions. Dividend information will be
confirmed quarterly. In addition, the Funds will send you an immediate
transaction confirmation statement after every non-systematic transaction.
Financial reports for the Funds, which include a list of the Funds' portfolio
holdings, will be mailed semiannually to all shareholders. You will receive an
updated prospectus annually. To reduce expenses, only one copy of most financial
reports and prospectuses will be mailed to your household, even if more than one
person in the household has a Fund account. Please call 1-800-525-3713 if you
would like to receive additional reports or prospectuses.
40 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
MANAGEMENT OF THE FUNDS
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Fund's investment objectives and policies. The
Trustees delegate the day-to-day management of the Funds to the officers of the
Trust and meet at least quarterly to review the Funds' investment policies,
performance, expenses and other business affairs.
INVESTMENT ADVISER
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, is the
investment adviser to each of the Funds and is responsible for the day-to-day
management of the investment portfolios and other business affairs of the Funds.
Janus Capital began serving as investment adviser to certain series of the Trust
in 1970 and currently serves as investment adviser to all of the Janus funds, as
well as adviser or subadviser to other mutual funds and individual, corporate,
charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning each
Fund's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Funds, and may be reimbursed by the
Fixed-Income Funds for its costs in providing those services. In addition, Janus
Capital employees serve as officers of the Trust and Janus Capital provides
office space for the Funds and pays the salaries, fees and expenses of all Fund
officers and those Trustees who are affiliated with Janus Capital. The Funds pay
all of their expenses not assumed by Janus Capital, including auditing fees and
independent Trustees' fees and expenses. (Janus Capital provides these services
to the Money Market Funds pursuant to an Administration Agreement as described
below.)
ADMINISTRATOR
Each of the Money Market Funds has entered into an Administration Agreement with
Janus Capital, pursuant to which Janus Capital furnishes certain administrative,
compliance and accounting services for the Money Market Funds, pays the costs of
printing reports and prospectuses for existing shareholders, provides office
space for the Money Market Funds and pays the salaries, fees and expenses of
Fund officers and of those Trustees who are affiliated with Janus Capital.
Administrative services provided or procured by Janus Capital under the
Agreements include custody and transfer agency services.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 41
<PAGE>
INVESTMENT PERSONNEL
SHARON S. PICHLER is Executive Vice President and portfolio manager of Janus
Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money
Market Fund, each of which she has managed since inception. She holds a Bachelor
of Arts in Economics from Michigan State University and a Master of Business
Administration from the University of Texas at San Antonio. Ms. Pichler is a
Chartered Financial Analyst.
SANDY R. RUFENACHT is Executive Vice President and portfolio manager of Janus
Short-Term Bond Fund and Janus High-Yield Fund. He has managed Janus Short-Term
Bond Fund since January 1996 and has served as manager or co-manager of Janus
High-Yield Fund since June 1996. He previously served as Executive Vice
President and co-manager of Janus Flexible Income Fund from June 1996 to
February 1998. 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 Janus
Flexible Income Fund, which he has managed or co-managed since December 1991. He
previously served as co-manager of Janus High-Yield Fund from its inception to
February 1998 and manager of 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.
In January 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 which ended on
April 25, 1997.
DARRELL W. WATTERS is Executive Vice President and portfolio manager of Janus
Federal Tax-Exempt Fund, which he has managed since January 1996. Mr. Watters
joined Janus Capital in 1993 as a municipal bond trader. He holds a Bachelor of
Arts in Economics from Colorado State University.
42 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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 Funds or Janus
Capital's other advisory clients. See the SAI for more detailed information.
MANAGEMENT EXPENSES AND EXPENSE LIMITS
FIXED-INCOME FUNDS
Each Fund pays Janus Capital a management fee which is calculated daily and paid
monthly. The advisory agreement with each Fund spells out the management fee and
other expenses that the Funds must pay. Each of the Funds is subject to the
following management fee schedule (expressed as an annual rate):
<TABLE>
<CAPTION>
AVERAGE DAILY NET ANNUAL RATE EXPENSE LIMIT
FEE SCHEDULE ASSETS OF FUND PERCENTAGE (%) PERCENTAGE (%)
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Flexible Income First $300 0.65 1.00*
Fund Million
Over $300 Million 0.55
-------------------------------------------------------------------------------------
First $300 0.75 1.00*
Janus High-Yield Fund Million
Over $300 Million 0.65
-------------------------------------------------------------------------------------
Janus Federal First $300 0.60 .65*
Tax-Exempt Million
Fund Over $300 Million 0.55
-------------------------------------------------------------------------------------
First $300 0.65 .65*
Janus Short-Term Bond Million
Fund Over $300 Million 0.55
</TABLE>
* Janus Capital will waive certain fees and expenses to the extent that total
expenses exceed the stated limits. Janus Capital may modify or terminate such
waivers at any time upon at least 90 days' notice to
the Trustees. You will be notified of any changes in these limits.
- --------------------------------------------------------------------------------
Each Fixed-Income Fund incurs expenses not assumed by Janus Capital, including
transfer agent and custodian fees and expenses, legal and auditing fees,
printing and mailing costs of sending reports and other information to existing
shareholders, and independent Trustees' fees and expenses. The Annual Operating
Expenses table on page 5 lists the actual management fees and total operating
expenses of each Fund for the most recent fiscal year.
MONEY MARKET FUNDS
Each of the Money Market Funds has agreed to compensate Janus Capital for its
advisory services by the monthly payment of a fee at the annual rate of 0.20% of
the value of the average daily net assets of each Money Market Fund. However,
Janus Capital has agreed to waive a portion of its fee and accordingly, the
advisory fee of each Money Market Fund will be calculated at the annual rate of
0.10% of the value of each Money Market Fund's average daily net assets. Janus
Capital may modify or terminate such waiver at any time upon at least 90 days'
notice to the Trustees. You will be notified of any change in this limit.
Janus Capital is paid a fee, calculated daily and paid monthly, at the annual
rate of 0.50% of the value of the average daily net assets of each Money Market
Fund attributable to Shares for services rendered pursuant to the Administration
Agreements.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 43
<PAGE>
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by
broker-dealers selected by Janus Capital. Broker-dealers are selected on the
basis of their ability to obtain best price and execution for a Fund's
transactions and recognizing brokerage, research and other services provided to
the Fund and to Janus Capital. Janus Capital may also consider payments made by
brokers effecting transactions for a Fund i) to the Fund or ii) to other persons
on behalf of the Fund for services provided to the Fund for which it would be
obligated to pay. Janus Capital may also consider sales of shares of a Janus
fund as a factor in the selection of broker-dealers to execute transactions. The
Funds' Trustees have authorized Janus Capital to place portfolio transactions on
an agency basis with a broker-dealer affiliated with Janus Capital. When
transactions for a Fund are effected with that broker-dealer, the commissions
payable by the Fund are credited against certain Fund operating expenses serving
to reduce those expenses. The SAI further explains the selection of
broker-dealers.
OTHER SERVICE PROVIDERS
The following parties provide the Funds with other services.
CUSTODIAN FOR THE FIXED-INCOME FUNDS
State Street Bank and Trust Company
P.O. Box 0351
Boston, Massachusetts 02117-0351
CUSTODIAN FOR THE MONEY MARKET FUNDS
UMB Bank, N.A.
P.O. Box 419226
Kansas City, Missouri 64141-6226
TRANSFER AGENT
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217-3375
DISTRIBUTOR
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206-4928
Janus Service Corporation and Janus Distributors, Inc. are wholly-owned
subsidiaries of Janus Capital.
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Massachusetts business
trust on February 11, 1986. A mutual fund is an investment vehicle that pools
money from numerous investors and invests the money to achieve a specified
objective.
As of the date of this Prospectus, the Trust offers 19 separate series. Each of
the Money Market Funds currently offer three classes of shares. This prospectus
only describes the
44 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Investor Shares of the Money Market Funds. Institutional Shares of the Money
Market Funds are available only to investors meeting the minimum investment
requirement of $250,000. Service Shares of the Money Market Funds are available
only to banks and other financial institutions that meet minimum investment
requirements in connection with trust accounts, cash management programs and
similar programs. Because the expenses of each class may differ, the performance
of each class is expected to differ. If you would like additional information,
please call 1-800-525-3713. This Prospectus describes seven series of the Trust;
the other series are offered by separate prospectuses.
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called for a specific Fund or for the Trust as a whole for
purposes such as electing or removing Trustees, terminating or reorganizing the
Trust, changing fundamental policies, or for any other purpose requiring a
shareholder vote under the 1940 Act. Separate votes are taken by each Fund only
if a matter affects or requires the vote of only that Fund or that Fund's
interest in the matter differs from the interest of other portfolios of the
Trust. As a shareholder, you are entitled to one vote for each share that you
own.
SIZE OF FUNDS
The Funds have no present plans to limit their size. However, any Fund may
discontinue sales of its shares if management believes that continued sales may
adversely affect the Fund's ability to achieve its investment objective. If
sales of a Fund are discontinued, it is expected that existing shareholders of
that Fund would be permitted to continue to purchase shares and to reinvest any
dividends or capital gains distributions, absent highly unusual circumstances.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve any Fund's investment objective by
investing all of that Fund's assets in another investment company having the
same investment objective and substantially the same investment policies and
restrictions as those applicable to that Fund. Unless otherwise required by law,
this policy may be implemented by the Trustees without shareholder approval.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which has
established a dedicated group to address this issue. Janus Capital has entered
into a consulting arrangement with one of the foremost experts in Year 2000
compliance to help Janus Capital successfully achieve Year 2000 compliance.
Janus Capital does not anticipate that the move to Year 2000 will have a
material impact on its ability to continue to provide the Funds with service at
current levels.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 45
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES EACH FUND TO DISTRIBUTE
NET INCOME AND ANY NET CAPITAL GAINS REALIZED ON ITS INVESTMENTS ANNUALLY. A
FUND'S INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM
CAPITAL GAINS ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET
REALIZED LONG-TERM GAINS, IF ANY, ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS
DISTRIBUTIONS.
THE FIXED-INCOME FUNDS
Income dividends for the Fixed-Income Funds are declared daily, Saturdays,
Sundays and holidays included, and are generally paid as of the last business
day of each month. If a month begins on a Saturday, Sunday or holiday, dividends
for those days are paid at the end of the preceding month. You will begin
accruing income dividends the day after a purchase is effective. If shares are
redeemed, you will receive all dividends accrued through the day of the
redemption. Capital gains, if any, are declared and paid in December.
HOW DISTRIBUTIONS AFFECT A FUND'S NAV
Distributions, other than daily income dividends, are paid to shareholders as of
the record date of a distribution of a Fund, regardless of how long the shares
have been held. Undistributed income and realized gains are included in each
Fund's daily NAV. The share price of a Fund drops by the amount of the
distribution, net of any subsequent market fluctuations. As an example, assume
that on December 31, Janus Flexible Income Fund declared a dividend in the
amount of $0.25 per share. If Janus Flexible Income Fund's share price was
$10.00 on December 30, the Fund's share price on December 31 would be $9.75,
barring market fluctuations. Shareholders should be aware that distributions
from a taxable mutual fund are not value-enhancing and may create income tax
obligations. Capital gains distributions, if any, from Janus Federal Tax-Exempt
Fund will also be taxable.
"BUYING A DIVIDEND"
If you purchase shares of a Fund just before the distribution, you will pay the
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. This is referred to as "buying a dividend." In the above
example, if you bought shares on December 30, you would have paid $10.00 per
share. On December 31, the Fund would pay you $0.25 per share as a dividend and
your shares would now be worth $9.75 per share. Unless your account is set up as
a tax-deferred account, dividends paid to you would be included in your gross
income for tax purposes even though you may not have participated in the
increase in NAV of the Fund, whether or not you reinvested the dividends.
THE MONEY MARKET FUNDS
For the Money Market Funds, dividends representing substantially all of the net
investment income and any net realized gains on sales of securities are declared
daily, Saturdays, Sundays and holidays included, and distributed on the last
business day of each month. If a month begins on a Saturday, Sunday or holiday,
dividends for those days are
46 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
declared at the end of the preceding month and distributed on the first business
day of the month.
Shares of the Money Market Funds purchased by wire on a day on which the Funds
calculate their net asset value and the Federal Reserve Banks are open ("bank
business day") will receive that day's dividend if the purchase is effected
prior to 3:00 p.m. (New York time) for Janus Money Market Fund, 5:00 p.m. for
Janus Government Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money
Market Fund. Otherwise, such Shares begin to accrue dividends on the following
bank business day. Orders for purchase accompanied by a check or other
negotiable bank draft will be accepted and effected as of 4:00 p.m. (New York
time) (5:00 p.m. for Janus Government Money Market Fund), on the business day of
receipt and such Shares will begin to accrue dividends on the first bank
business day following receipt of the order.
Redemption orders effected on any particular day will generally receive
dividends declared through the day of redemption. However, redemptions made by
wire which are received prior to 3:00 p.m. (New York time) for the Janus Money
Market Fund, 5:00 p.m. for Janus Government Money Market Fund and 12:00 p.m. for
Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that
day. Proceeds of such a redemption will normally be sent to the predesignated
account on that day, and that day's dividend will not be received. Requests for
redemptions made by wire which are received after these times will be processed
on that day and receive that day's dividend, but will not be wired until the
following bank business day.
The Funds reserve the right to require purchase and redemption requests and
payments prior to these times on days when the bond market or NYSE close early.
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 the Funds at one of the addresses on page 32 or calling
1-800-525-3713. The Funds offer the following options:
1. REINVESTMENT OPTION. You may reinvest your income dividends and capital gains
distributions in additional shares. This option is assigned automatically if
no other choice is made.
2. CASH OPTION. You may receive your income dividends and capital gains
distributions in cash.
3. REINVEST AND CASH OPTION (THE FIXED-INCOME FUNDS ONLY). 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 distributions
(dividends in the case of the Money Market Funds) to purchase shares of
another Janus fund.
The Funds reserve the right to reinvest into your account undeliverable and
uncashed dividend and distribution checks that remain outstanding for six months
in shares of the
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 47
<PAGE>
applicable 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 Funds. The following discussion does not apply to tax-deferred accounts, nor
is it a complete analysis of the federal tax implications of investing in the
Funds. You may wish to consult your own tax adviser. Additionally, state or
local taxes may apply to your investment, depending upon the laws of your state
of residence.
TAXES ON DISTRIBUTIONS
Janus Federal Tax-Exempt Fund and Janus Tax-Exempt Money Market Fund anticipate
that substantially all their income dividends will be exempt from federal income
tax, although either Fund may occasionally earn income on taxable investments
and dividends attributable to that income would be taxable. In addition,
interest from certain private activity bonds is a preference item for purposes
of the alternative minimum tax, and to the extent a Fund earns such income,
shareholders subject to the alternative minimum tax must include that income as
a preference item. Distributions from capital gains, if any, are subject to
federal tax. The Funds will advise shareholders of the percentage of dividends,
if any, subject to any federal tax.
Dividends and distributions for all of the other Funds are subject to federal
income tax, regardless of whether the distribution is made in cash or reinvested
in additional shares of a Fund. In certain states, a portion of the dividends
and distributions (depending on the sources of a Fund's income) may be exempt
from state and local taxes. Information regarding the tax status of income
dividends and capital gains distributions will be mailed to shareholders on or
before January 31st of each year. Account tax information will also be sent to
the IRS.
TAXATION OF THE FUNDS
Dividends, interest, and some capital gains received by the Funds on foreign
securities may be subject to tax withholding or other foreign taxes. The Funds
may from year to year make the election permitted under section 853 of the
Internal Revenue Code to pass through such taxes to shareholders as a foreign
tax credit. If such an election is not made, any foreign taxes paid or accrued
will represent an expense to the Funds which will reduce their investment
income.
The Funds do not expect to pay any federal income or excise taxes because they
intend to meet certain requirements of the Internal Revenue Code. It is
important that the Funds meet these requirements so that any earnings on your
investment will not be taxed twice.
48 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe a Fund's performance. You may see references to these terms in our
newsletters, advertisements and in media articles. Our newsletters and
advertisements may include comparisons of the Fund's performance to the
performance of other mutual funds, mutual fund averages or recognized stock
market indices. The Funds generally measure performance in terms of yield.
YIELD shows the rate of income a Fund earns on its investments as a percentage
of the Fund's share price. It is calculated by dividing a Fund's net investment
income for a 30-day period (7-day period for the Money Market Funds) 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 such 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.
EFFECTIVE YIELD is similar to yield in that it is calculated over the same time
frame, but instead the net investment income is compounded and then annualized.
Due to the compounding effect, the effective yield will normally be higher than
the yield.
TAX-EQUIVALENT YIELD OR TOTAL RETURN (for Janus Federal Tax-Exempt Fund and
Janus Tax-Exempt Money Market Fund) shows the before-tax yield or total return
that an investor would have to earn to equal the Funds' tax-free yield or total
return. It is calculated by dividing a Fund's tax-free yield or total return by
the result of one minus a stated federal tax rate.
CUMULATIVE TOTAL RETURN represents the actual rate of return on an investment
for a specified period. The Financial Highlights tables beginning on page 6 show
total return for a single fiscal period. Cumulative total return is generally
quoted for more than one year (e.g., the life of the Fund). A cumulative total
return does not show interim fluctuations in the value of an investment.
AVERAGE ANNUAL TOTAL RETURN represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in a Fund's return and are not the
same as actual annual results.
THE FUNDS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT YIELD OR TOTAL
RETURN COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET
ASSET VALUE WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 49
<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 Fixed-Income Funds may invest. The
Fixed-Income Funds may invest in these instruments to the extent permitted by
their investment objectives and policies. The Fixed-Income Funds are not limited
by this discussion and may invest in any other types of instruments not
precluded by the policies discussed elsewhere in this Prospectus. Please refer
to the SAI for a more detailed discussion of certain instruments.
I. EQUITY AND DEBT SECURITIES
BONDS are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value of the bond) at a specified maturity and to make
scheduled interest payments.
CERTIFICATES OF PARTICIPATION ("COPS") are certificates representing an interest
in a pool of securities. Holders are entitled to a proportionate interest in the
underlying securities. Municipal lease obligations are often sold in the form of
COPs. See "Municipal lease obligations" below.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The Funds may purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933.
COMMON STOCK represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stock are not fixed but are declared at the discretion of the issuer's board of
directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
FIXED-INCOME SECURITIES are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time, and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
HIGH-YIELD/HIGH-RISK SECURITIES are securities that are rated below investment
grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower
50 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
by Moody's). Other terms commonly used to describe such securities include
"lower rated bonds," "noninvestment grade bonds" and "junk bonds."
INDUSTRIAL DEVELOPMENT BONDS are revenue bonds that are issued by a public
authority but which may be backed only by the credit and security of a private
issuer and may involve greater credit risk. See "Municipal securities" below.
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, a portfolio manager may have
to reinvest the proceeds from the securities at a lower rate. Potential market
gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.
MUNICIPAL LEASE OBLIGATIONS are revenue bonds backed by leases or installment
purchase contracts for property or equipment. Lease obligations may not be
backed by the issuing municipality's credit and may involve risks not normally
associated with general obligation bonds and other revenue bonds. For example,
their interest may become taxable if the lease is assigned and the holders may
incur losses if the issuer does not appropriate funds for the lease payments on
an annual basis, which may result in termination of the lease and possible
default.
MUNICIPAL SECURITIES are bonds or notes issued by a U.S. state or political
subdivision. A municipal security may be a general obligation backed by the full
faith and credit (i.e., the borrowing and taxing power) of a municipality or a
revenue obligation paid out of the revenues of a designated project, facility or
revenue source.
PASSIVE FOREIGN INVESTMENT 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. To avoid taxes and interest that the Funds must
pay if these investments are profitable, the Funds may make various elections
permitted by the tax laws. These elections could require that the Funds
recognize taxable income, which in turn must be distributed, before the
securities are sold and before cash is received to pay the distributions.
PAY-IN-KIND BONDS are debt securities that normally give the issuer an option to
pay cash at a coupon payment date or give the holder of the security a similar
bond with the same coupon rate and a face value equal to the amount of the
coupon payment that would have been made.
PREFERRED STOCK is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights.
REPURCHASE AGREEMENTS involve the purchase of a security by a Fund and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 51
<PAGE>
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, a Fund
will bear the risk of market value fluctuations until the security can be sold
and may encounter delays and incur costs in liquidating the security.
REVERSE REPURCHASE AGREEMENTS involve the sale of a security by a Fund to
another party (generally a bank or dealer) in return for cash and an agreement
by the Fund to buy the security back at a specified price and time. This
technique will be used primarily to provide cash to satisfy unusually high
redemption requests, or for other temporary or emergency purposes.
RULE 144A SECURITIES are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
STANDBY COMMITMENTS are obligations purchased by a Fund from a dealer that give
the Fund the option to sell a security to the dealer at a specified price.
STEP COUPON BONDS are debt securities that trade at a discount from their face
value and pay coupon interest. The discount from the face value depends on the
time remaining until cash payments begin, prevailing interest rates, liquidity
of the security and the perceived credit quality of the issuer.
STRIP BONDS 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.
TENDER OPTION BONDS are generally long-term securities that are coupled with an
option to tender the securities to a bank, broker-dealer or other financial
institution at periodic intervals and receive the face value of the bond. This
type of security is commonly used as a means of enhancing the security's
liquidity.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations and others are supported only by
the credit of the sponsoring agency.
VARIABLE AND FLOATING RATE SECURITIES have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
52 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
WARRANTS are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD TRANSACTIONS generally involve the
purchase of a security with payment and delivery at some time in the
future - i.e., beyond normal settlement. The Funds do not earn interest on such
securities until settlement and bear the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
ZERO COUPON BONDS are debt securities that do not pay regular interest at
regular intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. The market value of these securities generally
fluctuates more in response to changes in interest rates than interest-paying
securities.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
FORWARD CONTRACTS are contracts to purchase or sell a specified amount of a
financial instrument for an agreed upon price at a specified time. Forward
contracts are not currently exchange traded and are typically negotiated on an
individual basis. The Funds may enter into forward currency contracts to hedge
against declines in the value of securities denominated in, or whose value is
tied to, a currency other than the U.S. dollar or to reduce the impact of
currency appreciation on purchases of such securities. They may also enter into
forward contracts to purchase or sell securities or other financial indices.
FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Funds may buy and sell futures contracts on foreign currencies,
securities and financial indices including interest rates or an index of U.S.
government, foreign government, equity or fixed-income securities. The Funds may
also buy options on futures contracts. An option on a futures contract gives the
buyer the right, but not the obligation, to buy or sell a futures contract at a
specified price on or before a specified date. Futures contracts and options on
futures are standardized and traded on designated exchanges.
INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices or other financial
indicators. Such securities may be positively or negatively indexed (i.e. their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments. A Fund bears the market risk of an
investment in the underlying instruments, as well as the credit risk of the
issuer.
INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 53
<PAGE>
INVERSE FLOATERS are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. Certain inverse floaters may have an interest rate
reset mechanism that multiplies the effects of change in the underlying index.
Such mechanism may increase the volatility of the security's market value.
OPTIONS are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Funds may purchase and write put and call options on securities,
securities indices and foreign currencies.
54 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<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 Janus Capital 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
CCC, CC, C issuer's capacity to meet required interest and
principal payments. BB - lowest degree of
speculation; C - the highest degree of speculation.
Quality and protective characteristics outweighed
by large uncertainties or major risk exposure to
adverse conditions.
D In default.
- ------------------------------------------------------------------------
</TABLE>
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 55
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
- ------------------------------------------------------------------------
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 will be treated as noninvestment grade securities unless a
portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received ratings from more
than one agency are considered investment grade if at least one agency has rated
the security investment grade.
56 JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended October 31, 1997, the percentage of securities
holdings for Janus Flexible Income Fund, Janus High-Yield Fund, and Janus
Short-Term Bond Fund by rating category based upon a weighted monthly average
was:
<TABLE>
<S> <C>
BONDS - S&P RATING JANUS FLEXIBLE INCOME FUND
- -----------------------------------------------------------------------------
AAA 15%
AA 1%
A 11%
BBB 21%
BB 15%
B 22%
CCC 3%
CC 0%
C 0%
Preferred Stock 2%
Cash and Options 10%
- -----------------------------------------------------------------------------
TOTAL 100%
- -----------------------------------------------------------------------------
BONDS - S&P RATING JANUS HIGH-YIELD FUND
- ----------------------------------------------------------------------------
AAA 0%
AA 0%
A 0%
BBB 1%
BB 5%
B 71%
CCC 11%
CC 0%
C 0%
Preferred Stock 3%
Cash and Options 9%
- ----------------------------------------------------------------------------
TOTAL 100%
- ----------------------------------------------------------------------------
BONDS - S&P RATING JANUS SHORT-TERM BOND FUND
- ----------------------------------------------------------------------------
AAA 22%
AA 4%
A 27%
BBB 25%
BB 2%
B 13%
CCC 2%
CC 0%
C 0%
Preferred Stock 0%
Cash and Options 5%
- ----------------------------------------------------------------------------
TOTAL 100%
- ----------------------------------------------------------------------------
</TABLE>
No other Fund described in this Prospectus held 5% or more of its assets in
bonds rated below investment grade for the fiscal period ended October 31, 1997.
JANUS INCOME FUNDS COMBINED PROSPECTUS FEBRUARY 17, 1998 57
<PAGE>
JANUS INCOME FUNDS
PROSPECTUS
Janus Flexible Income Fund
Janus High-Yield Fund
Janus Federal Tax-Exempt Fund
Janus Short-Term Bond Fund
Janus Money Market Fund
Janus Government Money Market Fund
Janus Tax-Exempt Money Market Fund
[JANUS LOGO]
P.O. Box 173375 * Denver, CO 80217-3375 * 1-800-525-3713
Janus Distributors, Inc. Member NASD. (2/98)
<PAGE>
Janus Venture Fund
100 Fillmore Street
Denver, CO 80206-4928
1-800-525-3713
http://www.Janus.com
FEBRUARY 17, 1998
Janus Venture Fund (the "Fund") is a no-load, diversified mutual fund that seeks
capital appreciation. The Fund normally invests at least 50% of its equity
assets in securities of small-sized companies.
THE FUND HAS DISCONTINUED PUBLIC SALES OF ITS SHARES TO NEW INVESTORS, BUT
SHAREHOLDERS WHO MAINTAIN OPEN FUND ACCOUNTS ARE STILL ABLE TO MAKE INVESTMENTS
IN THE FUND AND REINVEST ANY DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. CURRENT
SHAREHOLDERS MAY ALSO OPEN ADDITIONAL FUND ACCOUNTS UNDER CERTAIN CONDITIONS. IF
A FUND ACCOUNT IS CLOSED, HOWEVER, ADDITIONAL INVESTMENTS IN THE FUND MAY NOT BE
POSSIBLE. For complete information on how to purchase, exchange and sell shares,
please see the Shareholder's Manual beginning on page 15. The Fund may resume
sale of its shares to new investors in the future, although it has no current
intention to do so.
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 17, 1998, 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. The SEC maintains a
Web site located at http://www.sec.gov that contains the SAI, material
incorporated by reference, and other information regarding the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
THE FUND AT A GLANCE
Brief description of the Fund................ 2
EXPENSE INFORMATION
The Fund's annual operating expenses......... 3
Financial Highlights - a summary of financial
data....................................... 4
THE FUND IN DETAIL
Investment Objective......................... 7
General Portfolio Policies................... 9
Additional Risk Factors...................... 11
PERFORMANCE TERMS
An Explanation of Performance Terms.......... 14
SHAREHOLDER'S MANUAL
Minimum Investments.......................... 15
Types of Account Ownership................... 16
How to Open Your Janus Account............... 17
How to Purchase Shares....................... 18
How to Exchange Shares....................... 19
How to Redeem Shares......................... 20
Shareholder Services and Account Policies.... 23
MANAGEMENT OF THE FUND
Investment Adviser and Portfolio Managers.... 26
Personal Investing........................... 27
Management Expenses.......................... 27
Portfolio Transactions....................... 27
Other Service Providers...................... 28
Other Information............................ 28
DISTRIBUTIONS AND TAXES
Distributions................................ 30
Taxes........................................ 31
APPENDIX A
Glossary of Investment Terms................. 32
</TABLE>
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 1
<PAGE>
THE FUND AT A GLANCE
This section provides you with a brief overview of the Fund and its investment
emphasis. A more detailed discussion of the Fund's investment objective and
policies begins on page 7 and complete information on how to purchase, redeem
and exchange shares begins on page 15.
FUND FOCUS:
A diversified fund that seeks capital appreciation by investing primarily in
common stocks, with an emphasis on securities of small-sized companies.
SHAREHOLDER'S INVESTMENT HORIZON:
The Fund is designed for long-term investors who seek capital appreciation and
who can tolerate the greater risks associated with investments in foreign and
domestic common stocks. The Fund is not designed as a short-term trading vehicle
and should not be relied upon for short-term financial needs.
FUND ADVISER:
Janus Capital Corporation ("Janus Capital") serves as the Fund's investment
adviser. Janus Capital has been in the investment advisory business for over 27
years and currently manages approximately $70 billion in assets.
MANAGEMENT TEAM:
James P. Craig
William H. Bales
Jonathan D. Coleman
FUND INCEPTION:
April 30, 1985
2 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
EXPENSE INFORMATION
The tables and example below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. Shareholder Transaction Expenses are fees charged directly
to your individual account when you buy, sell or exchange shares. The table
below shows that you pay no such fees. Annual Fund Operating Expenses are paid
out of the Fund's assets and include fees for portfolio management, maintenance
of shareholder accounts, shareholder servicing, accounting and other services.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fee* None
Exchange fee None
</TABLE>
* There is an $8 service fee for redemptions by wire.
ANNUAL OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
<TABLE>
<S> <C>
- ------------------------------------------------------------
Management Fee 0.68%
Other Expenses 0.26%
- ------------------------------------------------------------
Total Fund Operating Expenses 0.94%
- ------------------------------------------------------------
</TABLE>
(1)The Management Fee reflects a reduced fee schedule effective July 1, 1997,
applied to assets as of October 31, 1997. Other Expenses are based on
expenses before expense offset arrangements for the fiscal year ended October
31, 1997.
EXAMPLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $30 $52 $115
</TABLE>
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 3
<PAGE>
FINANCIAL HIGHLIGHTS
Unless otherwise noted, the information below is for fiscal periods ending on
October 31st of each year. The accounting firm of Price Waterhouse LLP has
audited the Fund's financial statements beginning with the year ended October
31, 1990. Their report is included in the Fund's Annual Report, which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $57.16 $59.53 $52.86 $53.25
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income/(loss) 0.16 -- 0.05 0.11
3. Net gains or (losses) on securities
(both realized and unrealized) 6.80 5.09 9.49 4.40
- --------------------------------------------------------------------------------------
4. Total from investment operations 6.96 5.09 9.54 4.51
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) -- (0.01) (0.03) (0.53)
6. Distributions (from capital gains) (5.28) (7.45) (2.84) (4.37)
- --------------------------------------------------------------------------------------
7. Total distributions (5.28) (7.46) (2.87) (4.90)
- --------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $58.84 $57.16 $59.53 $52.86
- --------------------------------------------------------------------------------------
9. Total return* 13.38% 9.28% 19.24% 9.23%
- --------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $1,252 $1,741 $1,753 $1,550
11. Average net assets for the period (in
millions) $1,379 $1,823 $1,613 $1,563
12. Ratio of gross expenses to average net
assets** 0.94% 0.89% 0.92% N/A
13. Ratio of net expenses to average net
assets** 0.92% 0.88% 0.91% 0.96%
14. Ratio of net investment income/(loss) to
average net assets** 0.11% (0.33%) 0.29% 0.27%
15. Portfolio turnover rate** 146% 136% 113% 114%
16. Average commission rate $.0391 $.0382 N/A N/A
- --------------------------------------------------------------------------------------
<CAPTION>
1993 1992(1)
<S> <C> <C>
- ----------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $47.74 $45.96
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income/(loss) 0.66 0.17
3. Net gains or (losses) on securities
(both realized and unrealized) 6.72 1.61
- ----------------------------------------------------------------
4. Total from investment operations 7.38 1.78
- ----------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (1.16) --
6. Distributions (from capital gains) (0.71) --
- ----------------------------------------------------------------
7. Total distributions (1.87) --
- ----------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $53.25 $47.74
- ----------------------------------------------------------------
9. Total return* 15.76% 3.87%
- ----------------------------------------------------------------
10. Net assets, end of period (in millions) $1,837 $1,545
11. Average net assets for the period (in
millions) $1,793 $1,496
12. Ratio of gross expenses to average net
assets** N/A N/A
13. Ratio of net expenses to average net
assets** 0.97% 1.07%
14. Ratio of net investment income/(loss) to
average net assets** 1.29% 1.32%
15. Portfolio turnover rate** 139% 124%
16. Average commission rate N/A N/A
- ----------------------------------------------------------------
</TABLE>
(1) Fiscal period from August 1, 1992 to October 31, 1992.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
4 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
<TABLE>
<CAPTION>
(CONTINUED) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $45.05 $37.90 $36.97 $28.11 $34.63
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income/(loss) 0.36 0.44 0.28 0.33 1.50
3. Net gains or (losses) on securities (both
realized and unrealized) 4.23 7.71 3.44 10.05 (3.70)
- ------------------------------------------------------------------------------------------------------
4. Total from investment operations 4.59 8.15 3.72 10.38 (2.20)
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.25) (0.11) (0.44) (1.52) (0.15)
6. Distributions (from capital gains) (3.43) (0.89) (2.35) -- (4.17)
- ------------------------------------------------------------------------------------------------------
7. Total distributions (3.68) (1.00) (2.79) (1.52) (4.32)
- ------------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $45.96 $45.05 $37.90 $36.97 $28.11
- ------------------------------------------------------------------------------------------------------
9. Total return* 9.90% 22.28% 10.46% 38.73% (4.56%)
- ------------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $1,510 $893 $256 $58 $34
11. Average net assets for the period (in
millions) $1,382 $427 $127 $40 $35
12. Ratio of gross expenses to average net
assets** N/A N/A N/A N/A N/A
13. Ratio of net expenses to average net assets** 1.00% 1.04% 1.16% 1.28% 1.41%
14. Ratio of net investment income/(loss) to
average net assets** 1.20% 2.10% 1.24% 1.10% 5.11%
15. Portfolio turnover rate** 166% 167% 184% 219% 299%
16. Average commission rate N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal year ended on July 31st of each year.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 5
<PAGE>
UNDERSTANDING THE
FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights tables. The tables contain important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The 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 a Fund share 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) are 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) are 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. Total return includes both changes in
NAV and income. For the purpose of calculating total return, it is assumed that
dividends and distributions are reinvested at the NAV on the day of the
distribution.
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS is the total of the Fund's
operating expenses before expense offset arrangements divided by its average net
assets for the stated period. The Fund was not required to disclose the ratio of
gross expenses to average net assets prior to 1995. RATIO OF NET EXPENSES TO
AVERAGE NET ASSETS reflects reductions in the Fund's expenses through the use of
brokerage commissions and uninvested cash balances earning interest or balance
credits.
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS is the Fund's net
investment income divided by its average net assets for the stated period.
PORTFOLIO TURNOVER RATE is a measure of the amount of 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.
AVERAGE COMMISSION RATE is the total of the Fund's agency commissions paid on
equity securities trades divided by the number of shares purchased and sold.
6 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<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. 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.
You should carefully consider your own investment goals, time horizon (the
amount of time you plan to hold shares of the Fund) and risk tolerance before
investing in the Fund. 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. There is no guarantee that the Fund will meet its investment objective.
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.
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund pursues
its objective by normally investing at least 50% of its equity assets in
securities issued by small-sized companies. Small-sized companies are those who
have market capitalizations of less than $1 billion or annual gross revenues of
less than $500 million. Companies whose capitalization or revenues fall outside
these ranges after the Fund's initial purchase continue to be considered
small-sized for the purposes of this policy. Subject to the above policy, the
Fund may also invest in larger companies.
TYPES OF INVESTMENTS
The Fund invests primarily in common stocks with an emphasis on securities of
small-sized companies. The Fund may also invest in larger companies with strong
growth potential or relatively well-known and large companies with potential for
capital appreciation. The Fund may invest to a lesser degree in other types of
securities including preferred stocks, warrants, convertible securities and debt
securities. The Fund may invest up to 25% of its assets in mortgage- and
asset-backed securities, up to 10% of its assets in zero coupon, pay-in-kind and
step coupon securities, and without limit in indexed/structured securities. The
Fund will invest less than 35% of its assets in high-yield/high-risk securities.
The Fund may also purchase high-grade commercial paper, certificates of deposit,
and repurchase agreements. Such securities may offer growth potential because of
anticipated changes in interest rates, credit standing, currency relationships
or other factors.
When the Fund's portfolio managers believe that market conditions are not
favorable for profitable investing or when the portfolio managers are otherwise
unable to locate investment opportunities with favorable risk/reward
characteristics, the Fund's investments may be hedged to a greater degree and/or
its cash or similar investments may increase. In other words, the Fund does not
always stay fully invested in stocks and bonds. Cash or similar investments are
a residual - they represent the assets that remain
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 7
<PAGE>
after the portfolio managers have committed available assets to desirable
investment opportunities. Securities that the Fund may invest in as a 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. When the
Fund is hedged or its cash position increases, it might not participate in
market advances or declines to the extent that it would if it was not hedged or
it remained more fully invested in common stocks.
The Fund may invest without limit in foreign equity and debt securities. The
Fund may invest directly in foreign securities denominated in a foreign currency
and not publicly traded in the United States. Other ways of investing in foreign
securities include depositary receipts or shares, and passive foreign investment
companies. The Fund may use options, futures and other types of derivatives for
hedging purposes or for non-hedging purposes such as seeking to enhance return.
See "Additional Risk Factors" on page 11. The Fund may purchase securities on a
when-issued, delayed delivery or forward commitment basis.
The Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the Fund's portfolio managers, the
securities of a particular issuer will be recognized and appreciate in value due
to a specific development with respect to that issuer. See "Additional Risk
Factors" on page 11.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE FUND.
Q: HOW ARE COMMON STOCKS SELECTED?
A: The Fund may invest substantially all of its assets in common stocks to the
extent its portfolio managers believe that the relevant market environment
favors profitable investing in those securities. The portfolio managers
generally take a "bottom up" approach to building the portfolio. In other words,
they seek to identify individual companies with earnings growth potential that
may not be recognized by the market at large. Although themes may emerge in the
Fund, securities are generally selected without regard to any defined industry
sector or other similarly defined selection procedure. Realization of income is
not a significant investment consideration. Any income realized on the Fund's
investments will be incidental to its objective.
Q: ARE THE SAME CRITERIA USED
TO SELECT FOREIGN SECURITIES?
A: Generally, yes. The portfolio managers seek companies that meet their
selection criteria regardless of country of organization or place of principal
business activity. Foreign securities are generally selected on a stock-by-stock
basis without regard to any defined allocation among countries or geographic
regions. However, certain factors such as expected levels of inflation,
government policies influencing business conditions, the outlook for currency
relationships, and prospects for economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign
securities. See "Additional Risk Factors" on page 11.
8 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Q: WHAT IS THE MAIN RISK OF INVESTING
IN THE FUND?
A: Since the Fund invests primarily in common stocks, the fundamental risk is
that the value of the stocks it holds might decrease. Stock values may fluctuate
in response to the activities of an individual company or in response to general
market and/or economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than other
investment choices. Smaller or newer issuers, such as those in which the Fund
invests, are more likely to realize more substantial growth as well as suffer
more significant losses than larger or more established issuers. Investments in
such companies can be both more volatile and more speculative. See "Additional
Risk Factors" on page 11.
Q: WHAT IS MEANT BY
"MARKET CAPITALIZATION"?
A: Market capitalization is the most commonly used measure of the size and
value of a company. It is computed by multiplying the current market price of a
share of the company's stock by the total number of its shares outstanding. As
noted previously, market capitalization and annual gross revenues are important
investment criteria for the Fund.
Q: HOW DOES THE FUND
TRY TO REDUCE RISK?
A: Diversification of the Fund's assets reduces the effect of any single
holding on its overall portfolio value. The Fund may also use futures, options
and other derivative instruments to protect its portfolio from movements in
securities prices and interest rates. The Fund may use a variety of currency
hedging techniques, including forward currency contracts, to manage exchange
rate risk. See "Additional Risk Factors" on page 11. To the extent that the Fund
holds a larger cash position, it might not participate in market declines to the
same extent as if it had remained more fully invested in common stocks.
GENERAL PORTFOLIO POLICIES
In investing its portfolio assets, the Fund will follow the general policies
listed below. The percentage limitations included in these policies and
elsewhere in this Prospectus apply only 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:
- - As a fundamental policy, the Fund may not own more than 10% of the outstanding
voting shares of any issuer.
- - 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
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 9
<PAGE>
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.
- - The Fund will invest no more than 25% of its total assets in a single issuer
(other than U.S. government securities).
INDUSTRY CONCENTRATION
As a fundamental policy, the Fund will not invest 25% or more of its total
assets in any particular industry (excluding U.S. government securities).
PORTFOLIO TURNOVER
The Fund generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective, changes
in interest rates or the credit standing of an issuer, or by reason of economic
or other developments not foreseen at the time of the investment decision.
Changes are made in the Fund's portfolio whenever its portfolio managers believe
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.
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. If illiquid securities exceed 15% of net assets after
the time of purchase, the Fund will take steps to reduce in an orderly fashion
its holdings of illiquid securities. 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 will follow guidelines
established by the Fund's Trustees in making liquidity determinations for Rule
144A securities and certain other securities, including privately placed
commercial paper.
BORROWING AND LENDING
The Fund may borrow money and lend securities or other assets, as follows:
- - The Fund may borrow money for temporary or emergency purposes in amounts up to
25% of its total assets.
- - The Fund may mortgage or pledge securities as collateral for borrowings in
amounts up to 15% of its net assets.
- - 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.
Under the terms of an exemptive order received from the SEC, the Fund may borrow
money from or lend money to other funds that permit such transactions and for
which
10 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Janus Capital serves as investment adviser. All such borrowing and lending will
be subject to the above limits.
ADDITIONAL RISK FACTORS
INVESTMENTS IN SMALLER COMPANIES
The Fund may invest in companies that have relatively small revenues, have a
small share of the market for their products or services, or have limited
geographic or product markets. Smaller or newer companies may suffer more
significant losses as well as realize more substantial growth than larger or
more established issuers. Smaller or newer companies may lack depth of
management, they may be unable to generate internally funds necessary for growth
or potential development or to generate such funds through external financing on
favorable terms, or they may be developing or marketing new products or services
for which markets are not yet established and may never become established. In
addition, such companies may be insignificant factors in their industries and
may become subject to intense competition from larger companies. Securities of
small companies held by the Fund may have more limited trading markets than the
markets for securities of larger or more established issuers, and may be subject
to wider price fluctuations. Investments in such companies tend to be more
volatile and somewhat more speculative.
SPECIAL SITUATIONS
Special situations may include, among others, significant changes in a company's
allocation of its existing capital, a restructuring of assets, 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.
FOREIGN SECURITIES
Investments in foreign securities, including those of foreign governments, may
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:
- - 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 denominated 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.
- - POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to heightened
political and economic risks, particularly in underdeveloped or developing
countries which may have relatively unstable governments and economies based
on only a few industries. In some countries, there is the risk that the
government may take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of the Fund's assets from
that country. The Fund may invest in emerging market countries. Emerging
market countries involve greater risks such as
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 11
<PAGE>
immature economic structures, national policies restricting investments by
foreigners, and different legal systems.
- - 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.
- - 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.
- - 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.
Foreign securities purchased indirectly (e.g., depositary receipts) are subject
to many of the above risks, including currency risk, because their values depend
on the performance of a foreign security denominated in its home currency.
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
nonhedging purposes such as seeking to increase the Fund's income or otherwise
seeking to enhance return. Please refer to Appendix A to this Prospectus and the
SAI for a more detailed discussion of these instruments.
The use of derivative instruments exposes the Fund to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include:
- - the risk that interest rates, securities prices and currency markets will not
move in the direction that the portfolio managers anticipate;
- - imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies being
hedged;
- - the fact that skills needed to use these strategies are different from those
needed to select portfolio securities;
- - inability to close out certain hedged positions to avoid adverse tax
consequences;
- - 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;
12 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
- - 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
- - 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 managers' judgement proves incorrect.
When the Fund invests in a derivative instrument, it may be required to
segregate cash and other liquid assets or certain portfolio securities with its
custodian to "cover" the Fund's position. Assets segregated or set aside
generally may not be disposed of so long as the Fund maintains the positions
requiring segregation or cover. Segregating assets could diminish the Fund's
return due to the opportunity losses of foregoing other potential investments
with the segregated assets.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are debt securities rated
below investment grade by the primary rating agencies such as Standard & Poor's
Ratings Services ("Standard & Poor's") and Moody's Investors Service, Inc.
("Moody's").
The value of lower quality securities generally is more dependent on the ability
of the company 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. In addition, companies issuing high-yield securities may be
more vulnerable to real or perceived economic changes, political changes or
other developments adverse to the company and lower quality securities may have
less liquid markets than higher quality securities. Investments in companies
issuing high-yield securities 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. The market for lower quality securities is generally less liquid
than the market for higher quality securities. 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.
Please refer to the SAI for a description of bond rating categories.
SHORT SALES
The Fund may engage in "short sales against the box." This technique involves
selling either a security that the Fund owns, or a security equivalent in kind
and amount to the security sold short that the Fund has the right to obtain, for
delivery at a specified date in the future. The Fund may enter into a short sale
against the box to hedge against anticipated declines in the market price of
portfolio securities. If the value of the securities sold short increases prior
to the scheduled delivery date, the Fund loses the opportunity to participate in
the gain.
See Appendix A for risks associated with certain other investments.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 13
<PAGE>
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe the Fund's performance. You may see references to these terms in our
newsletters, advertisements and in media articles. Our newsletters and
advertisements may include comparisons of the Fund's performance to the
performance of other mutual funds, mutual fund averages or recognized stock
market indices. The Fund generally measures performance in terms of total
return.
CUMULATIVE TOTAL RETURN represents the actual rate of return on an investment
for a specified period. 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.
THE FUND IMPOSES NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN
COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET
VALUE WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
14 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SHAREHOLDER'S MANUAL
This section will help you become familiar with the different types of accounts
you can establish with Janus. It also explains in detail the wide array of
services and features you can establish on your account as well as account
policies and fees that may apply to your account. Account policies (including
fees), services and features may be modified or discontinued without shareholder
approval or prior notice.
Although the Fund has discontinued public sales of its shares to new investors,
shareholders who maintain open accounts will be able to continue to purchase
shares and reinvest any dividends and capital gains distributions in additional
shares. In addition, the Fund will continue to accept new accounts which are
opened under taxpayer identification numbers that are identical to those for
existing Fund accounts.
Once a Fund account is closed, it may not be reopened. An account may be
considered closed and subject to redemption by the Fund in the circumstances
discussed under "Involuntary Redemptions" on page 24.
MINIMUM INVESTMENTS*
<TABLE>
<S> <C>
To open a new account.............................. $2,500
To open a new retirement, education 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+
</TABLE>
* 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.
** An Automatic Investment Program requires a $100 minimum automatic
investment per month until the account balance reaches $2,500.
+ The minimum subsequent investment for IRA UGMA/UTMA accounts is $50.
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.-8:00
p.m., and Saturday: 10:00 a.m.-4:00 p.m., New York time. The Quick Address and
Telephone Reference below includes other ways to get in touch with Janus.
QUICK ADDRESS AND TELEPHONE REFERENCE
<TABLE>
<S> <C>
MAILING ADDRESS JANUS XPRESS LINE(TM) 1-888-979-7737
Janus For 24-hour access to account and
P.O. Box 173375 fund information, exchanges and
Denver, CO 80217-3375 purchases, automated daily quotes on
fund share prices, yields and total
FOR OVERNIGHT CARRIER refunds.
Janus
Suite 101 TDD 1-800-525-0056
3773 Cherry Creek North Drive A telecommunications device for our
Denver, CO 80209-3811 hearing- and speech-impaired
JANUS INTERNET ADDRESS shareholders.
http://www.Janus.com JANUS LITERATURE LINE 1-800-525-8983
To request a prospectus, shareholder
reports or marketing materials.
</TABLE>
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 15
<PAGE>
TYPES OF ACCOUNT OWNERSHIP
As discussed above, the Fund will accept new accounts opened under taxpayer
identification numbers identical to those on current Fund accounts. You can
establish the following types of accounts by completing a New Account
Application. To request an application, call 1-800-525-3713.
- - INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one person.
Joint accounts have two or more owners.
- - 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.
- - 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.
- - 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.
TAX-DEFERRED ACCOUNTS
If you are eligible, you may set up one or more tax-deferred accounts. A
tax-deferred account allows you to shelter your investment income and capital
gains from current income taxes. A contribution to certain of these plans may
also be tax deductible. Tax-deferred accounts include retirement plans and the
Education IRA. Distributions from these plans are generally subject to income
tax and may be subject to an additional tax if withdrawn prior to age 59 1/2 or
used for a nonqualifying purpose. Investors should consult their tax advisor or
legal counsel before selecting a tax-deferred account.
Investors Fiduciary Trust Company serves as custodian for the tax-deferred
accounts offered by the Fund. You will be charged an annual account maintenance
fee of $12 for each Fund account, up to a maximum of $24 for two or more Fund
accounts registered under the same taxpayer identification number. Each Janus
fund you own under your IRA account number is considered a separate "Fund
account." You may pay the fee by check or have it automatically deducted from
your account (usually in December). The Fund reserves the right to change the
amount of this fee or to waive it in whole or in part for certain types of
accounts.
The following plans require a special application. For an application and more
details about our Retirement Plans, call 1-800-525-3713.
- - REGULAR AND ROTH INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"): Both types of IRAs
allow most individuals with earned income to contribute up to the lesser of
$2,000 ($4,000 for most married couples) or 100% of compensation annually.
Please refer to the Janus IRA booklet for more complete information regarding
the different types of IRAs.
- - EDUCATION IRA: This plan allows individuals, subject to certain income
limitations, to contribute up to $500 annually on behalf of any child under
the age of 18. Please
16 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
refer to the Janus IRA booklet for more complete information regarding the
Education IRA.
- - 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.
- - PROFIT SHARING OR MONEY PURCHASE PENSION PLAN: These plans are open to
corporations, partnerships and sole proprietors to benefit their employees and
themselves.
- - SECTION 403(B)(7) PLAN: Employees of educational organizations or other
qualifying, tax-exempt organizations may be eligible to participate in a
Section 403(b)(7) Plan.
HOW TO OPEN YOUR JANUS ACCOUNT
If you are a current Fund shareholder and want to open another Fund account,
complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application and make
your check payable to Janus. The Fund is available only to U.S. citizens or
residents, and your application will be returned to you if you do not meet these
criteria. Send all items to one of following addresses:
For Overnight Carrier
- --------------------
Janus
Suite 101
3773 Cherry Creek North Drive
Denver, CO 80209-3811
For All Other Inquiries
- ---------------------
Janus
P.O. Box 173375
Denver, CO 80217-3375
INVESTOR SERVICE CENTERS
Janus 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: Monday-Friday 7:00 a.m. to 6:00
p.m. Mountain time and Saturday 9:00 a.m. to 1:00 p.m. Mountain time.
100 Fillmore Street, Suite 100
Denver, CO 80206
3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 17
<PAGE>
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:
- - Cash, credit cards, third party checks and credit card checks will not be
accepted.
- - All purchases must be made in U.S. dollars.
- - Checks must be drawn on a U.S. bank and made payable to Janus.
- - If a check does not clear your bank, the Fund reserves the right to cancel the
purchase.
- - 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.
- - 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 ($50 FOR IRAS OR UGMA/UTMA ACCOUNTS). 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. To purchase shares by telephone, call
an Investor Service Representative at 1-800-525-3713 during normal business
hours or call the Janus Xpress Line, 1-888-979-7737, for access to this option
24 hours a day. When you make an additional purchase by telephone, Janus will
automatically debit your predesignated bank account for the desired amount. To
establish the telephone purchase option on your new account, complete the
"Telephone Purchase of Shares Option" section on the application and attach a
"voided" check or deposit slip from your bank account. If your account is
already established, call 1-800-525-3713 to request the appropriate form. This
option will become effective ten business days after the form is received.
BY WIRE
Purchases may also be made by wiring money from your bank account to your Janus
account. Call 1-800-525-3713 to receive wiring instructions.
18 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
AUTOMATIC INVESTMENT PROGRAMS
Janus offers several automatic investment programs to help you achieve your
financial goals as simply and conveniently as possible. You may open a new
account with a $500 initial purchase and $100 automatic subsequent investments.
- - AUTOMATIC MONTHLY INVESTMENT PROGRAM
You select the day each month that your money ($100 minimum) will be
electronically transferred from your bank account to your Fund account. To
establish this option, complete the "Automatic Monthly Investment Program"
section on the application and attach a "voided" check or deposit slip from
your bank account. If your Fund account is already established, call
1-800-525-3713 to request the appropriate form.
- - PAYROLL DEDUCTION
If your employer can initiate an automatic payroll deduction, you may have all
or a portion of your paycheck ($100 minimum) invested directly into your Fund
account. To obtain information on establishing this option, call
1-800-525-3713.
- - 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 21.
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 Xpress Line,
1-888-979-7737, for access to this option 24 hours a day.
BY SYSTEMATIC EXCHANGE
As noted above, you may establish a Systematic Exchange for as little as $100
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
- - Except for Systematic Exchanges, new accounts established by exchange must be
opened with $2,500 or the total account value if the value of the account you
are exchanging from is less than $2,500.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 19
<PAGE>
- - Exchanges between existing accounts must meet the $100 subsequent investment
requirement.
- - You may make four exchanges out of the Fund during a calendar year (exclusive
of Systematic Exchanges). Exchanges in excess of this limit may be subject to
an exchange fee or may result in termination of the exchange privilege.
- - The Fund reserves the right to reject any exchange request and to modify or
terminate the exchange privilege at any time. For example, the Fund may reject
exchanges from accounts engaged in or known to engage in excessive trading
(including market timing transactions).
- - Exchanges between accounts will be accepted only if the registrations are
identical.
- - If the shares you are exchanging are held in certificate form, you must return
the certificate to the Fund prior to making any exchanges.
- - Be sure to read the prospectus for the fund into which you are exchanging.
- - An exchange represents the sale of shares from one fund and the purchase of
shares of another fund, which may produce a taxable gain or loss in a non-tax
deferred account.
HOW TO REDEEM SHARES
On any business day, you may redeem all or a portion of your shares. REMEMBER
THAT THE FUND IS CLOSED TO NEW INVESTORS AND IF A TOTAL REDEMPTION IS MADE
ADDITIONAL INVESTMENTS IN YOUR FUND ACCOUNT MIGHT NOT BE POSSIBLE.
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 21.
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 request redemptions daily from your account by calling 1-800-525-3713 by the
close of the regular trading session of the New York Stock Exchange ("NYSE")
normally 4:00 p.m. New York time. You may also use Janus Xpress Line,
1-888-979-7737, for access to this option 24 hours a day. Redemption requests
received through Janus Xpress Line will be processed at the NAV next calculated
after receipt and acceptance of the request. (There is a daily limit of $100,000
per account for redemptions payable by check.)
SYSTEMATIC REDEMPTION OPTION
The Systematic Redemption Option allows you to redeem a specific dollar amount
from your Fund account on a regular basis. For more information or to request
the appropriate form, please call 1-800-525-3713.
20 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
PAYMENT OF REDEMPTION PROCEEDS
- - 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.
- - BY ELECTRONIC TRANSFER
If you have established the electronic redemption option, your redemption
proceeds can be electronically transferred to your predesignated bank account
on the next bank business day after receipt of your redemption request (wire
transfer) or the second bank business day after receipt of your redemption
request (ACH transfer). Wire transfers will be charged an $8 fee per wire and
your bank may charge an additional fee to receive the wire. ACH transfers are
made free of charge. Wire redemptions are not available for retirement
accounts.
If you would like to establish the electronic redemption option on an existing
account, please call 1-800-525-3713 to request the appropriate form.
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 all or part of your shares in writing, your request should be sent to
one of the addresses listed on page 17 and must include the following
information:
- - the name of the Fund
- - the account number
- - the amount of money or number of shares being redeemed
- - the name(s) on the account registration
- - the signature(s) of all registered account owners
- - your daytime telephone number
SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE
- - INDIVIDUAL, JOINT TENANTS, TENANTS IN COMMON: Written instructions must be
signed by each shareholder, exactly as the names appear in the account
registration.
- - UGMA OR UTMA: Written instructions must be signed by the custodian in his/her
capacity as it appears in the account registration.
- - SOLE PROPRIETOR, GENERAL PARTNER: Written instructions must be signed by an
authorized individual in his/her capacity as it appears on the account
registration.
- - 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.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 21
<PAGE>
- - 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.
- - IRA: Written instructions must be signed by the account owner. If you do not
want federal income tax withheld from your redemption, you must state that you
elect not to have such withholding apply. In addition, your instructions must
state whether the distribution is normal (after age 59 1/2) or premature
(before age 59 1/2) and, if premature, whether any exceptions such as death or
disability apply with regard to the 10% additional tax on early distributions.
SIGNATURE GUARANTEE
In addition to the signature requirements, A SIGNATURE GUARANTEE IS ALSO
REQUIRED if any of the following is applicable:
- - You request a redemption that exceeds $100,000.
- - You would like the check made payable to anyone other than the shareholder(s)
of record.
- - You would like the check mailed to an address which has been changed within 10
days of the redemption request.
- - You would like the check mailed to an address other than the address of
record.
THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713.
HOW TO OBTAIN A SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized account transfers. The
following financial institutions may guarantee signatures: banks, savings and
loan associations, trust companies, credit unions, broker-dealers, and member
firms of a national securities exchange. Call your financial institution to see
if they have the ability to guarantee a signature. A signature guarantee may not
be provided by a notary public.
If you live outside the United States, a foreign bank properly authorized to do
business in your country of residence or a U.S. consulate may be able to
authenticate your signature.
PRICING OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the NAV next
calculated after your request is received and approved by the Fund (or its
designated agent). The Fund's NAV is calculated at the close of the regular
trading session of 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. 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
22 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
maturing within 60 days are valued at amortized cost, which approximates market
value. See the SAI for more detailed information.
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
JANUS XPRESS LINE(TM)
Janus Xpress Line, our electronic telephone service, offers you 24-hour access
by TouchTone(TM) telephone to obtain information on account balances, Fund
performance or dividends. You can also make exchanges, purchases, redemptions
and electronic transfers in existing accounts, request literature about any
Janus fund, or order duplicate statements. Janus Xpress Line is accessed by
calling 1-888-979-7737. Calls are limited to five minutes.
JANUS WEB SITE
Janus maintains a Web site located at http://www.Janus.com. You can access
information such as your account balance and the Fund's NAV through the Web
site. In addition, you may request and/or download a prospectus for any Janus
fund.
ACCOUNT MINIMUMS
Due to the proportionately higher costs of maintaining small accounts, Janus
reserves the right to deduct a $10 minimum balance fee (or the value of the
account if less than $10) from accounts with values below the minimums described
on page 16 or to close such accounts. This policy will apply to accounts
participating in the Automatic Monthly Investment Program only if your account
balance does not reach the required minimum initial investment or falls below
such minimum and you have discontinued monthly investments. This policy does not
apply to accounts that fall below the minimums solely as a result of market
value fluctuations. It is expected that, for purposes of this policy, accounts
will be valued in September, and the $10 fee will be 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.
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 employee benefit 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. Processing Organizations may also impose other
charges or restrictions different from those applicable to shareholders who
invest in the Fund directly. A 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 your 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
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 23
<PAGE>
31% backup withholding or you did not certify your taxpayer identification
number, the IRS requires the Fund to withhold 31% of any dividends paid and
redemption or exchange proceeds. In addition to the 31% backup withholding, you
may be subject to a $50 fee to reimburse the Fund for any penalty that the IRS
may impose.
SHARE CERTIFICATES
Most shareholders choose not to hold their shares in certificate form because
account transactions such as exchanges and redemptions cannot be completed until
the certificate has been returned to the Fund. The Fund will issue share
certificates upon written request only. Share certificates will not be issued
until the shares have been held for at least 15 days and will not be issued for
accounts that do not meet the minimum investment requirements. Share
certificates cannot be issued for retirement accounts. In addition, if the
certificate is lost, there may be a replacement charge.
INVOLUNTARY REDEMPTIONS
The Fund reserves the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise believed to be detrimental
to the Fund.
TELEPHONE TRANSACTIONS
You may initiate many transactions by telephone. The Fund and its agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
It may be difficult to reach an Investor Service Representative by telephone
during periods of unusual market activity. If you are unable to reach a
representative by telephone, please consider sending written instructions,
stopping by a Service Center, or in the case of purchases, exchanges,
redemptions and electronic transfers, calling the Janus Xpress Line.
TEMPORARY SUSPENSION OF SERVICES
The Fund or its agents may, in case of emergency, temporarily suspend telephone
transactions or 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
Investors participating in an automatic investment program will receive
quarterly confirmations of all transactions. (Dividend information will be
distributed annually.) In addition, the Fund will send you an immediate
transaction confirmation statement after every non-systematic transaction.
24 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Financial reports for the Fund, which include a list of the Fund's portfolio
holdings, will be mailed semiannually to all shareholders. You will receive an
updated prospectus annually. To reduce expenses, only one copy of most financial
reports and prospectuses will be mailed to your household even if more than one
person in the household has a Fund account. Please call 1-800-525-3713 if you
would like to receive additional reports or prospectuses.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 25
<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 80206-4928, 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 began serving as investment adviser to certain series of the Trust
in 1970 and currently serves as investment adviser to all of the Janus funds, as
well as adviser or subadviser to other mutual funds and individual, corporate,
charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning 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 MANAGERS
The Fund is managed by a management team consisting of James P. Craig, William
Bales and Jonathan Coleman, each of whom also serves as Executive Vice President
of the Fund. The management team began managing the Fund on February 1, 1997.
The portfolio managers' other primary responsibilities and education are set
forth below.
JAMES P. CRAIG, III is Chief Investment Officer of Janus Capital. He is
Executive Vice President and portfolio manager of Janus Fund, which he has
managed since 1986. Mr. Craig previously managed the Fund from its inception to
December 1993 and Janus Balanced Fund from December 1993 to December 1995. He
holds a Bachelor of Arts in Business from the University of Alabama and a Master
of Arts in Finance from the Wharton School of the University of Pennsylvania.
WILLIAM H. BALES has been a research analyst with Janus Capital since 1993,
focusing primarily on the transportation, consumer products and restaurant
industries. He joined
26 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Janus in September 1991. Mr. Bales holds a Bachelor of Science in Marketing and
a Master of Science in Marketing and Finance from the University of Colorado. He
is seeking the Chartered Financial Analyst designation.
JONATHAN D. COLEMAN has been a research analyst with Janus Capital since July
1994, focusing primarily on the railroad, computer, healthcare and financial
services industries. Prior to joining Janus, Mr. Coleman was a Fulbright Fellow
from August 1993 until June 1994. He holds a Bachelor of Arts in Political
Economy and Spanish from Williams College (1991-1993) and is seeking the
Chartered Financial Analyst designation.
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.
MANAGEMENT EXPENSES
The Fund pays Janus Capital a management fee which is calculated daily and paid
monthly. The advisory agreement with the Fund spells out the management fee and
other expenses that the Fund must pay. The Fund is subject to the following
management fee schedule (expressed as an annual rate):
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS OF FUND ANNUAL RATE PERCENTAGE (%)
- --------------------------------------------------------------------------------
<S> <C>
First $300 Million 0.75
Next $200 Million 0.70
Over $500 Million 0.65
</TABLE>
- --------------------------------------------------------------------------------
The actual management fee paid by the Fund for the fiscal year ended October 31,
1997 was 0.68% 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.
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 a
Janus fund as a factor in the selection of broker-dealers to execute
transactions. 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
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 27
<PAGE>
credited against certain Fund operating expenses serving to reduce those
expenses. The SAI further explains the selection of broker-dealers.
OTHER SERVICE PROVIDERS
The following parties provide the Fund with administrative and other services.
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 0351
Boston, Massachusetts 02117-0351
TRANSFER AGENT
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217-3375
DISTRIBUTOR
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206-4928
Janus Service Corporation and Janus Distributors, Inc. are wholly-owned
subsidiaries of Janus Capital.
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Massachusetts business
trust on February 11, 1986. A mutual fund is an investment vehicle that pools
money from numerous investors and invests the money to achieve a specified
objective.
As of the date of this Prospectus, the Trust offers 19 separate series, three of
which currently offer three classes of shares. The Fund became a series of the
Trust on August 7, 1992. It was previously known as Janus Venture Fund, Inc., a
Maryland corporation. All references in this Prospectus to the Fund prior to the
above date are to its predecessor entity and all references after such date are
to the series of the Trust. The Trust currently offers the other 18 series by
separate prospectuses.
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called specifically for the Fund or for the Trust as a whole for
purposes such as electing or removing Trustees, terminating or reorganizing the
Trust, changing fundamental policies, or for any other purpose requiring a
shareholder vote under the 1940 Act. Separate votes are taken by the Fund only
if a matter affects or requires the vote of just the Fund or the Fund's interest
in the matter differs from the interest of other portfolios of the Trust. As a
shareholder, you are entitled to one vote for each share that you own.
28 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SIZE OF THE FUND
The Fund has discontinued sales of its shares because its management believes
that a substantial increase in size may adversely affect the Fund's ability to
achieve its investment objective by reducing its flexibility in making
investments and in effecting portfolio changes. Although sales to new investors
have been discontinued, existing shareholders are permitted to continue to
purchase shares and to reinvest any dividends or capital gains distributions.
See the Shareholder's Manual beginning on page 16.
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. Unless otherwise required by law,
this policy may be implemented by the Trustees without shareholder approval.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which has
established a dedicated group to address this issue. Janus Capital has entered
into a consulting arrangement with one of the foremost experts in Year 2000
compliance to help Janus Capital successfully achieve Year 2000 compliance.
Janus Capital does not anticipate that the move to Year 2000 will have a
material impact on its ability to continue to provide the Fund with service at
current levels.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 29
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES THE FUND TO DISTRIBUTE NET
INCOME AND ANY NET CAPITAL GAINS REALIZED ON ITS INVESTMENTS ANNUALLY. THE
FUND'S INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM
CAPITAL GAINS ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET
REALIZED LONG-TERM GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS
DISTRIBUTIONS.
HOW DISTRIBUTIONS AFFECT THE FUND'S NAV
Distributions are paid to shareholders as of the record date of the distribution
of the Fund, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in the Fund's daily NAV. The
share price of the Fund drops by the amount of the distribution, net of any
subsequent market fluctuations. As an example, assume that on December 31, the
Fund declared a dividend in the amount of $0.25 per share. If the Fund's share
price was $10.00 on December 30, the Fund's share price on December 31 would be
$9.75, barring market fluctuations. Shareholders should be aware that
distributions from a taxable mutual fund are not value-enhancing and may create
income tax obligations.
"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 the Fund at one of the addresses on page 17 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.
30 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
4. REDIRECT OPTION. You may direct your dividends or capital gains to purchase
shares of another Janus fund.
The Fund reserves the right to reinvest into your account undeliverable and
uncashed dividend and distribution checks that remain outstanding for six months
in shares of the Fund at the NAV next computed after the check is cancelled.
Subsequent distributions may also be reinvested.
TAXES
As with any investment, you should consider the tax consequences of investing in
the Fund. The following discussion does not apply to tax-deferred 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
Dividends and 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. Account tax information will also be sent to the IRS.
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. The Fund
may from year to year make the election permitted under section 853 of the
Internal Revenue Code to pass through such taxes to shareholders as a foreign
tax credit. If such an election is not made, any foreign taxes paid or accrued
will represent an expense to the Fund which will reduce its investment income.
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.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 31
<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 of the bond) at a specified maturity and to make
scheduled interest payments.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash. The Fund may purchase commercial paper issued under
Section 4(2) of the Securities Act of 1933.
COMMON STOCK represents a share of ownership in a company, and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stocks are not fixed but are declared at the discretion of the issuer's board of
directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
FIXED-INCOME SECURITIES are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time, and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
HIGH-YIELD/HIGH-RISK SECURITIES are securities that are rated below investment
grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower by Moody's). Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and "junk bonds."
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
32 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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 managers may have to reinvest the
proceeds from the securities at a lower rate. Potential market gains on a
security subject to prepayment risk may be more limited than potential market
gains on a comparable security that is not subject to prepayment risk.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are any foreign corporations which
generate certain amounts of passive income or hold certain amounts of assets for
the production of passive income. Passive income includes dividends, interest,
royalties, rents and annuities. To avoid taxes and interest that the Fund must
pay if these investments are profitable, the Fund may make various elections
permitted by the tax laws. These elections could require that the Fund recognize
taxable income, which in turn must be distributed, before the securities are
sold and before cash is received to pay the distributions.
PAY-IN-KIND BONDS are debt securities that normally give the issuer an option to
pay cash at a coupon payment date or give the holder of the security a similar
bond with the same coupon rate and a face value equal to the amount of the
coupon payment that would have been made.
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 primarily to provide cash to satisfy unusually heavy
redemption requests, or for other temporary or emergency purposes.
RULE 144A SECURITIES are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
STANDBY COMMITMENTS are obligations purchased by the Fund from a dealer that
give the Fund the option to sell a security to the dealer at a specified price.
STEP COUPON BONDS are debt securities that trade at a discount from their face
value and pay coupon interest. The discount from their face value depends on the
time remaining until cash payments begin, prevailing interest rates, liquidity
of the security and the perceived credit quality of the issuer.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 33
<PAGE>
STRIP BONDS 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.
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.
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 regular interest at
regular intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. 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 a
financial instrument for an agreed upon price at a specified time. Forward
contracts are not currently exchange traded and are typically negotiated on an
individual basis. The Fund may enter into forward currency contracts to hedge
against declines in the value of securities denominated in, or whose value is
tied to, a currency other than the U.S. dollar or to reduce the impact of
currency appreciation on purchases of such securities. It may also enter into
forward contracts to purchase or sell securities or other financial indices.
FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Fund may buy and sell futures contracts on foreign currencies,
securities and financial indices including interest rates or an index of U.S.
government, foreign government, equity or fixed-income securities. The Fund may
also buy options on futures contracts. An option
34 JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998
<PAGE>
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 instrument and may be more
volatile than the underlying instrument. The Fund bears the market risk of an
investment in the underlying instrument, as well as the credit risk of the
issuer.
INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
OPTIONS are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Fund may purchase and write put and call options on securities,
securities indices and foreign currencies.
JANUS VENTURE FUND PROSPECTUS FEBRUARY 17, 1998 35
<PAGE>
JANUS VENTURE FUND
PROSPECTUS
[JANUS LOGO]
P.O. Box 173375 * Denver, CO 80217-3375 * 1-800-525-3713
Janus Distributors, Inc. Member NASD. (2/98)
<PAGE>
JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Institutional Shares
100 Fillmore Street
Denver, CO 80206-4928
(800) 29JANUS
FEBRUARY 17, 1998
Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-
Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds")
are designed for investors who seek maximum current income consistent with
stability of capital. This prospectus offers a separate class of shares of each
Fund (collectively, the "Shares") exclusively to institutional and individual
clients meeting minimum investment requirements. Each Fund is a separate series
of Janus Investment Fund (the "Trust"), an open-end management investment
company.
Each Fund invests exclusively in high quality money market instruments. AN
INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
The Shares are offered with no sales charges, commissions, redemption fees, Rule
12b-1 fees or deferred sales charges. The minimum initial investment is
$250,000. There is no minimum amount required for subsequent investments. For
complete details on how to purchase, redeem and exchange Shares, please see the
Shareholder's Guide beginning at page 17.
This prospectus contains information about the Shares that prospective investors
should consider before investing and should be read carefully and retained for
future reference. Additional information about the Shares is contained in the
Statement of Additional Information ("SAI") dated February 17, 1998, which is
filed with the Securities and Exchange Commission ("SEC") and is incorporated by
reference into this Prospectus. The SAI is available upon request and without
charge by writing or calling the Funds at the address or telephone number shown
above. The SEC maintains a Web site located at http://www.sec.gov that contains
the SAI, material incorporated by reference, and other information regarding the
Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
FEE TABLE.................................... 2
FINANCIAL HIGHLIGHTS......................... 3
INVESTMENT OBJECTIVES, POLICIES AND
TECHNIQUES................................. 5
INVESTMENT ADVISER AND
ADMINISTRATOR.............................. 12
DISTRIBUTIONS AND TAXES...................... 13
PERFORMANCE.................................. 15
MISCELLANEOUS INFORMATION.................... 15
SHAREHOLDER'S GUIDE
How to Open an Account....................... 17
Purchasing Shares............................ 17
How to Exchange Shares....................... 19
How to Redeem Shares......................... 19
Special Shareholder Services and Other
Information................................ 20
</TABLE>
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 1
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
(Applicable to each Fund)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES*
(Expressed as a percentage of average net assets)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL OPERATING
FEE EXPENSES EXPENSES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund -
Institutional Shares 0.10% 0.05% 0.15%
Janus Government Money Market Fund -
Institutional Shares 0.10% 0.05% 0.15%
Janus Tax-Exempt Money Market Fund -
Institutional Shares 0.10% 0.05% 0.15%
</TABLE>
- --------------------------------------------------------------------------------
* The information in the table above is based on expenses for the fiscal year
ended October 31, 1997, net of fee waivers from the investment adviser.
Without such waivers, the Management Fee, Other Expenses and Total Operating
Expenses would have been 0.20%, 0.15% and 0.35%, respectively. Janus Capital
may modify or terminate the waivers at any time upon at least 90 days' notice
to the Trustees. See "Investment Adviser and Administrator" for a more
detailed discussion of the fees.
EXAMPLE
You would indirectly pay the following expenses on a $1,000 investment, assuming
expense ratios remain as listed above and assuming a 5% annual return, with or
without redemption at the end of each period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
============================================================================
Janus Money Market Fund - Institutional
Shares $2 $5 $8 $19
Janus Government Money Market Fund -
Institutional Shares $2 $5 $8 $19
Janus Tax-Exempt Money Market Fund -
Institutional Shares $2 $5 $8 $19
</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.
The purpose of the preceding table and example is to assist the investor in
understanding the various costs and expenses that an investor in each Fund will
bear directly or indirectly. These expenses are described in greater detail
under "Investment Adviser and Administrator."
2 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
FINANCIAL HIGHLIGHTS
The information below is for fiscal periods ending October 31 of each year. The
accounting firm of Price Waterhouse LLP has audited the Funds' financial
statements and their report is included in the Funds' Annual Report, which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
JANUS JANUS GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
INSTITUTIONAL SHARES 1997 1996 1995(1) 1997 1996 1995(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income .06 .05 .03 .05 .05 .03
- ------------------------------------------------------------------------------------
3. Total from investment operations .06 .05 .03 .05 .05 .03
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
4. Dividends (from net investment
income) (.06) (.05) (.03) (.05) (.05) (.03)
- ------------------------------------------------------------------------------------
5. Total distributions (.06) (.05) (.03) (.05) (.05) (.03)
- ------------------------------------------------------------------------------------
6. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
7. Total return* 5.71% 5.61% 3.25% 5.58% 5.50% 3.20%
- ------------------------------------------------------------------------------------
8. Net assets, end of period (in
millions) $2,771 $1,706 $305 $36 $59 $44
9. Average net assets for the period
(millions) $2,545 $874 $202 $57 $53 $25
10. Ratio of expenses to average net
assets** 0.15%(2) 0.15%(2) 0.15%(2) 0.15%(2) 0.15%(2) 0.15%(2)
11. Ratio of net investment income to
average net assets** 5.54% 5.41% 5.86% 6.04% 5.34% 5.75%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Period from April 17, 1995 (inception of Shares) through October 31, 1995.
(2) The ratio was .35% before voluntary reduction of fees.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 3
<PAGE>
(continued)
<TABLE>
<CAPTION>
JANUS TAX-EXEMPT
MONEY MARKET
FUND
INSTITUTIONAL SHARES 1997 1996 1995(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income .04 .04 .02
3. Net gains or (losses) on securities (both realized and
unrealized) -- -- --
- ------------------------------------------------------------------------------------
4. Total from investment operations .04 .04 .02
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (.04) (.04) (.02)
6. Distributions (from capital gains) -- -- --
- ------------------------------------------------------------------------------------
7. Total distributions (.04) (.04) (.02)
- ------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
9. Total return* 3.67% 3.74% 2.09%
- ------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $4 $2 $11
11. Average net assets for the period (millions) $3 $2 $1
12. Ratio of expenses to average net assets** 0.15%(2) 0.15%(2) 0.15%(2)
13. Ratio of net investment income to average net assets** 3.94% 3.82% 3.82%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Period from April 17, 1995 (inception of Shares) through October 31, 1995.
(2) The ratio was .35% before voluntary reduction of fees.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
4 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
INVESTMENT OBJECTIVES,
POLICIES AND TECHNIQUES
Unless otherwise stated, the investment objectives and policies set forth in
this Prospectus are not fundamental and may be changed by the Trustees of the
Trust (the "Trustees") without shareholder approval. Shareholders will be
notified of material changes in investment objectives or policies. If there is a
change in the investment objective or policies of any Fund, shareholders should
consider whether that Fund remains an appropriate investment in light of their
then current financial position and needs. The Funds are subject to additional
investment policies and restrictions described in the SAI, some of which are
fundamental and may not be changed without shareholder approval.
INVESTMENT OBJECTIVES
The investment objective of Janus Money Market Fund and Janus Government Money
Market Fund is to seek maximum current income to the extent consistent with
stability of capital. The investment objective of Janus Tax-Exempt Money Market
Fund is to seek maximum current income that is exempt from federal income taxes
to the extent consistent with stability of capital. There can be no assurance
that a Fund will achieve its investment objective or that the Shares will be
able to maintain a stable net asset value of $1.00 per share.
COMMON INVESTMENT POLICIES
The Funds will invest only in eligible high quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital
Corporation, the Funds' investment adviser ("Janus Capital"), pursuant to
procedures adopted by the Trustees. Each Fund may invest only in U.S.
dollar-denominated instruments that have a remaining maturity of 397 days or
less (as calculated pursuant to Rule 2a-7 under the Investment Company Act of
1940 ("1940 Act")) and will maintain a dollar-weighted average portfolio
maturity of 90 days or less.
Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities (as defined below), each Fund will not invest more than 5%
of its total assets in the securities of any one issuer. Up to 25% of Janus
Tax-Exempt Money Market Fund's total assets may be invested without regard to
this limit until July 1, 1998. Investment in demand features, guarantees and
other types of instruments or features are subject to the diversification limits
under Rule 2a-7. A Fund may not invest more than 25% of its total assets in any
one industry, except that this limit does not apply to U.S. Government
Securities, bank obligations or municipal securities. To ensure adequate
liquidity, no Fund may invest more than 10% of its net assets in illiquid
investments, including repurchase agreements maturing in more than seven days
(unless subject to a demand feature) and certain time deposits that are subject
to early withdrawal penalties and mature in more than seven days. Because the
Funds are typically used as a cash management vehicle, they intend to maintain a
high degree of liquidity. Janus Capital determines and monitors the liquidity of
portfolio securities under the supervision of the Trustees.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 5
<PAGE>
RATINGS
High quality money market instruments include those that (i) are rated (or, if
unrated, are issued by an issuer with comparable outstanding short-term debt
that is rated) in one of the two highest rating categories for short-term debt
by any two nationally recognized statistical rating organizations ("NRSROs") or,
if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise
unrated and determined by Janus Capital to be of comparable quality. Each Fund,
except Janus Tax-Exempt Money Market Fund, will invest at least 95% of its total
assets in securities in the highest rating category (as determined pursuant to
Rule 2a-7). Descriptions of the rating categories of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., and certain other NRSROs are
contained in the SAI, as is a further description of the Funds' investment
policies.
Although each Fund only invests in high quality money market instruments, an
investment in a Fund is subject to risk even if all securities in its portfolio
are paid in full at maturity. All money market instruments, including U.S.
Government Securities, can change in value as a result of changes in interest
rates, the issuer's actual or perceived creditworthiness or the issuer's ability
to meet its obligations.
TYPES OF INVESTMENTS
JANUS MONEY MARKET FUND
Janus Money Market Fund pursues its objective by investing primarily in high
quality debt obligations and obligations of financial institutions. The Fund may
also invest in U.S. Government Securities (as defined below) and municipal
securities, although the Fund expects to invest in such securities to a lesser
degree.
DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers, including
commercial paper (short-term promissory notes issued by companies to finance
their, or their affiliates', current obligations), notes and bonds, and variable
amount master demand notes. The payment obligations on these instruments may be
backed by securities, swap agreements or other assets, by the guarantee of a
third party or solely by the unsecured promise of the issuer to make payments
when due. The Fund may invest in privately issued commercial paper or other
securities that are restricted as to disposition under the federal securities
laws. In general, sales of these securities may not be made absent registration
under the Securities Act of 1933 (the "1933 Act") or the availability of an
appropriate exemption. Pursuant to Section 4(2) of the 1933 Act or Rule 144A
adopted under the 1933 Act, however, some of these securities are eligible for
resale to institutional investors, and accordingly, Janus Capital may determine
that a liquid market exists for such a security pursuant to guidelines adopted
by the Trustees.
OBLIGATIONS OF FINANCIAL INSTITUTIONS
The Fund may invest in obligations of financial institutions. Examples of
obligations in which the Fund may invest include negotiable certificates of
deposit, bankers' acceptances, time deposits and other obligations of U.S. banks
(including savings and loan associations) having total assets in excess of one
billion dollars and U.S. branches of foreign banks having total assets in excess
of ten billion dollars. The Fund may also invest in Eurodollar and Yankee bank
obligations as discussed below and other U.S. dollar-denominated obligations of
foreign banks having total assets in excess of ten billion
6 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
dollars that Janus Capital believes are of an investment quality comparable to
obligations of U.S. banks in which the Fund may invest.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. Time deposits are non-negotiable deposits with a banking institution that
earn a specified interest rate over a given period. Fixed time deposits, which
are payable at a stated maturity date and bear a fixed rate of interest,
generally may be withdrawn on demand by the Fund but may be subject to early
withdrawal penalties that could reduce the Fund's yield. Unless there is a
readily available market for them, time deposits that are subject to early
withdrawal penalties and that mature in more than seven days will be treated as
illiquid securities.
Eurodollar bank obligations are dollar-denominated certificates of deposit or
time deposits issued outside the U.S. capital markets by foreign branches of
U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.
Foreign, Eurodollar (and to a limited extent, Yankee) bank obligations are
subject to certain sovereign risks. One such risk is the possibility that a
foreign government might prevent dollar-denominated funds from flowing across
its borders. Other risks include: adverse political and economic developments in
a foreign country; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
U.S. GOVERNMENT SECURITIES
The Fund may invest without limit in U.S. Government Securities as described
below under "Janus Government Money Market Fund."
MUNICIPAL SECURITIES
The Fund may invest in obligations of states, territories or possessions of the
United States and their subdivisions, authorities and corporations as described
below under "Janus Tax-Exempt Money Market Fund." These obligations may pay
interest that is exempt from federal income taxation.
JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund pursues its objective by investing
exclusively in obligations issued and/or guaranteed as to principal and interest
by the United States government or by its agencies and instrumentalities and
repurchase agreements secured by such obligations.
U.S. GOVERNMENT SECURITIES
U.S. Government Securities shall have the meaning set forth in the 1940 Act. The
1940 Act defines U.S. Government Securities to include securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities. U.S.
Government Securities may also include repurchase agreements collateralized by
and municipal securities escrowed with or refunded with U.S. government
securities. U.S. Government Securities in which the Fund may invest include U.S.
Treasury securities and obligations issued or guaranteed by U.S. government
agencies and instrumentalities that are backed by the full
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 7
<PAGE>
faith and credit of the U.S. government, such as those guaranteed by the Small
Business Administration or issued by the Government National Mortgage
Association. In addition, U.S. Government Securities in which the Fund may
invest include securities supported primarily or solely by the creditworthiness
of the issuer, such as securities of the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority.
There is no guarantee that the U.S. government will support securities not
backed by its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the full faith and credit of the
U.S. government.
JANUS TAX-EXEMPT MONEY MARKET FUND
Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily
in municipal securities whose interest is exempt from federal income taxes,
including the federal alternative minimum tax. Although the Fund will attempt to
invest substantially all of its assets in municipal securities whose interest is
exempt from federal income taxes, the Fund reserves the right to invest up to
20% of its net assets in securities whose interest is federally taxable.
Additionally, when its portfolio manager is unable to locate investment
opportunities with desirable risk/reward characteristics, the Fund may invest
without limit in cash and cash equivalents, including obligations that may be
federally taxable (see "Taxable Investments").
MUNICIPAL SECURITIES
The municipal securities in which the Fund may invest include municipal notes
and short-term municipal bonds. Municipal notes are generally used to provide
for the issuer's short-term capital needs and generally have maturities of 397
days or less. Examples include tax anticipation and revenue anticipation notes,
which generally are issued in anticipation of various seasonal revenues, bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Short-term municipal bonds may include "general obligation bonds," which are
secured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest; "revenue bonds," which are generally paid from the
revenues of a particular facility or a specific excise tax or other source; and
"industrial development bonds," which are issued by or on behalf of public
authorities to provide funding for various privately operated industrial and
commercial facilities. The Fund may also invest in high quality participation
interests in municipal securities. A more detailed description of various types
of municipal securities is contained in Appendix B in the SAI.
When the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
issuing entity and a security is backed only by the assets and revenues of the
issuing entity, that entity will be deemed to be the sole issuer of the
security. Similarly, in the case of an industrial development bond backed only
by the assets and revenues of the non-governmental issuer, the non-governmental
issuer will be deemed to be the sole issuer of the bond.
At times, the Fund may invest more than 25% of its total assets in tax-exempt
securities that are related in such a way that an economic, business, or
political development or change affecting one such security could similarly
affect the other securities; for example, securities whose issuers are located
in the same state, or securities whose
8 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
interest is derived from revenues of similar type projects. The Fund may also
invest more than 25% of its assets in industrial development bonds or
participation interests therein.
Yields on municipal securities are dependent on a variety of factors, including
the general conditions of the money market and of the municipal bond and
municipal note markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The achievement of the Fund's investment
objective is dependent in part on the continuing ability of the issuers of
municipal securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due. Obligations of issuers of municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Bankruptcy
Reform Act of 1978, as amended. Therefore, the possibility exists that, as a
result of litigation or other conditions, the ability of any issuer to pay, when
due, the principal of and interest on its municipal securities may be materially
affected.
MUNICIPAL LEASES
The Fund may invest in municipal leases or participation interests therein.
Municipal leases are municipal securities which may take the form of a lease or
an installment purchase or conditional sales contract. Municipal leases are
issued by state and local governments and authorities to acquire a wide variety
of equipment and facilities. 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 payment on an annual basis, which may
result in termination of the lease and possible default. Janus Capital may
determine that a liquid market exists for municipal lease obligations pursuant
to guidelines established by the Trustees.
TAXABLE INVESTMENTS
As discussed above, although the Fund will attempt to invest substantially all
of its assets in municipal securities whose interest is exempt from federal
income tax, the Fund may under certain circumstances invest in certain
securities whose interest is subject to such taxation. These securities include:
(i) short-term obligations of the U.S. government, its agencies or
instrumentalities, (ii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than one
billion dollars and whose deposits are insured by the Federal Deposit Insurance
Corporation, (iii) commercial paper and (iv) repurchase agreements as described
below.
COMMON INVESTMENT TECHNIQUES
PARTICIPATION INTERESTS
The Funds may invest in participation interests in any type of security in which
the Funds may invest. A participation interest gives a Fund an undivided
interest in the underlying securities in the proportion that the Fund's
participation interest bears to the total principal amount of the underlying
securities. Participation interests usually carry a demand feature, as described
below, backed by a letter of credit or guarantee of the institution that issued
the interests permitting the holder to tender them back to the institution.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 9
<PAGE>
DEMAND FEATURES
The Funds may invest in securities that are subject to puts and stand-by
commitments ("demand features"). Demand features give the Fund the right to
resell securities at specified periods prior to their maturity dates to the
seller or to some third party at an agreed-upon price or yield. Securities with
demand features may involve certain expenses and risks, including the inability
of the issuer of the instrument to pay for the securities at the time the
instrument is exercised, non-marketability of the instrument and differences
between the maturity of the underlying security and the maturity of the
instrument. Securities may cost more with demand features than without them.
Demand features can serve three purposes: to shorten the maturity of a variable
or floating rate security, to enhance the instrument's credit quality and to
provide a source of liquidity. Demand features are often issued by third party
financial institutions, generally domestic and foreign banks. Accordingly, the
credit quality and liquidity of the Funds' investments may be dependent in part
on the credit quality of the banks supporting the Funds' investments. This will
result in exposure to risks pertaining to the banking industry, including the
foreign banking industry. Brokerage firms and insurance companies also provide
certain liquidity and credit support. A substantial portion of the Janus Tax-
Exempt Money Market Fund's portfolio in particular may consist of securities
backed by banks and other financial institutions, and thus adverse changes in
the credit quality of these institutions could cause losses to the Fund and
affect its share price.
VARIABLE AND FLOATING RATE SECURITIES
The securities in which the Funds invest may have variable or floating rates of
interest. 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. Securities with ultimate maturities of greater
than 397 days may be purchased only pursuant to Rule 2a-7. Under that Rule, only
those long-term instruments that have demand features which comply with certain
requirements and certain variable rate U.S. Government Securities may be
purchased. Similar to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market interest
rates or changes in the issuer's or guarantor's creditworthiness. The rate of
interest on securities purchased by a Fund may be tied to short-term Treasury or
other government securities or indices on securities that are permissible
investments of the Funds, as well as other money market rates of interest. The
Funds will not purchase securities whose values are tied to interest rates or
indices that are not appropriate for the duration and volatility standards of a
money market fund.
MORTGAGE- AND ASSET-BACKED SECURITIES
Janus Money Market Fund and Janus Government Money Market Fund may purchase
fixed or adjustable rate mortgage-backed securities issued by the Government
National Mortgage Association, Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, or other governmental or
government-related entities. In addition, Janus Money Market Fund may purchase
other asset-backed securities, including securities backed by automobile loans,
equipment leases or credit card receivables. These securities directly or
indirectly represent a participation in, or are secured by and payable from,
fixed or adjustable rate mortgage or other loans which may be secured by real
estate or other assets. Unlike traditional debt instruments, payments on these
securities include both interest and a partial payment of principal.
10 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
Prepayments of the principal of underlying loans may shorten the effective
maturities of these securities and may result in a Fund having to reinvest
proceeds at a lower interest rate.
REPURCHASE AGREEMENTS
Each Fund may seek additional income by entering into collateralized repurchase
agreements. Repurchase agreements are transactions in which a Fund purchases
securities and simultaneously commits to resell those securities to the seller
at an agreed-upon price on an agreed-upon future date. The resale price reflects
a market rate of interest that is not related to the coupon rate or maturity of
the purchased securities. If the seller of the securities underlying a
repurchase agreement fails to pay the agreed resale price on the agreed delivery
date, a Fund may incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements are transactions in which a Fund sells a security and simultaneously
commits to repurchase that security from the buyer at an agreed upon price on an
agreed upon future date. This technique will be used primarily for temporary or
emergency purposes, such as meeting redemption requests.
DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Securities so purchased are subject to market price fluctuation from the time of
purchase but no interest on the securities accrues to a Fund until delivery and
payment for the securities take place. Accordingly, the value of the securities
on the delivery date may be more or less than the purchase price. Forward
commitments will be entered into only when a Fund has the intention of taking
possession of the securities, but a Fund may sell the securities before the
settlement date if deemed advisable.
BORROWING AND LENDING
Each Fund may borrow money for temporary or emergency purposes in amounts up to
25% of its total assets. A Fund may not mortgage or pledge securities except to
secure permitted borrowings. As a fundamental policy, a Fund will not lend
securities or other assets if, as a result, more than 25% of its total assets
would be lent to other parties. The Funds do not currently intend to engage in
securities lending; however, under the terms of an exemptive order received from
the SEC, each of the Funds may borrow money from or lend money to other funds
that permit such transactions and are advised by Janus Capital.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 11
<PAGE>
INVESTMENT ADVISER AND
ADMINISTRATOR
INVESTMENT ADVISER
Each Fund has a separate Investment Advisory Agreement with Janus Capital, 100
Fillmore Street, Denver, Colorado 80206-4923. Janus Capital has served as
investment adviser to Janus Fund since 1970 and currently serves as investment
adviser to all of the Janus funds, as well as adviser or subadviser to other
mutual funds and individual, corporate, charitable and retirement accounts.
Kansas City Southern Industries, Inc., a publicly traded holding company whose
primary subsidiaries are engaged in transportation, information processing and
financial services ("KCSI"), owns approximately 83% of the outstanding voting
stock of Janus Capital. Thomas H. Bailey, the President and Chairman of the
Board of Janus Capital, owns approximately 12% of its voting stock and, by
agreement with KCSI, selects a majority of Janus Capital's Board.
Pursuant to the Investment Advisory Agreements, Janus Capital furnishes
continuous advice and recommendations concerning each Fund's investments. Each
of the Funds has agreed to compensate Janus Capital for its advisory services by
the monthly payment of a fee at the annual rate of 0.20% of the value of the
average daily net assets of each Fund. Janus Capital has agreed to waive a
portion of its fee and accordingly, the advisory fee of each Fund will be
calculated at the annual rate of 0.10% of the value of each Fund's average daily
net assets. Janus Capital may modify or terminate the waiver at any time upon at
least 90 days' notice to the Trustees.
ADMINISTRATOR
Each of the Funds has also entered into an Administration Agreement with Janus
Capital, pursuant to which Janus Capital furnishes certain administrative,
compliance and accounting services for the Funds, pays the costs of printing
reports and prospectuses for existing shareholders, provides office space for
the Funds and pays the salaries, fees and expenses of all Fund officers and of
those Trustees who are affiliated with Janus Capital. Administrative services
provided by Janus Capital under the Administration Agreements include custody
and transfer agency services. Janus Capital is paid an administration fee,
calculated daily and paid monthly, at the annual rate of 0.15% of the value of
the average daily net assets of each Fund attributable to Shares for services
rendered pursuant to the Administration Agreements. Janus Capital has agreed to
waive a portion of its fee and accordingly, the administration fee paid by the
Shares will be calculated at the annual rate of 0.05% of the value of each
Fund's average daily net assets attributable to the Shares. Janus Capital may
modify or terminate this waiver upon at least 90 days' notice to the Trustees.
Each Fund pays all of its expenses not assumed by Janus Capital, including
auditing fees and independent Trustees' fees and expenses.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by brokers
and dealers selected by Janus Capital. Broker-dealers are selected on the basis
of their ability
12 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
to obtain best price and execution for the Funds' transactions and recognizing
brokerage, research and other services provided to the Fund and to Janus
Capital. Janus Capital may also consider payments made by brokers effecting
transactions for a Fund (i) to the Fund or (ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. The Funds' Trustees have also authorized the Funds to place portfolio
transactions on an agency basis with a broker-dealer that is affiliated with
Janus Capital. Agency trades, if any, that are placed with such affiliated party
serve to reduce certain expenses of the Funds. The SAI further explains the
selection of broker-dealers.
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 Funds and
Janus Capital's other advisory clients. See the SAI for more detailed
information.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which has
established a dedicated group to address this issue. Janus Capital has entered
into a consulting arrangement with one of the foremost experts in Year 2000
compliance to help Janus Capital successfully achieve Year 2000 compliance.
Janus Capital does not anticipate that the move to Year 2000 will have a
material impact on its ability to continue to provide the Funds with service at
current levels.
DISTRIBUTIONS AND TAXES
Dividends representing substantially all of the net investment income and any
net realized gains on sales of securities are declared daily, Saturdays, Sundays
and holidays included, and distributed on the last business day of each month.
If a month begins on a Saturday, Sunday or holiday, dividends for those days are
declared at the end of the preceding month and distributed on the first business
day of the month. Distributions will be reinvested in Shares of a Fund or wired
to a predesignated bank account at the election of the shareholder. If no
election is made, all distributions will be reinvested in additional Shares of a
Fund.
Shares purchased by wire on a day on which the Funds calculate their net asset
value and the Federal Reserve Banks are open ("bank business day") will receive
that day's dividend if the purchase is effected prior to 3:00 p.m. (New York
time) for Janus Money Market Fund, 5:00 p.m. for Janus Government Money Market
Fund and 12:00 p.m. for Janus Tax-Exempt Money Market Fund. Otherwise, such
Shares begin to accrue dividends on the first bank business day following
receipt of the order.
Redemption orders effected on any particular day will generally receive
dividends declared through the day of redemption. However, redemptions made by
wire which are received prior to 3:00 p.m. (New York time) for Janus Money
Market Fund, 5:00 p.m.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 13
<PAGE>
for Janus Government Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money
Market Fund will result in Shares being redeemed that day. Proceeds of such a
redemption will normally be sent to the predesignated account on that day and
that day's dividend will not be received. Requests for redemptions made by wire
which are received after 3:00 p.m. for Janus Money Market Fund, after 5:00 p.m.
for Janus Government Money Market Fund, and after 12:00 p.m. for Janus
Tax-Exempt Money Market Fund will be processed on that day and receive that
day's dividend, but will not be wired until the following bank business day.
The Funds reserve the right to require purchase and redemption requests prior to
these times on days when the bond market or the NYSE close early.
Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund)
are taxable income and are subject to federal income tax (except for
shareholders exempt from income tax), whether such distributions are received in
cash or are reinvested in additional Shares. Full information regarding the tax
status of income dividends and any capital gains distributions will be mailed to
shareholders for tax purposes on or before January 31st of each year. Because
the Funds are money market funds, they do not anticipate making any capital
gains distributions.
Janus Tax-Exempt Money Market Fund anticipates that substantially all income
dividends it pays will be exempt from federal income tax. However, dividends
attributable to interest on taxable investments, together with distributions
from any net realized capital gains, are taxable. In addition, interest on
certain private activity bonds is a preference item for purposes of the
individual and corporate alternative minimum taxes. To the extent that the Fund
earns such income, shareholders who are subject to the alternative minimum tax
must include such income as a preference item. The Fund will advise shareholders
of the percentage of dividends, if any, subject to the alternative minimum tax.
Dividends and capital gains distributions may also be subject to state and local
taxes. In certain states some portion of dividends and distributions (depending
on the sources of the Fund's net income) of Janus Tax-Exempt Money Market Fund
may be exempt from state and local taxes. Shareholders should consult their own
tax advisor regarding exemption from any applicable state and local tax, as well
as the tax treatment of any dividends or distributions from the Shares.
The Funds intend to comply with provisions of the Internal Revenue Code
applicable to investment companies, and thus it is not expected that any of the
Funds will be required to pay any federal income or excise taxes. The SAI
further explains the Funds' tax status.
14 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
PERFORMANCE
The Shares may measure performance in several ways, including "yield,"
"effective yield," and "tax equivalent yield" (for Janus Tax-Exempt Money Market
Fund only). Yield is a way of showing the rate of income the Shares earn on
investments as a percentage of the Share price. Yield represents the income,
less expenses generated by an investment, in the Shares over a seven-day period
expressed as an annual percentage rate. Effective yield is similar in that it is
calculated over the same time frame, but instead the net investment income is
compounded and then annualized. Due to the compounding effect, the effective
yield will normally be higher than the yield.
Shares of Janus Tax-Exempt Money Market Fund may also quote tax-equivalent
yield, which shows the taxable yield an investor would have to earn before taxes
to equal such Shares' tax-free yield. A tax-equivalent yield is calculated by
dividing such Shares' tax-exempt yield by the result of one minus a stated
federal tax rate. Only that portion of the Fund's income that is tax-exempt is
adjusted in this calculation.
Performance figures are based upon historical results and are not intended to
indicate future performance.
MISCELLANEOUS INFORMATION
ORGANIZATION
Each Fund is an open-end management investment company registered under the 1940
Act as a series of the Trust, which was created on February 11, 1986. Each Fund
currently offers three classes of shares by separate prospectuses. The Shares
offered by this Prospectus are available only to institutional clients,
including corporations, foundations and trusts, and individuals meeting certain
initial investment requirements. A second class of shares of each Fund, Service
Shares, are available only through Financial Institutions that meet minimum
investment requirements in connection with trust accounts, cash management
programs and similar programs. A third class of shares of each Fund, Investor
Shares, are available to the general public. Because the expenses of each class
may differ, the performance of each class is expected to differ. If you would
like additional information, please call Janus Extended Services at
1-800-29JANUS.
SIGNIFICANT SHAREHOLDERS
As of January 22, 1998, the following Institution owned more than 25% of the
Shares of Janus Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Comerica Bank P.O. Box 75000, Detroit, MI 26.24%
- -------------------------------------------------------------------------------
</TABLE>
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 15
<PAGE>
As of January 22, 1998, the following Institutions owned more than 25% of the
Shares of Janus Government Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
UMB Bank P.O. Box 419226 69.84%
Kansas City, MO 64141-6226
United Postal Service 7905 Malcolm Road 4th Floor 29.33%
FCU Clinton, MD 20735-1734
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following Institution owned more than 25% of the
Shares of Janus Tax-Exempt Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
First Trust N/A P.O. Box 64010 99.65%
St. Paul, MN 55164-0010
- -------------------------------------------------------------------------------
</TABLE>
Thus, these shareholders may have the power to control any vote of the Shares of
these Funds.
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Fund's investment objective and policies. The
Trustees delegate the day-to-day management of the Funds to the officers of the
Trust and meet at least quarterly to review the Funds' investment policies,
performance, expenses and other business affairs.
VOTING RIGHTS
The Trust is not required to hold annual shareholder meetings. However, special
meetings may be called for a specific class of shares, a specific Fund, or for
the Trust as a whole, for purposes such as electing or removing Trustees,
terminating or reorganizing the Trust, changing fundamental policies or voting
on matters when required by the 1940 Act. Separate votes are taken by a separate
Fund (or a separate class of shares) only if a matter affects or requires the
vote of just that Fund (or those shares). Shareholders are entitled to cast one
vote for each Share they own.
CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR
UMB Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the
custodian of the Funds' assets. The custodian holds each Fund's assets in
safekeeping and collects and remits the income thereon subject to the
instructions of each Fund.
Janus Service Corporation, P.O. Box 173375, Denver, Colorado 80217-3375, a
wholly-owned subsidiary of Janus Capital, provides transfer agency and
shareholder services for the Funds.
Janus Distributors, Inc., 100 Fillmore Street, Denver, Colorado 80206-4928, a
wholly-owned subsidiary of Janus Capital, is a distributor of the Shares.
16 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
SHAREHOLDER'S GUIDE
HOW TO OPEN AN ACCOUNT
ESTABLISHING YOUR ACCOUNT
The Application enclosed with this Prospectus describes the options available to
you as an institutional shareholder of the Funds. After reviewing the
Application carefully, complete, sign and forward it to:
<TABLE>
<S> <C>
Via Regular Mail Via Express Mail - Overnight Delivery
Janus Janus
P.O. Box 173375 100 Fillmore Street
Denver, CO 80217-3375 Denver, CO 80206-4928
Attn: Extended Services Attn: Extended Services
</TABLE>
Do not include any purchase money with the Application. All purchases of Shares
should be effected by wire transfer. See "Purchasing Shares." The Funds reserve
the right to suspend the offering of the Shares for a period of time and to
reject any specific purchase request.
You may set up your account for Investment Retirement Plan rollovers (in excess
of $250,000) under a tax-sheltered retirement plan. A retirement plan allows you
to shelter your investment income from current income taxes. A contribution to
these plans may also be tax deductible. Distributions from a retirement plan are
generally subject to income tax and may be subject to an additional tax if
withdrawn prior to age 59 1/2.
Please refer to the Janus IRA booklet for complete information regarding IRAs.
You will need a special application to be enrolled in the plan. For an
application and more details, call 1-800-525-3713.
TAXPAYER IDENTIFICATION NUMBERS
On the application or other appropriate form, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that you
are not subject to backup withholding for failing to report income to the IRS.
If you are subject to the 31% backup withholding or you did not certify your
taxpayer identification, the IRS requires the Funds to withhold 31% of any
dividends paid and redemption or exchange proceeds. In addition, to the 31%
backup withholding, you may be subject to a $50 fee to reimburse the Funds for
any penalty that the IRS may impose.
DISTRIBUTION OPTIONS
Shareholders have the option of having their dividends and distributions
automatically reinvested in Shares of a Fund or wired to a predesignated bank
account. If no election is made, all dividends and distributions will be
reinvested in additional Shares.
PURCHASING SHARES
You must establish a Fund account and receive an account number before making
purchases by wire. Purchase requests received before 3:00 p.m. for Janus Money
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 17
<PAGE>
Market Fund, (New York time) 5:00 p.m. for Janus Government Money Market Fund
and 12:00 p.m. for Janus Tax-Exempt Money Market Fund on a business day will
receive dividends declared on the purchase date. In addition, the Funds'
transfer agent must receive payment in federal funds by 6:00 p.m. (New York
time). If your payment on a purchase order is not received by this time, your
purchase may be canceled. You will be responsible for any losses or expenses
incurred by the Fund, Janus Capital, Janus Service Corporation or Janus
Distributors, Inc., and the Fund can redeem shares you own in this or another
identically registered Janus fund as reimbursement. The Funds and their agent
have the right to reject or cancel any purchase, exchange, or redemption due to
nonpayment. The Funds also reserve the right to require purchase requests and
payments prior to these times on days when the bond market or the New York Stock
Exchange ("NYSE") close early. Purchase orders received after these times will
receive the dividend declared the following day.
WIRE INSTRUCTIONS:
Request your bank to transmit immediately available funds by wire for purchase
of Shares to the Funds' custodian bank as follows:
United Missouri Bank, N.A., Kansas City, Missouri
ABA # 101000695
BNF = Janus Money Market Funds Account # 9870610000
For credit to: Name of Shareholder:
- -----------------------------------------------
Shareholder Account No.:
---------------------------------------------------------
Name of Fund(s):
----------------------------------------------------------------
Complete information regarding your account must be included in all wire
instructions in order to facilitate prompt and accurate handling of investments.
Please contact the Janus Extended Services Team at 1-800-29JANUS when you intend
to make a wire purchase.
The Funds do not charge any fees for transactions by wire in Shares of the
Funds.
Once you have established a Fund account, you may purchase Shares for such
account or open additional accounts with other Funds at any time. The Funds
reserve the right to suspend the offering of Shares for a period of time and to
reject any specific purchase request. If you have any questions, please call
1-800-29JANUS.
MINIMUM INVESTMENT
The minimum initial investment in the Shares is $250,000. The Funds may, in
their discretion, waive this minimum under certain circumstances but, in such
event, the minimum must be reached within 90 days of opening the account.
Shareholders who do not maintain the $250,000 minimum will be given the option
of exchanging into Investor Shares or having their Shares redeemed.
NET ASSET VALUE
The net asset value ("NAV") of the Shares is determined at the close of the
regular trading session of the New York Stock Exchange (normally 4:00 p.m., New
York time) each day that both the Exchange and the New York Federal Reserve Bank
are open, except that Janus Government Money Market Fund's NAV is normally
calculated at
18 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
5:00 p.m. (New York time) on such days. NAV per share is determined by dividing
the total value of the securities and other assets, less liabilities, by the
total number of Shares outstanding. Portfolio securities are valued at their
amortized cost. Amortized cost valuation involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity (or such other
date as permitted by Rule 2a-7) of any discount or premium. If fluctuating
interest rates cause the market value of a portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Trustees will
consider whether any action, such as adjusting the Share's NAV to reflect
current market conditions, should be initiated to prevent any material dilutive
effect on shareholders.
SHARE CERTIFICATES
Share certificates are not available for the Shares in order to maintain the
general liquidity that is representative of a money market fund and to help
facilitate transactions in shareholder accounts.
HOW TO EXCHANGE SHARES
The Janus funds include several funds with a variety of investment objectives.
You may exchange your Shares for shares of any other Janus fund that is
available to the public and registered in your state of residence. There are
certain procedures which should be followed to effect the transfer of the entire
or partial balance in your Shares to one of the other Janus funds. The Funds
reserve the right to reject any exchange request and to modify or terminate the
exchange privilege at any time. For example, the Funds may reject exchanges from
accounts engaged in excessive trading (including market timing transactions)
that are detrimental to the Funds. If you would like more information regarding
this option, please call the Janus Extended Services Team at 1-800-29JANUS.
HOW TO REDEEM SHARES
PARTIAL OR COMPLETE REDEMPTIONS
You may redeem all or a portion of your Shares on any business day. Your Shares
will be redeemed at the NAV next calculated after your Fund has received your
redemption request in good order and meeting all the requirements of this
Prospectus. Proceeds of such redemption generally will be wired to your
predesignated bank account as of the day of redemption, or, if that day is a
bank holiday, on the next bank business day.
IN WRITING
To redeem all or part of your Shares in writing, send a letter of instruction to
the following address:
<TABLE>
<S> <C>
Via Regular Mail Via Express Mail - Overnight Delivery
Janus Janus
P.O. Box 173375 100 Fillmore Street
Denver, CO 80217-3375 Denver, CO 80206-4928
Attn: Extended Services Attn: Extended Services
</TABLE>
The letter should be on company letterhead (in the case of institutional
clients) and should specify the name of the Fund, the number of Shares or
dollars being redeemed,
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 19
<PAGE>
the account number, appropriate wiring instructions, the name(s) on the account,
your name and your daytime telephone number. The letter must be signed by an
authorized person whose signature is on file with the Fund.
For IRA shareholders, written instructions must be signed by the account owner.
If you do not want federal income tax withheld from your redemption, you must
state that you elect not to have such withholding apply. In addition, your
instructions must state whether the distribution is normal (after age 59 1/2) or
premature (before age 59 1/2) and, if premature, whether any exceptions apply
with regard to the 10% additional tax on early distributions.
BY TELEPHONE
Shares may be redeemed by telephone. If a request for a redemption is received
by 3:00 p.m. (New York time) for Janus Money Market Fund, 5:00 p.m. for Janus
Government Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money Market
Fund, Shares will be redeemed and the redemption amount wired in federal funds
to the shareholder's predesignated bank account that day. After these times, a
redemption request will be processed at that day's NAV and will include that
day's dividends, but generally will not be wired until the next bank business
day. The Funds reserve the right to require redemption requests prior to these
times on days when the bond market or NYSE close early. There is no fee for
redemptions by wire.
BY A FUND
Your account may be terminated by your Fund if, due to the transfer or
redemption of Shares, the value of the remaining Shares in your account falls
below the minimum investment required to open a new account, or if you engage in
illegal or other conduct detrimental to the Funds. In the case of insufficient
account size, your Fund will notify you that you have 60 days to increase your
account to the minimum required before redeeming your account.
SPECIAL SHAREHOLDER SERVICES AND OTHER INFORMATION
PORTFOLIO INFORMATION
You may call 1-800-29JANUS by TouchTone(TM) telephone for access to certain
information regarding your account, including current yield and dividend rate
information, Monday through Friday from 7:00 a.m. to 10:00 p.m. (New York time).
TELEPHONE INSTRUCTIONS
You may initiate many transactions by telephone. The Funds and their agents will
not be responsible for any losses resulting from unauthorized transactions when
procedures designed to verify the identity of the caller are followed.
ACCOUNT ADDRESS AND NAME CHANGES
To change the address on your account, you may call 1-800-29JANUS or send a
written request signed by all registered owners of your account. Please include
the name of the Fund(s), the account number(s), the name(s) on the account and
both the old and new addresses. Within the first 10 days of an address change,
redemptions by institutional clients are permissible only if the redemption
proceeds are wired to a pre-designated bank account or you provide the Funds
with appropriate corporate resolutions changing wire instructions. Please call
1-800-29JANUS for additional information.
20 JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998
<PAGE>
To change the name on an account, the Shares must be transferred to a new
account. Such a change generally requires written instructions with the
guaranteed signatures of all registered owners, as well as an Application and
supporting legal documentation, if applicable. Please call 1-800-29JANUS for
additional information.
STATEMENTS AND REPORTS
Each shareholder will receive daily confirmations of purchases and redemptions
made in the Funds. On the last day of each month, the shareholder will receive a
statement reporting all purchases and redemptions made during that month, and
dividends paid during the month.
Twice each year you will receive the financial statements of the Funds,
including a statement listing portfolio securities. To reduce expenses, only one
copy of most reports (such as the Funds' Annual Report) may be mailed to all
accounts with the same tax identification number. Please call 1-800-29JANUS if
you need additional reports sent each time.
TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may temporarily suspend telephone transactions and
other shareholder services described in this Prospectus upon reasonable notice
or to the extent that any circumstance reasonably beyond the control of the
Funds or their agents materially hampers the provision of such services.
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 retirement or other employee benefit plans (a "Processing
Organization"). Processing Organizations may charge you a fee for this service
and may require different minimum initial and subsequent investments than the
Funds. Processing Organizations may also impose other charges or restrictions
different from those applicable to shareholders who invest in the Funds
directly. A Processing Organization, rather than its customers, may be the
shareholder of record of your shares. The Funds are not responsible for the
failure of any Processing Organization to carry out its obligations to its
customers. Janus Capital or its affiliates, from their own assets, may
compensate certain Processing Organizations for providing administrative,
recordkeeping and similar services, as well as distribution-related services.
JANUS MONEY MARKET FUNDS - INSTITUTIONAL SHARES PROSPECTUS FEBRUARY 17,
1998 21
<PAGE>
JANUS MONEY MARKET FUNDS INSTITUTIONAL SHARES
PROSPECTUS
[JANUS LOGO]
P.O. Box 173375 * Denver, CO 80217-3375 * 1-800-525-3713
Janus Distributors, Inc. Member NASD. (2/98)
<PAGE>
JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Service Shares
100 Fillmore Street
Denver, CO 80206-4923
FEBRUARY 17, 1998
Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-
Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds")
are designed for investors who seek maximum current income consistent with
stability of capital. This prospectus offers a separate class of shares of each
Fund (collectively, the "Shares") exclusively through banks and other financial
institutions ("Financial Institutions") in connection with trust accounts, cash
management programs and similar programs provided to their customers. Each Fund
is a separate series of Janus Investment Fund (the "Trust"), an open-end
management investment company.
Each Fund invests exclusively in high quality money market instruments. AN
INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
The Shares are offered with no sales charges, commissions, redemption fees, Rule
12b-1 fees or deferred sales charges. There is a $250,000 initial investment
minimum by each Financial Institution. The Financial Institution may aggregate
investments by all of its customers to achieve this minimum. There is no minimum
amount required for subsequent investments. For complete details on how to
purchase, redeem and exchange Shares, please see the Shareholder's Guide
beginning at page 17.
This prospectus contains information about the Shares that prospective investors
should consider before investing and should be read carefully and retained for
future reference. Additional information about the Shares is contained in the
Statement of Additional Information ("SAI") dated February 17, 1998, which is
filed with the Securities and Exchange Commission ("SEC") and is incorporated by
reference into this Prospectus. The SAI is available upon request and without
charge by writing or calling your Financial Institution. The SEC maintains a Web
site located at http://www.sec.gov that contains the SAI, material incorporated
by reference, and other information regarding the Funds.
THE FUNDS' SHARES ARE NOT BANK DEPOSITS, ARE NOT ENDORSED OR GUARANTEED BY ANY
BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
FEE TABLE.................................... 2
FINANCIAL HIGHLIGHTS......................... 4
INVESTMENT OBJECTIVES, POLICIES AND
TECHNIQUES................................. 5
INVESTMENT ADVISER AND
ADMINISTRATOR.............................. 11
DISTRIBUTIONS AND TAXES...................... 13
PERFORMANCE.................................. 15
MISCELLANEOUS INFORMATION.................... 15
SHAREHOLDER'S GUIDE
Purchases.................................... 17
Redemptions.................................. 18
Shareholder Communications................... 18
</TABLE>
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 1
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
(Applicable to each Fund)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES(1)
(Expressed as a percentage of average net assets)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MANAGEMENT OTHER TOTAL OPERATING
FEE(1) EXPENSES(1,2) EXPENSES(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund - Service
Shares 0.10% 0.30% 0.40%
Janus Government Money Market
Fund - Service Shares 0.10% 0.30% 0.40%
Janus Tax-Exempt Money Market
Fund - Service Shares 0.10% 0.30% 0.40%
</TABLE>
- --------------------------------------------------------------------------------
(1) The information in the table above is based on expenses for the fiscal
period ended October 31, 1997, net of fee waivers from the investment
adviser. Without such waivers, the Management Fee, Other Expenses and Total
Operating Expenses for Service Shares would have been 0.20%, 0.40% and
0.60%, respectively. Janus Capital may modify or terminate the waivers at
any time upon at least 90 days' notice to the Trustees. See "Investment
Adviser and Administrator" for a more detailed discussion of the fees.
(2) A portion of the administration fee included in "other expenses" may be used
to compensate Financial Institutions for providing administrative services
to their customers who invest in the Shares. See "Administrator" for more
details. Certain Financial Institutions may charge additional fees directly
to their customers for other services. Consult your Financial Institution to
determine whether it charges any additional fees.
2 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
EXAMPLE
You would indirectly pay the following expenses on a $1,000 investment, assuming
expense ratios remain as listed above and assuming a 5% annual return, with or
without redemption at the end of each period:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Money Market Fund - Service
Shares $4 $13 $22 $51
Janus Government Money Market Fund -
Service Shares $4 $13 $22 $51
Janus Tax-Exempt Money Market Fund -
Service Shares $4 $13 $22 $51
</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.
The purpose of the preceding table and example is to assist the investor in
understanding the various costs and expenses that an investor in each Fund will
bear directly or indirectly. These expenses are described in greater detail
under "Investment Adviser and Administrator."
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 3
<PAGE>
FINANCIAL HIGHLIGHTS
The information below is for the fiscal period ended October 31. The accounting
firm of Price Waterhouse LLP has audited the Funds' financial statements and
their report is included in the Funds' Annual Report, which is incorporated by
reference into the SAI.
<TABLE>
<CAPTION>
JANUS JANUS
JANUS GOVERNMENT TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
SERVICE SHARES 1997(1) 1997(1) 1997(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income .05 .05 .03
3. Net gains or (losses) on securities
(both realized and unrealized) -- -- --
- ------------------------------------------------------------------------------------
4. Total from investment operations .05 .05 .03
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (.05) (.05) (.03)
6. Distributions (from capital gains) -- -- --
- ------------------------------------------------------------------------------------
7. Total distributions (.05) (.05) (.03)
- ------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------
9. Total return* 5.14% 5.01% 3.22%
- ------------------------------------------------------------------------------------
10. Net assets, end of period (in
thousands) $10,341 $628 $10
11. Average net assets for the period (in
thousands) $913 $1,141 $10
12. Ratio of expenses to average net
assets** 0.40%(2) 0.40%(2) 0.40%(2)
13. Ratio of net investment income to
average net assets** 5.02% 5.23% 3.17%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Period from November 22, 1996 (inception of Shares) to October 31, 1997.
(2) The ratio was .60% before voluntary reduction of fees.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
4 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
INVESTMENT OBJECTIVES,
POLICIES AND TECHNIQUES
Unless otherwise stated, the investment objectives and policies set forth in
this Prospectus are not fundamental and may be changed by the Trustees of the
Trust (the "Trustees") without shareholder approval. Shareholders will be
notified of material changes in investment objectives or policies. If there is a
change in the investment objective or policies of any Fund, shareholders should
consider whether that Fund remains an appropriate investment in light of their
then current financial position and needs. The Funds are subject to additional
investment policies and restrictions described in the SAI, some of which are
fundamental and may not be changed without shareholder approval.
INVESTMENT OBJECTIVES
The investment objective of Janus Money Market Fund and Janus Government Money
Market Fund is to seek maximum current income to the extent consistent with
stability of capital. The investment objective of Janus Tax-Exempt Money Market
Fund is to seek maximum current income that is exempt from federal income taxes
to the extent consistent with stability of capital. There can be no assurance
that a Fund will achieve its investment objective or that the Shares will be
able to maintain a stable net asset value of $1.00 per share.
COMMON INVESTMENT POLICIES
The Funds will invest only in eligible high quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital
Corporation, the Funds' investment adviser ("Janus Capital"), pursuant to
procedures adopted by the Trustees. Each Fund may invest only in U.S.
dollar-denominated instruments that have a remaining maturity of 397 days or
less (as calculated pursuant to Rule 2a-7 under the Investment Company Act of
1940 ("1940 Act")) and will maintain a dollar-weighted average portfolio
maturity of 90 days or less.
Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities (as defined below), each Fund will not invest more than 5%
of its total assets in the securities of any one issuer. Up to 25% of Janus
Tax-Exempt Money Market Fund's total assets may be invested without regard to
this limit until July 1, 1998. Investment in demand features, guarantees and
other types of instruments or features are subject to the diversification limits
under Rule 2a-7. A Fund may not invest more than 25% of its total assets in any
one industry, except that this limit does not apply to U.S. Government
Securities, bank obligations or municipal securities. To ensure adequate
liquidity, no Fund may invest more than 10% of its net assets in illiquid
investments, including repurchase agreements maturing in more than seven days
(unless subject to a demand feature) and certain time deposits that are subject
to early withdrawal penalties and mature in more than seven days. Because the
Funds are typically used as a cash management vehicle, they intend to maintain a
high degree of liquidity. Janus Capital determines and monitors the liquidity of
portfolio securities under the supervision of the Trustees.
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 5
<PAGE>
RATINGS
High quality money market instruments include those that (i) are rated (or, if
unrated, are issued by an issuer with comparable outstanding short-term debt
that is rated) in one of the two highest rating categories for short-term debt
by any two nationally recognized statistical rating organizations ("NRSROs") or,
if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise
unrated and determined by Janus Capital to be of comparable quality. Each Fund,
except Janus Tax-Exempt Money Market Fund, will invest at least 95% of its total
assets in securities in the highest rating category (as determined pursuant to
Rule 2a-7). Descriptions of the rating categories of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., and certain other NRSROs are
contained in the SAI, as is a further description of the Funds' investment
policies.
Although each Fund only invests in high quality money market instruments, an
investment in a Fund is subject to risk even if all securities in its portfolio
are paid in full at maturity. All money market instruments, including U.S.
Government Securities, can change in value as a result of changes in interest
rates, the issuer's actual or perceived creditworthiness or the issuer's ability
to meet its obligations.
TYPES OF INVESTMENTS
JANUS MONEY MARKET FUND
Janus Money Market Fund pursues its objective by investing primarily in high
quality debt obligations and obligations of financial institutions. The Fund may
also invest in U.S. Government Securities (as defined below) and municipal
securities, although the Fund expects to invest in such securities to a lesser
degree.
DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers, including
commercial paper (short-term promissory notes issued by companies to finance
their, or their affiliates', current obligations), notes and bonds, and variable
amount master demand notes. The payment obligations on these instruments may be
backed by securities, swap agreements or other assets, by the guarantee of a
third party or solely by the unsecured promise of the issuer to make payments
when due. The Fund may invest in privately issued commercial paper or other
securities that are restricted as to disposition under the federal securities
laws. In general, sales of these securities may not be made absent registration
under the Securities Act of 1933 (the "1933 Act") or the availability of an
appropriate exemption. Pursuant to Section 4(2) of the 1933 Act or Rule 144A
adopted under the 1933 Act, however, some of these securities are eligible for
resale to institutional investors, and accordingly, Janus Capital may determine
that a liquid market exists for such a security pursuant to guidelines adopted
by the Trustees.
OBLIGATIONS OF FINANCIAL INSTITUTIONS
The Fund may invest in obligations of financial institutions. Examples of
obligations in which the Fund may invest include negotiable certificates of
deposit, bankers' acceptances, time deposits and other obligations of U.S. banks
(including savings and loan associations) having total assets in excess of one
billion dollars and U.S. branches of foreign banks having total assets in excess
of ten billion dollars. The Fund may also invest in Eurodollar and Yankee bank
obligations as discussed below and other U.S. dollar-denominated obligations of
foreign banks having total assets in excess of ten billion
6 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
dollars that Janus Capital believes are of an investment quality comparable to
obligations of U.S. banks in which the Fund may invest.
Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. Time deposits are non-negotiable deposits with a banking institution that
earn a specified interest rate over a given period. Fixed time deposits, which
are payable at a stated maturity date and bear a fixed rate of interest,
generally may be withdrawn on demand by the Fund but may be subject to early
withdrawal penalties that could reduce the Fund's yield. Unless there is a
readily available market for them, time deposits that are subject to early
withdrawal penalties and that mature in more than seven days will be treated as
illiquid securities.
Eurodollar bank obligations are dollar-denominated certificates of deposit or
time deposits issued outside the U.S. capital markets by foreign branches of
U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.
Foreign, Eurodollar (and to a limited extent, Yankee) bank obligations are
subject to certain sovereign risks. One such risk is the possibility that a
foreign government might prevent dollar-denominated funds from flowing across
its borders. Other risks include: adverse political and economic developments in
a foreign country; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
U.S. GOVERNMENT SECURITIES
The Fund may invest without limit in U.S. Government Securities as described
below under "Janus Government Money Market Fund."
MUNICIPAL SECURITIES
The Fund may invest in obligations of states, territories or possessions of the
United States and their subdivisions, authorities and corporations as described
below under "Janus Tax-Exempt Money Market Fund." These obligations may pay
interest that is exempt from federal income taxation.
JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund pursues its objective by investing
exclusively in obligations issued and/or guaranteed as to principal and interest
by the United States government or by its agencies and instrumentalities and
repurchase agreements secured by such obligations.
U.S. GOVERNMENT SECURITIES
U.S. Government Securities shall have the meaning set forth in the 1940 Act. The
1940 Act defines U.S. Government Securities to include securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities. U.S.
Government Securities may also include repurchase agreements collateralized by
and municipal securities escrowed with or refunded with U.S. government
securities. U.S. Government Securities in which the Fund may invest include U.S.
Treasury securities and obligations issued or guaranteed by U.S. government
agencies and instrumentalities that are backed by the full
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 7
<PAGE>
faith and credit of the U.S. government, such as those guaranteed by the Small
Business Administration or issued by the Government National Mortgage
Association. In addition, U.S. Government Securities in which the Fund may
invest include securities supported primarily or solely by the creditworthiness
of the issuer, such as securities of the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority.
There is no guarantee that the U.S. government will support securities not
backed by its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the full faith and credit of the
U.S. government.
JANUS TAX-EXEMPT MONEY MARKET FUND
Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily
in municipal securities whose interest is exempt from federal income taxes,
including the federal alternative minimum tax. Although the Fund will attempt to
invest substantially all of its assets in municipal securities whose interest is
exempt from federal income taxes, the Fund reserves the right to invest up to
20% of its net assets in securities whose interest is federally taxable.
Additionally, when its portfolio manager is unable to locate investment
opportunities with desirable risk/reward characteristics, the Fund may invest
without limit in cash and cash equivalents, including obligations that may be
federally taxable (see "Taxable Investments").
MUNICIPAL SECURITIES
The municipal securities in which the Fund may invest include municipal notes
and short-term municipal bonds. Municipal notes are generally used to provide
for the issuer's short-term capital needs and generally have maturities of 397
days or less. Examples include tax anticipation and revenue anticipation notes,
which generally are issued in anticipation of various seasonal revenues, bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Short-term municipal bonds may include "general obligation bonds," which are
secured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest; "revenue bonds," which are generally paid from the
revenues of a particular facility or a specific excise tax or other source; and
"industrial development bonds," which are issued by or on behalf of public
authorities to provide funding for various privately operated industrial and
commercial facilities. The Fund may also invest in high quality participation
interests in municipal securities. A more detailed description of various types
of municipal securities is contained in Appendix B in the SAI.
When the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
issuing entity and a security is backed only by the assets and revenues of the
issuing entity, that entity will be deemed to be the sole issuer of the
security. Similarly, in the case of an industrial development bond backed only
by the assets and revenues of the non-governmental issuer, the non-governmental
issuer will be deemed to be the sole issuer of the bond.
At times, the Fund may invest more than 25% of its total assets in tax-exempt
securities that are related in such a way that an economic, business, or
political development or change affecting one such security could similarly
affect the other securities; for example, securities whose issuers are located
in the same state, or securities whose
8 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
interest is derived from revenues of similar type projects. The Fund may also
invest more than 25% of its assets in industrial development bonds or
participation interests therein.
Yields on municipal securities are dependent on a variety of factors, including
the general conditions of the money market and of the municipal bond and
municipal note markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The achievement of the Fund's investment
objective is dependent in part on the continuing ability of the issuers of
municipal securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due. Obligations of issuers of municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Bankruptcy
Reform Act of 1978, as amended. Therefore, the possibility exists that, as a
result of litigation or other conditions, the ability of any issuer to pay, when
due, the principal of and interest on its municipal securities may be materially
affected.
MUNICIPAL LEASES
The Fund may invest in municipal leases or participation interests therein.
Municipal leases are municipal securities which may take the form of a lease or
an installment purchase or conditional sales contract. Municipal leases are
issued by state and local governments and authorities to acquire a wide variety
of equipment and facilities. 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 payment on an annual basis, which may
result in termination of the lease and possible default. Janus Capital may
determine that a liquid market exists for municipal lease obligations pursuant
to guidelines established by the Trustees.
TAXABLE INVESTMENTS
As discussed above, although the Fund will attempt to invest substantially all
of its assets in municipal securities whose interest is exempt from federal
income tax, the Fund may under certain circumstances invest in certain
securities whose interest is subject to such taxation. These securities include:
(i) short-term obligations of the U.S. government, its agencies or
instrumentalities, (ii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than one
billion dollars and whose deposits are insured by the Federal Deposit Insurance
Corporation, (iii) commercial paper and (iv) repurchase agreements as described
below.
COMMON INVESTMENT TECHNIQUES
PARTICIPATION INTERESTS
The Funds may invest in participation interests in any type of security in which
the Funds may invest. A participation interest gives a Fund an undivided
interest in the underlying securities in the proportion that the Fund's
participation interest bears to the total principal amount of the underlying
securities. Participation interests usually carry a demand feature, as described
below, backed by a letter of credit or guarantee of the institution that issued
the interests permitting the holder to tender them back to the institution.
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 9
<PAGE>
DEMAND FEATURES
The Funds may invest in securities that are subject to puts and stand-by
commitments ("demand features"). Demand features give the Fund the right to
resell securities at specified periods prior to their maturity dates to the
seller or to some third party at an agreed-upon price or yield. Securities with
demand features may involve certain expenses and risks, including the inability
of the issuer of the instrument to pay for the securities at the time the
instrument is exercised, non-marketability of the instrument and differences
between the maturity of the underlying security and the maturity of the
instrument. Securities may cost more with demand features than without them.
Demand features can serve three purposes: to shorten the maturity of a variable
or floating rate security, to enhance the instrument's credit quality and to
provide a source of liquidity. Demand features are often issued by third party
financial institutions, generally domestic and foreign banks. Accordingly, the
credit quality and liquidity of the Funds' investments may be dependent in part
on the credit quality of the banks supporting the Funds' investments. This will
result in exposure to risks pertaining to the banking industry, including the
foreign banking industry. Brokerage firms and insurance companies also provide
certain liquidity and credit support. A substantial portion of the Janus Tax-
Exempt Money Market Fund's portfolio in particular may consist of securities
backed by banks and other financial institutions, and thus adverse changes in
the credit quality of these institutions could cause losses to the Fund and
affect its share price.
VARIABLE AND FLOATING RATE SECURITIES
The securities in which the Funds invest may have variable or floating rates of
interest. 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. Securities with ultimate maturities of greater
than 397 days may be purchased only pursuant to Rule 2a-7. Under that Rule, only
those long-term instruments that have demand features which comply with certain
requirements and certain variable rate U.S. Government Securities may be
purchased. Similar to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market interest
rates or changes in the issuer's or guarantor's creditworthiness. The rate of
interest on securities purchased by a Fund may be tied to short-term Treasury or
other government securities or indices on securities that are permissible
investments of the Funds, as well as other money market rates of interest. The
Funds will not purchase securities whose values are tied to interest rates or
indices that are not appropriate for the duration and volatility standards of a
money market fund.
MORTGAGE- AND ASSET-BACKED SECURITIES
Janus Money Market Fund and Janus Government Money Market Fund may purchase
fixed or adjustable rate mortgage-backed securities issued by the Government
National Mortgage Association, Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, or other governmental or
government-related entities. In addition, Janus Money Market Fund may purchase
other asset-backed securities, including securities backed by automobile loans,
equipment leases or credit card receivables. These securities directly or
indirectly represent a participation in, or are secured by and payable from,
fixed or adjustable rate mortgage or other loans which may be secured by real
estate or other assets. Unlike traditional debt instruments, payments on these
securities include both interest and a partial payment of principal.
10 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
Prepayments of the principal of underlying loans may shorten the effective
maturities of these securities and may result in a Fund having to reinvest
proceeds at a lower interest rate.
REPURCHASE AGREEMENTS
Each Fund may seek additional income by entering into collateralized repurchase
agreements. Repurchase agreements are transactions in which a Fund purchases
securities and simultaneously commits to resell those securities to the seller
at an agreed-upon price on an agreed-upon future date. The resale price reflects
a market rate of interest that is not related to the coupon rate or maturity of
the purchased securities. If the seller of the securities underlying a
repurchase agreement fails to pay the agreed resale price on the agreed delivery
date, a Fund may incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements are transactions in which a Fund sells a security and simultaneously
commits to repurchase that security from the buyer at an agreed upon price on an
agreed upon future date. This technique will be used primarily for temporary or
emergency purposes, such as meeting redemption requests.
DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Securities so purchased are subject to market price fluctuation from the time of
purchase but no interest on the securities accrues to a Fund until delivery and
payment for the securities take place. Accordingly, the value of the securities
on the delivery date may be more or less than the purchase price. Forward
commitments will be entered into only when a Fund has the intention of taking
possession of the securities, but a Fund may sell the securities before the
settlement date if deemed advisable.
BORROWING AND LENDING
Each Fund may borrow money for temporary or emergency purposes in amounts up to
25% of its total assets. A Fund may not mortgage or pledge securities except to
secure permitted borrowings. As a fundamental policy, a Fund will not lend
securities or other assets if, as a result, more than 25% of its total assets
would be lent to other parties. The Funds do not currently intend to engage in
securities lending; however, under the terms of an exemptive order received from
the SEC, each of the Funds may borrow money from or lend money to other funds
that permit such transactions and are advised by Janus Capital. There is no
assurance that such permission will be granted.
INVESTMENT ADVISER AND
ADMINISTRATOR
INVESTMENT ADVISER
Each Fund has a separate Investment Advisory Agreement with Janus Capital, 100
Fillmore Street, Denver, Colorado 80206-4923. Janus Capital has served as
investment adviser to Janus Fund since 1970 and currently serves as investment
adviser to all of the
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 11
<PAGE>
Janus funds, as well as adviser or subadviser to other mutual funds and
individual, corporate, charitable and retirement accounts. Kansas City Southern
Industries, Inc., a publicly traded holding company whose primary subsidiaries
are engaged in transportation, information processing and financial services
("KCSI"), owns approximately 83% of the outstanding voting stock of Janus
Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus
Capital, owns approximately 12% of its voting stock and, by agreement with KCSI,
selects a majority of Janus Capital's Board.
Pursuant to the Investment Advisory Agreements, Janus Capital furnishes
continuous advice and recommendations concerning each Fund's investments. Each
of the Funds has agreed to compensate Janus Capital for its advisory services by
the monthly payment of a fee at the annual rate of 0.20% of the value of the
average daily net assets of each Fund. Janus Capital has agreed to waive a
portion of its fee and accordingly, the advisory fee of each Fund will be
calculated at the annual rate of 0.10% of the value of each Fund's average daily
net assets. Janus Capital may modify or terminate the waiver at any time upon at
least 90 days' notice to the Trustees.
ADMINISTRATOR
Each of the Funds has also entered into an Administration Agreement with Janus
Capital, pursuant to which Janus Capital furnishes certain administrative,
compliance and accounting services for the Funds, pays the costs of printing
reports and prospectuses for existing shareholders, provides office space for
the Funds and pays the salaries, fees and expenses of all Fund officers and of
those Trustees who are affiliated with Janus Capital. Administrative services
provided by Janus Capital under the Administration Agreements include custody
and transfer agency services. Janus Capital is paid an administration fee,
calculated daily and paid monthly, at the annual rate of 0.40% of the value of
the average daily net assets of each Fund attributable to Shares for services
rendered pursuant to the Administration Agreements. Janus Capital has agreed to
waive a portion of its fee and accordingly, the administration fee paid by the
Shares will be calculated at the annual rate of 0.30% of the value of each
Fund's average daily net assets attributable to the Shares. Janus Capital may
modify or terminate this waiver at any time upon at least 90 days' notice to the
Trustees.
Each Fund pays all of its expenses not assumed by Janus Capital, including
auditing fees and independent Trustees' fees and expenses.
Janus Capital may use all or a portion of its administration fee to compensate
Financial Institutions for providing administrative services to their customers
who invest in the Shares. The types of services that the Financial Institutions
would provide include serving as the sole shareholder of record, shareholder
recordkeeping, processing and aggregating purchase and redemption transactions,
providing periodic statements, forwarding shareholder reports and other
materials, providing tax information, and providing other similar services that
the Funds would have to perform if they were dealing directly with the
beneficial owners, rather than the Financial Institutions, as shareholders of
record.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from
12 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
acting in the administrative capacities described above or should Congress relax
current restrictions on depository institutions, the Trustees will consider
appropriate changes in the services.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by brokers
and dealers selected by Janus Capital. Broker-dealers are selected on the basis
of their ability to obtain best price and execution for the Funds' transactions
and recognizing brokerage, research and other services provided to the Fund and
to Janus Capital. Janus Capital may also consider payments made by brokers
effecting transactions for a Fund (i) to the Fund or (ii) to other persons on
behalf of the Fund for services provided to the Fund for which it would be
obligated to pay. The Funds' Trustees have also authorized the Funds to place
portfolio transactions on an agency basis with a broker-dealer that is
affiliated with Janus Capital. Agency trades, if any, that are placed with such
affiliated party serve to reduce certain expenses of the Funds. The SAI further
explains the selection of broker-dealers.
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 Funds and
Janus Capital's other advisory clients. See the SAI for more detailed
information.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which has
established a dedicated group to address this issue. Janus Capital has entered
into a consulting arrangement with one of the foremost experts in Year 2000
compliance to help Janus Capital successfully achieve Year 2000 compliance.
Janus Capital does not anticipate that the move to Year 2000 will have a
material impact on its ability to continue to provide the Funds with service at
current levels.
DISTRIBUTIONS AND TAXES
Dividends representing substantially all of the net investment income and any
net realized gains on sales of securities are declared daily, Saturdays, Sundays
and holidays included, and distributed on the last business day of each month.
If a month begins on a Saturday, Sunday or holiday, dividends for those days are
declared at the end of the preceding month and distributed on the first business
day of the month. Distributions will be reinvested in Shares of a Fund unless
otherwise elected by the shareholder pursuant to the options offered by the
Financial Institution.
Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund)
are taxable income and are subject to federal income tax (except for
shareholders exempt from income tax), whether such distributions are received in
cash or are reinvested in
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 13
<PAGE>
additional Shares. Full information regarding the tax status of income dividends
and any capital gains distributions will be mailed to Financial Institutions who
will forward the information to their customers for tax purposes on or before
January 31st of each year. Because the Funds are money market funds, they do not
anticipate making any capital gains distributions.
Janus Tax-Exempt Money Market Fund anticipates that substantially all income
dividends it pays will be exempt from federal income tax. However, dividends
attributable to interest on taxable investments, together with distributions
from any net realized capital gains, are taxable. In addition, interest on
certain private activity bonds is a preference item for purposes of the
individual and corporate alternative minimum taxes. To the extent that the Fund
earns such income, shareholders who are subject to the alternative minimum tax
must include such income as a preference item. The Fund will advise shareholders
of the percentage of dividends, if any, subject to the alternative minimum tax.
Dividends and capital gains distributions may also be subject to state and local
taxes. In certain states some portion of dividends and distributions (depending
on the sources of the Fund's net income) of Janus Tax-Exempt Money Market Fund
may be exempt from state and local taxes. Shareholders should consult their own
tax advisor regarding exemption from any applicable state and local tax, as well
as the tax treatment of any dividends or distributions from the Shares.
The Funds intend to comply with provisions of the Internal Revenue Code
applicable to investment companies, and thus it is not expected that any of the
Funds will be required to pay any federal income or excise taxes. The SAI
further explains the Funds' tax status.
14 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
PERFORMANCE
The Shares may measure performance in several ways, including "yield,"
"effective yield," and "tax equivalent yield" (for Janus Tax-Exempt Money Market
Fund only). Yield is a way of showing the rate of income the Shares earn on
investments as a percentage of the Share price. Yield represents the income,
less expenses generated by an investment, in the Shares over a seven-day period
expressed as an annual percentage rate. Effective yield is similar in that it is
calculated over the same time frame, but instead the net investment income is
compounded and then annualized. Due to the compounding effect, the effective
yield will normally be higher than the yield.
Shares of Janus Tax-Exempt Money Market Fund may also quote tax-equivalent
yield, which shows the taxable yield an investor would have to earn before taxes
to equal such Shares' tax-free yield. A tax-equivalent yield is calculated by
dividing such Shares' tax-exempt yield by the result of one minus a stated
federal tax rate. Only that portion of the Fund's income that is tax-exempt is
adjusted in this calculation.
Performance figures are based upon historical results and are not intended to
indicate future performance.
MISCELLANEOUS INFORMATION
ORGANIZATION
Each Fund is an open-end management investment company registered under the 1940
Act as a series of the Trust, which was created on February 11, 1986. Each Fund
currently offers three classes of shares by separate prospectuses. The Shares
offered by this Prospectus are available only through Financial Institutions
that meet minimum investment requirements in connection with trust accounts,
cash management programs and similar programs provided to their customers. A
second class of shares, Institutional Shares of each Fund, are available only to
institutional clients, including corporations, foundations and trusts, and
individuals meeting certain initial investment requirements. A third class of
shares, Investor Shares of each Fund, are available to the general public.
Because the expenses of each class may differ, the performance of each class is
expected to differ. If you would like additional information, please call
1-800-29JANUS.
SIGNIFICANT SHAREHOLDERS
As of January 22, 1998, the following shareholder owned more than 25% of the
Shares of Janus Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Norwest Investment 608 Second Ave. S. 99.93%
Services Minneapolis, MN 55402-1916
- -------------------------------------------------------------------------------
</TABLE>
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 15
<PAGE>
As of January 22, 1998, the following shareholder owned more than 25% of the
Shares of Janus Government Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Trust Bank of 1200 17th St. 24th Floor 98.27%
Colorado Denver, CO 80202-5835
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following shareholder owned more than 25% of the
Shares of Janus Tax-Exempt Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Janus Capital 100 Fillmore Street 99.90%
Corporation Denver, CO 80206-4928
- -------------------------------------------------------------------------------
</TABLE>
Thus, these shareholders may have power to control any vote of the Shares of
these Funds.
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Fund's investment objective and policies. The
Trustees delegate the day-to-day management of the Funds to the officers of the
Trust and meet at least quarterly to review the Funds' investment policies,
performance, expenses and other business affairs.
VOTING RIGHTS
The Trust is not required to hold annual shareholder meetings. However, special
meetings may be called for a specific class of shares, a specific Fund, or for
the Trust as a whole, for purposes such as electing or removing Trustees,
terminating or reorganizing the Trust, changing fundamental policies or voting
on matters when required by the 1940 Act. Separate votes are taken by a separate
Fund (or a separate class of shares) only if a matter affects or requires the
vote of just that Fund (or those shares). Shareholders are entitled to cast one
vote for each Share they own.
CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR
UMB Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the
custodian of the Funds' assets. The custodian holds each Fund's assets in
safekeeping and collects and remits the income thereon subject to the
instructions of each Fund.
Janus Service Corporation, P.O. Box 173375, Denver, Colorado 80217-3375, a
wholly-owned subsidiary of Janus Capital, provides transfer agency and
shareholder services for the Funds.
Janus Distributors, Inc., 100 Fillmore Street, Denver, Colorado 80206-4928, a
wholly-owned subsidiary of Janus Capital, is a distributor of the Shares.
16 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
SHAREHOLDER'S GUIDE
INVESTORS MAY NOT PURCHASE OR REDEEM SHARES OF THE FUNDS DIRECTLY. SHARES MAY BE
PURCHASED OR REDEEMED ONLY THROUGH FINANCIAL INSTITUTIONS IN CONNECTION WITH
TRUST ACCOUNTS, CASH MANAGEMENT PROGRAMS AND SIMILAR PROGRAMS. YOUR FINANCIAL
INSTITUTION WILL PROVIDE YOU WITH INSTRUCTIONS ON PURCHASING OR REDEEMING
SHARES.
The Financial Institutions are responsible for promptly transmitting purchase,
redemption and other requests to the Funds under the arrangements made between
the Financial Institutions and their customers. The Funds are not responsible
for the failure of any Financial Institution to carry out its obligations to its
customers.
PURCHASES
Purchases of Fund Shares may be made only through omnibus accounts of Financial
Institutions in connection with trust accounts, cash management programs and
similar programs. Your Financial Institution will provide you with instructions
on purchasing Shares. The following information applies to purchase orders from
Financial Institutions to Janus (Check with your Financial Institution directly
for deadlines for purchase orders from you to your Financial Institution).
Requests to purchase received from a Financial Institution before 3:00 p.m. (New
York time) for Janus Money Market Fund, 5:00 p.m., for Janus Government Money
Market Fund, and 12:00 p.m. for Janus Tax-Exempt Money Market Fund on a business
day will receive dividends declared on the purchase date. In addition, the
Funds' transfer agent must receive payment from the Financial Institution in
federal funds by 6:00 p.m. (New York time). The Funds also reserve the right to
require purchase requests and payments from the Financial Institution prior to
these times on days when the bond market or New York Stock Exchange ("NYSE")
close early. Purchase orders received after these times will receive the
dividend declared the following day.
The Financial Institutions may impose charges and restrictions different from
those imposed by the Funds. The Financial Institutions may also require
different minimum initial and subsequent investments than required by the Funds.
Each Fund reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in Janus Capital's opinion, they are of a size that
would disrupt the management of a Fund. Any Fund may discontinue sales of its
Shares if management believes that a substantial further increase may adversely
affect that Fund's ability to achieve its investment objective. In such event,
however, it is anticipated that existing Financial Institution customers in that
Fund would be permitted to continue to authorize investment in such Fund and to
reinvest any dividends or capital gains distributions.
MINIMUM INVESTMENT
There is a $250,000 initial aggregate investment minimum by each Financial
Institution. The Funds may, in their discretion, waive this minimum under
certain circumstances but, in such event, the minimum must be reached within 90
days of opening the account. Financial Institutions who do not maintain the
$250,000 minimum will be
JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998 17
<PAGE>
given the option of requesting their customers to exchange into Investor Shares
if the required minimum investment for Investor Shares is met or having their
customers' Shares redeemed.
NET ASSET VALUE
The net asset value ("NAV") of the Shares is determined at the close of the
regular trading session of the New York Stock Exchange (normally 4:00 p.m., New
York time) each day that both the Exchange and the New York Federal Reserve Bank
are open, except that Janus Government Money Market Fund's NAV is normally
calculated at 5:00 p.m. (New York time) on such days. NAV per share is
determined by dividing the total value of the securities and other assets, less
liabilities, by the total number of Shares outstanding. Portfolio securities are
valued at their amortized cost. Amortized cost valuation involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity (or such other date as permitted by Rule 2a-7) of any discount or
premium. If fluctuating interest rates cause the market value of a portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Trustees will consider whether any action, such as adjusting the
Share's NAV to reflect current market conditions, should be initiated to prevent
any material dilutive effect on shareholders.
SHARE CERTIFICATES
Share certificates are not available for the Shares in order to maintain the
general liquidity that is representative of a money market fund and to help
facilitate transactions in shareholder accounts.
REDEMPTIONS
Redemptions, like purchases, may be effected only through the accounts of
participating Financial Institutions. Your Financial Institution will provide
you with instructions on redeeming shares. The following information applies to
redemption orders from Financial Institutions to Janus (Check with your
Financial Institution directly for deadlines for redemption orders from you to
your Financial Institution). If a request for a redemption is received from a
Financial Institution by 3:00 p.m. (New York time) for Janus Money Market Fund,
5:00 p.m. for Janus Government Money Market Fund and 12:00 p.m. for Janus
Tax-Exempt Money Market Fund, Shares will be redeemed and the redemption amount
wired in federal funds to the Financial Institution's omnibus account that day.
After these times, a redemption request will be processed at that day's NAV and
will include that day's dividends, but generally will not be wired until the
next bank business day. The Funds reserve the right to require redemption
requests prior to these times on days when the bond market or NYSE close early.
Shares of any Fund may be redeemed on any business day.
SHAREHOLDER COMMUNICATIONS
Shareholders will receive annual and semiannual reports including the financial
statements of the Funds that they have authorized for investment from their
Financial Institution. Each report will show the investments owned by each Fund
and the market values thereof, as well as other information about the Funds and
their operations. The Trust's fiscal year ends October 31.
18 JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS FEBRUARY 17, 1998
<PAGE>
JANUS MONEY MARKET FUNDS SERVICE SHARES
PROSPECTUS
[JANUS LOGO]
P.O. Box 173375 * Denver, CO 80217-3375 * 1-800-525-3713
Janus Distributors, Inc. Member NASD. (2/98)
<PAGE>
JANUS INVESTMENT FUND
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
GROWTH FUNDS
Janus Fund
Janus Enterprise Fund
Janus Mercury Fund
Janus Olympus Fund
Janus Special Situations Fund
Janus Twenty Fund
Janus Worldwide Fund
Janus Overseas Fund
COMBINATION FUNDS
Janus Balanced Fund
Janus Equity Income Fund
Janus Growth and Income Fund
FIXED-INCOME FUNDS
Janus Flexible Income Fund
Janus High-Yield Fund
Janus Federal Tax-Exempt Fund
Janus Short-Term Bond Fund
This Statement of Additional Information ("SAI") pertains to the funds
listed above, each of which is a separate series of Janus Investment Fund, a
Massachusetts business trust (the "Trust"). Each of these series of the Trust
represents shares of beneficial interest in a separate portfolio of securities
and other assets with its own objective and policies (individually, a "Fund" and
collectively, the "Funds"). Each Fund is managed separately by Janus Capital
Corporation ("Janus Capital").
This SAI is not a Prospectus and should be read in conjunction with the
Funds' Prospectuses dated February 17, 1998, which are incorporated by reference
into this SAI and may be obtained from the Trust at the above phone number or
address. This SAI contains additional and more detailed information about the
Funds' operations and activities than the Prospectuses.
[JANUS LOGO]
<PAGE>
JANUS INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Investment Policies, Restrictions and Techniques.............................. 3
Investment Objectives.................................................... 3
Portfolio Policies....................................................... 4
Investment Restrictions Applicable to All Funds.......................... 5
Investment Policies Applicable to Certain Funds.......................... 8
Types of Securities and Investment Techniques................................. 8
Illiquid Investments..................................................... 8
Zero Coupon, Pay-In-Kind and Step Coupon Securities...................... 9
Pass-Through Securities................................................. 10
Investment Company Securities........................................... 11
Depositary Receipts..................................................... 11
Municipal Obligations................................................... 12
Other Income-Producing Securities....................................... 12
Repurchase and Reverse Repurchase Agreements............................ 13
High-Yield/High-Risk Securities......................................... 13
Futures, Options and Other Derivative Instruments....................... 14
Investment Adviser........................................................... 26
Custodian, Transfer Agent and Certain Affiliations........................... 29
Portfolio Transactions and Brokerage......................................... 30
Officers and Trustees........................................................ 34
Purchase of Shares........................................................... 39
Net Asset Value Determination........................................... 39
Reinvestment of Dividends and Distributions............................. 40
Redemption of Shares......................................................... 40
Shareholder Accounts......................................................... 41
Telephone Transactions.................................................. 41
Systematic Redemptions.................................................. 41
Tax-Deferred Accounts........................................................ 42
Income Dividends, Capital Gains Distributions and Tax Status................. 43
Principal Shareholders....................................................... 43
Miscellaneous Information.................................................... 45
Shares of the Trust..................................................... 45
Voting Rights........................................................... 46
Independent Accountants................................................. 46
Registration Statement.................................................. 46
Performance Information...................................................... 46
Financial Statements......................................................... 49
Appendix A................................................................... 50
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INVESTMENT POLICIES,
RESTRICTIONS AND TECHNIQUES
Each Fund's investment objective is discussed in the Prospectus and
summarized below. There is no assurance that any Fund will achieve its
respective objective. The investment objectives of the Funds are not fundamental
and may be changed by the Trustees without shareholder approval.
INVESTMENT OBJECTIVES
JANUS FUND is a diversified fund that seeks long-term growth of capital in
a manner consistent with the preservation of capital by investing primarily in
common stocks of issuers of any size. Generally, this Fund emphasizes issuers
with larger market capitalizations.
JANUS ENTERPRISE FUND is a nondiversified fund that seeks long-term growth
of capital by investing primarily in common stocks. The Fund intends to normally
invest at least 50% of its equity assets in securities issued by medium-sized
companies (as defined in the Prospectus).
JANUS MERCURY FUND is a diversified fund that seeks long-term growth of
capital by investing primarily in common stocks of issuers of any size,
including larger, well-established companies and/or smaller, emerging growth
companies.
JANUS OLYMPUS FUND is a nondiversified fund that seeks long-term growth of
capital by investing primarily in common stocks of issuers of any size,
including larger, well-established companies and/or smaller, emerging growth
companies.
JANUS SPECIAL SITUATIONS FUND is a nondiversified fund that seeks capital
appreciation by investing primarily in common stocks of domestic and foreign
issuers. The Fund seeks investments in issuers that its portfolio manager
believes have been overlooked or undervalued by other investors.
JANUS TWENTY FUND is a nondiversified fund that seeks long-term growth of
capital. Under normal conditions, this Fund concentrates its investments in a
core position of 20-30 common stocks.
JANUS WORLDWIDE FUND is a diversified fund that seeks long-term growth of
capital in a manner consistent with the preservation of capital by investing
primarily in common stocks of foreign and domestic issuers of any size. Janus
Worldwide Fund normally invests in issuers from at least five different
countries including the United States.
JANUS OVERSEAS FUND is a diversified fund that seeks long-term growth of
capital by investing primarily in common stocks of foreign issuers of any size.
The Fund normally invests at least 65% of its total assets in issuers from at
least five different countries excluding the United States.
JANUS BALANCED FUND is a diversified fund that seeks long-term capital
growth, consistent with preservation of capital and balanced by current income.
Janus Balanced Fund normally invests 40-60% of its assets in securities selected
primarily for growth
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potential and 40-60% of its assets in securities selected primarily for their
income potential.
JANUS EQUITY INCOME FUND is a diversified fund that seeks current income
and long-term growth of capital by investing primarily in income-producing
equity securities.
JANUS GROWTH AND INCOME FUND is a diversified fund that seeks both long-
term capital growth and current income. Janus Growth and Income Fund places a
stronger emphasis on the growth objective and normally invests up to 75% of its
assets in equity securities selected primarily for their growth potential and at
least 25% of its assets in securities that the portfolio manager believes have
income potential. In unusual circumstances, the Fund may reduce the growth
component of its portfolio to 25% of its assets.
JANUS FLEXIBLE INCOME FUND is a diversified fund that seeks to maximize
total return consistent with preservation of capital. 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. Janus
Flexible Income Fund invests in all types of income-producing securities. This
Fund may have substantial holdings of debt securities rated below investment
grade.
JANUS HIGH-YIELD FUND is a diversified fund that seeks high current income
as its primary objective and capital appreciation as its secondary objective
when consistent with the primary objective by investing in high-yield/high-risk
fixed-income securities. The Fund invests primarily in high-yield corporate debt
securities ("junk bonds") and may invest all of its assets in such securities.
JANUS FEDERAL TAX-EXEMPT FUND is a diversified fund that seeks as high a
level of current income exempt from federal income tax as is consistent with
preservation of capital. It will normally invest at least 80% of its net assets
in securities whose income is not subject to federal income tax.
JANUS SHORT-TERM BOND FUND is a diversified fund that seeks as high a level
of current income as is consistent with the preservation of capital by investing
primarily in short- and intermediate-term fixed-income securities. It will
normally maintain a dollar-weighted average portfolio effective maturity not to
exceed three years.
PORTFOLIO POLICIES
The Funds' Prospectuses discuss the types of securities in which the Funds
will invest, portfolio policies of the Funds and the investment techniques of
the Funds. The Prospectuses include a discussion of portfolio turnover policies.
Portfolio turnover is calculated by dividing total purchases or sales, whichever
is less, by the average monthly value of a Fund's portfolio securities. The
following table summarizes the portfolio
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turnover rates for the fiscal periods indicated. The information below is for
fiscal years ended October 31.
<TABLE>
<CAPTION>
Fund Name 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Janus Fund........................................... 132% 104%
Janus Enterprise Fund................................ 111% 93%
Janus Mercury Fund................................... 157% 177%
Janus Olympus Fund................................... 244% 303%(1)
Janus Special Situations Fund........................ 146%(2) N/A
Janus Twenty Fund.................................... 123% 137%
Janus Worldwide Fund................................. 79% 80%
Janus Overseas Fund.................................. 72% 71%
Janus Balanced Fund.................................. 139% 151%
Janus Equity Income Fund............................. 180% 325%(3)
Janus Growth and Income Fund......................... 127% 153%
Janus Flexible Income Fund........................... 207% 214%
Janus High-Yield Fund................................ 404% 324%
Janus Federal Tax-Exempt Fund........................ 304% 225%
Janus Short-Term Bond Fund........................... 133% 486%
- ----------------------------------------------------------------------
</TABLE>
(1) Annualized rate based on the ten month period ended October 31, 1996.
(2) Annualized rate based on the ten month period ended October 31, 1997.
(3) Annualized rate based on the four month period ended October 31, 1996.
For the fiscal year ended October 31, 1997, the lower portfolio turnover
rate for Janus Equity Income Fund was primarily the result of comparing an
annualized rate for a four month period for 1996 to the rate for a complete
twelve month period for 1997. With respect to Janus High-Yield Fund and Janus
Federal Tax-Exempt Fund for the same period, the higher portfolio turnover rates
are primarily attributable to increased purchase and sales activity resulting
from increased assets. With respect to Janus Short-Term Bond Fund for that
period, the lower portfolio turnover rate is primarily attributable to decreased
purchase and sales activity in the portfolio.
INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS
As indicated in the Prospectus, the Funds are subject to certain
fundamental policies and restrictions that may not be changed without
shareholder approval. Shareholder approval means approval by the lesser of (i)
more than 50% of the outstanding voting securities of the Trust (or a particular
Fund if a matter affects just that Fund), or (ii) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Trust (or a particular Fund) are present or
represented by proxy. As fundamental policies, each of the Funds may not:
(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to fifty percent (50%) of the value of the total assets for Janus
Enterprise Fund, Janus Olympus Fund, Janus Special Situations Fund, and Janus
Twenty Fund and as to seventy-five percent (75%) of the value of the total
assets of the other Funds, purchase the securities of any one issuer (except
cash items and "government securities" as defined under the Investment Company
Act of 1940, as amended (the "1940 Act")), if immediately after and as a result
of such purchase, the value of the holdings of a Fund
5
<PAGE>
in the securities of such issuer exceeds 5% of the value of such Fund's total
assets. With respect to the other 50% of the value of their total assets, Janus
Twenty Fund, Janus Enterprise Fund, Janus Special Situations Fund and Janus
Olympus Fund may invest in the securities of as few as two issuers.
(2) Invest 25% or more of the value of their respective total assets in any
particular industry (other than U.S. government securities); provided, however,
that for Janus Federal Tax-Exempt Fund this limitation does not apply to
municipal obligations. For the purposes of this limitation only, industrial
development bonds issued by nongovernmental users shall not be deemed to be
municipal obligations. Industrial development bonds shall be classified
according to the industry of the entity that has the ultimate responsibility for
the payment of principal and interest on the obligation.
(3) Invest directly in real estate or interests in real estate; however,
the Funds may own debt or equity securities issued by companies engaged in those
businesses.
(4) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the Funds from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities).
(5) Lend any security or make any other loan if, as a result, more than 25%
of a Fund's total assets would be lent to other parties (but this limitation
does not apply to purchases of commercial paper, debt securities or repurchase
agreements).
(6) Act as an underwriter of securities issued by others, except to the
extent that a Fund may be deemed an underwriter in connection with the
disposition of portfolio securities of such Fund.
As a fundamental policy, each Fund may, notwithstanding any other
investment policy or limitation (whether or not fundamental), invest all of its
assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
limitations as such Fund.
The Trustees have adopted additional investment restrictions for the Funds.
These restrictions are operating policies of the Funds and may be changed by the
Trustees without shareholder approval. The additional investment restrictions
adopted by the Trustees to date include the following:
(a) A Fund will not (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission ("CFTC") regulations if the
aggregate initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of a Fund's
net assets, after taking into account unrealized profits and unrealized losses
on any such contracts it has entered into; and (ii) enter into any futures
contracts if the aggregate amount of such Fund's commitments under outstanding
futures contracts positions would exceed the market value of its total assets.
(b) The Funds do not currently intend to sell securities short, unless they
own or have the right to obtain securities equivalent in kind and amount to the
securities sold short without the payment of any additional consideration
therefor, and provided that
6
<PAGE>
transactions in futures, options, swaps and forward contracts are not deemed to
constitute selling securities short.
(c) The Funds do not currently intend to purchase securities on margin,
except that the Funds may obtain such short-term credits as are necessary for
the clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in futures, options, swaps and forward
contracts shall not be deemed to constitute purchasing securities on margin.
(d) A Fund may not mortgage or pledge any securities owned or held by such
Fund in amounts that exceed, in the aggregate, 15% of that Fund's net asset
value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options, swaps or forward contracts, or the segregation of assets in connection
with such contracts.
(e) The Funds may borrow money for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 25% of the value of their
respective total assets (including the amount borrowed) less liabilities (other
than borrowings). If borrowings exceed 25% of the value of a Fund's total assets
by reason of a decline in net assets, the Fund will reduce its borrowings within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse repurchase agreements, deposits of assets
to margin or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such contracts.
(f) The Funds do not currently intend to purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of their respective
net assets would be invested in repurchase agreements not entitling the holder
to payment of principal and interest within seven days and in securities that
are illiquid by virtue of legal or contractual restrictions on resale or the
absence of a readily available market. The Trustees, or the Funds' investment
adviser acting pursuant to authority delegated by the Trustees, may determine
that a readily available market exists for securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"),
or any successor to such rule, Section 4(2) commercial paper and municipal lease
obligations. Accordingly, such securities may not be subject to the foregoing
limitation.
(g) The Funds may not invest in companies for the purpose of exercising
control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), each of the Funds may 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 limits. A Fund will borrow money through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of seven
days. A Fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements). A Fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in
7
<PAGE>
repayment to a lending Fund could result in a lost investment opportunity or
additional borrowing costs.
For the purposes of these investment restrictions, the identification of
the issuer of a municipal obligation depends on the terms and conditions of the
security. When assets and revenues of a political subdivision are separate from
those of the government that created the subdivision and the security is backed
only by the assets and revenues of the subdivision, the subdivision is deemed to
be the sole issuer. Similarly, in the case of an industrial development bond, if
the bond is backed only by assets and revenues of a nongovernmental user, then
the nongovernmental user would be deemed to be the sole issuer. If, however, in
either case, the creating government or some other entity guarantees the
security, the guarantee would be considered a separate security that would be
treated as an issue of the guaranteeing entity.
For purposes of the Funds' restriction on investing in a particular
industry, the Funds will rely primarily on industry classifications as published
by Bloomberg L.P. To the extent that Bloomberg L.P. classifications are so broad
that the primary economic characteristics in a single class are materially
different, the Funds may further classify issuers in accordance with industry
classifications as published by the SEC.
INVESTMENT POLICIES APPLICABLE TO CERTAIN FUNDS
JANUS BALANCED FUND. As an operational policy, at least 25% of the assets
of Janus Balanced Fund normally will be invested in fixed-income senior
securities, which include debt securities and preferred stock.
JANUS FLEXIBLE INCOME FUND. As a fundamental policy, this Fund may not
purchase a non-income-producing security if, after such purchase, less than 80%
of the Fund's total assets would be invested in income-producing securities.
Income-producing securities include securities that make periodic interest
payments as well as those that make interest payments on a deferred basis or pay
interest only at maturity (e.g., Treasury bills or zero coupon bonds).
JANUS FEDERAL TAX-EXEMPT FUND. As a fundamental policy, this Fund will
normally invest at least 80% of its net assets in securities whose income is not
subject to federal income taxes, including the alternative minimum tax.
JANUS SHORT-TERM BOND FUND. As an operational policy, this Fund will not
invest in any debt security that, at the time of purchase, causes its portfolio
of debt securities to have a dollar-weighted average, then remaining effective
term to maturity of three years or more. The portfolio manager may consider
estimated prepayment dates or call dates of certain securities in computing the
portfolio's effective maturity.
TYPES OF SECURITIES
AND INVESTMENT TECHNIQUES
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments
(i.e., securities that are not readily marketable). The Trustees have authorized
Janus
8
<PAGE>
Capital to make liquidity determinations with respect to certain securities,
including Rule 144A Securities, commercial paper and municipal lease obligations
purchased by the Funds. Under the guidelines established by the Trustees, Janus
Capital will consider the following factors: 1) the frequency of trades and
quoted prices for the obligation; 2) the number of dealers willing to purchase
or sell the security and the number of other potential purchasers; 3) the
willingness of dealers to undertake to make a market in the security; and 4) the
nature of the security and the nature of marketplace trades, including the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer. In the case of commercial paper, Janus Capital will
also consider whether the paper is traded flat or in default as to principal and
interest and any ratings of the paper by a nationally recognized statistical
rating organization ("NRSRO"). With respect to municipal lease obligations,
Janus Capital will also consider factors unique to municipal lease obligations
including the general creditworthiness of the municipality, the importance of
the property covered by the lease obligation and the likelihood that the
marketability of the obligation will be maintained throughout the time the
obligation is held by a Fund. A foreign security that may be freely traded on or
through the facilities of an offshore exchange or other established offshore
securities market is not deemed to be a restricted security subject to these
procedures.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES
Each Fund may invest up to 10% (without limit for Janus High-Yield Fund and
Janus Flexible Income Fund) of its assets in zero coupon, pay-in-kind and step
coupon securities. Zero coupon bonds are issued and traded at a discount from
their face value. They do not entitle the holder to any periodic payment of
interest prior to maturity. Step coupon bonds trade at a discount from their
face value and pay coupon interest. The coupon rate is low for an initial period
and then increases to a higher coupon rate thereafter. The discount from the
face amount or par value depends on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the security a
similar bond with the same coupon rate and a face value equal to the amount of
the coupon payment that would have been made.
Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), a Fund must distribute
its investment company taxable income, including the original issue discount
accrued on zero coupon or step coupon bonds. Because a Fund will not receive
cash payments on a current basis in respect of accrued original-issue discount
on zero coupon bonds or step coupon bonds during the period before interest
payments begin, in some years that Fund may have to distribute cash obtained
from other sources in order to satisfy the distribution requirements under the
Code. A Fund might obtain such cash from selling other portfolio holdings which
might cause that Fund to incur capital gains or losses on the sale.
Additionally, these actions are likely to reduce the assets to which Fund
expenses could be allocated and to reduce the rate of return for that Fund. In
some circumstances, such sales might be necessary in order to
9
<PAGE>
satisfy cash distribution requirements even though investment considerations
might otherwise make it undesirable for a Fund to sell the securities at the
time.
Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
PASS-THROUGH SECURITIES
The Funds may invest in various types of pass-through securities, such as
mortgage-backed securities, asset-backed securities and participation interests.
A pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. The purchaser of a pass-through security receives an undivided
interest in the underlying pool of securities. The issuers of the underlying
securities make interest and principal payments to the intermediary which are
passed through to purchasers, such as the Funds. The most common type of
pass-through securities are mortgage-backed securities. Government National
Mortgage Association ("GNMA") Certificates are mortgage-backed securities that
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrowers over
the term of the loan rather than returned in a lump sum at maturity. A Fund will
generally purchase "modified pass-through" GNMA Certificates, which entitle the
holder to receive a share of all interest and principal payments paid and owned
on the mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of
whether or not the mortgagor actually makes the payment. GNMA Certificates are
backed as to the timely payment of principal and interest by the full faith and
credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. FHLMC guarantees timely payments of
interest on PCs and the full return of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semiannually and return principal once a year in guaranteed minimum payments.
This type of security is guaranteed by FHLMC as to timely payment of principal
and interest but it is not guaranteed by the full faith and credit of the U.S.
government.
The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro rata
share of all interest and principal payments made and owned on the underlying
pool. This type of security is guaranteed by FNMA as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.
Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the
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<PAGE>
security holders (such as the Funds), like the payments on the underlying loans,
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 20 or 30 years, the borrowers can,
and typically do, pay them off sooner. Thus, the security holders frequently
receive prepayments of principal in addition to the principal that is part of
the regular monthly payments. A portfolio manager will consider estimated
prepayment rates in calculating the average weighted maturity of a Fund. A
borrower is more likely to prepay a mortgage that bears a relatively high rate
of interest. This means that in times of declining interest rates, higher
yielding mortgage-backed securities held by a Fund might be converted to cash
and that Fund will be forced to accept lower interest rates when that cash is
used to purchase additional securities in the mortgage-backed securities sector
or in other investment sectors. Additionally, prepayments during such periods
will limit a Fund's ability to participate in as large a market gain as may be
experienced with a comparable security not subject to prepayment.
Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and interest
and principal payments ultimately depend upon payment of the underlying loans by
individuals. Tax-exempt asset-backed securities include units of beneficial
interests in pools of purchase contracts, financing leases, and sales agreements
that may be created when a municipality enters into an installment purchase
contract or lease with a vendor. Such securities may be secured by the assets
purchased or leased by the municipality; however, if the municipality stops
making payments, there generally will be no recourse against the vendor. The
market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.
INVESTMENT COMPANY SECURITIES
From time to time, the Funds may invest in securities of other investment
companies, subject to the provisions of Section 12(d)(1) of the 1940 Act. The
Funds may invest in securities of money market funds managed by Janus Capital
subject to the terms of an exemptive order obtained by Janus Capital and the
Janus funds which currently provides that each Fund will limit its aggregate
investment in a Janus money market fund to the greater of (i) 5% of its total
assets or (ii) $2.5 million. The Janus funds are seeking an amended and restated
exemptive order that would permit each Fund to invest in Janus money market
funds in excess of the limitations of Section 12(d)(1) of the 1940 Act. There is
no assurance that such amendment will be granted.
DEPOSITARY RECEIPTS
The Funds may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depositary of an unsponsored ADR may be
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under no obligation to distribute shareholder communications received from the
foreign issuer or to pass through voting rights. The Funds may also invest in
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and
in other similar instruments representing securities of foreign companies. EDRs
are receipts issued by a European financial institution evidencing an
arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use
in European securities markets.
MUNICIPAL OBLIGATIONS
The Funds may invest in municipal obligations issued by states, territories
and possessions of the United States and the District of Columbia. Janus Federal
Tax-Exempt Fund may, at times, invest more than 25% of the value of its assets
in industrial development bonds, a type of revenue bond which, although issued
by a public authority, may be backed only by the credit and security of a
private issuer, thus presenting a greater credit risk.
The value of municipal obligations can be affected by changes in their
actual or perceived credit quality. The credit quality of municipal obligations
can be affected by among other things, the financial condition of the issuer or
guarantor, the issuer's future borrowing plans and sources of revenue, the
economic feasibility of the revenue bond project or general borrowing purpose,
political or economic developments in the region where the security is issued,
and the liquidity of the security. Because municipal securities are generally
traded over-the-counter, the liquidity of a particular issue often depends on
the willingness of dealers to make a market in the security. The liquidity of
some municipal obligations may be enhanced by demand features, which would
enable a Fund to demand payment on short notice from the issuer or a financial
intermediary.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Funds may purchase
include, but are not limited to, the following types of securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities are
relatively long-term instruments that often carry demand features permitting the
holder to demand payment of principal at any time or at specified intervals
prior to maturity.
STANDBY COMMITMENTS. These instruments, which are similar to a put, give a
Fund the option to obligate a broker, dealer or bank to repurchase a security
held by that Fund at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker, dealer
or bank) to grant the holders of such securities the option to tender the
securities to the institution at periodic intervals.
INVERSE FLOATERS. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security. The
Funds will not invest more than 5% of their respective assets in inverse
floaters.
The Funds will purchase standby commitments, tender option bonds and
instruments with demand features primarily for the purpose of increasing the
liquidity of their portfolios.
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REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement, a Fund purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon incremental amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and
marked-to-market daily) of the underlying security or "collateral." A risk
associated with repurchase agreements is the failure of the seller to repurchase
the securities as agreed, which may cause a Fund to suffer a loss if the market
value of such securities declines before they can be liquidated on the open
market. In the event of bankruptcy or insolvency of the seller, a Fund may
encounter delays and incur costs in liquidating the underlying security.
Repurchase agreements that mature in more than seven days will be subject to the
15% limit on illiquid investments. While it is not possible to eliminate all
risks from these transactions, it is the policy of the Funds to limit repurchase
agreements to those parties whose creditworthiness has been reviewed and found
satisfactory by Janus Capital.
A Fund may use reverse repurchase agreements to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities, or to earn additional
income on portfolio securities, such as Treasury bills or notes. In a reverse
repurchase agreement, a Fund sells a portfolio security to another party, such
as a bank or broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase agreement
is outstanding, a Fund will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. The
Funds will enter into reverse repurchase agreements only with parties that Janus
Capital deems creditworthy. Using reverse repurchase agreements to earn
additional income involves the risk that the interest earned on the invested
proceeds is less than the expense of the reverse repurchase agreement
transaction. This technique may also have a leveraging effect on the Fund's
portfolio, although the Fund's intent to segregate assets in the amount of the
reverse repurchase agreement minimizes this effect.
HIGH-YIELD/HIGH-RISK SECURITIES
Janus Flexible Income Fund and Janus High-Yield Fund may invest without
limit in debt securities that are rated below investment grade (e.g., securities
rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's") or
Ba or lower by Moody's Investors Service, Inc. ("Moody's")). No other Fund
intends to invest 35% or more of its net assets in such securities. Lower rated
securities involve a higher degree of credit risk, which is the risk that the
issuer will not make interest or principal payments when due. In the event of an
unanticipated default, a Fund would experience a reduction in its income, and
could expect a decline in the market value of the securities so affected.
Each Fund may also invest in unrated debt securities of foreign and
domestic issuers. Unrated debt, while not necessarily of lower quality than
rated securities, may not have as broad a market. Because of the size and
perceived demand of the issue,
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among other factors, certain municipalities may not incur the costs of obtaining
a rating. A Fund's portfolio manager will analyze the creditworthiness of the
issuer, as well as any financial institution or other party responsible for
payments on the security, in determining whether to purchase unrated municipal
bonds. Unrated debt securities will be included in the 35% limit of each Fund
unless its portfolio manager deems such securities to be the equivalent of
investment grade securities.
Subject to the above limits, each Fund may purchase defaulted securities
only when their portfolio managers believe, based upon their analysis of the
financial condition, results of operations and economic outlook of an issuer,
that there is potential for resumption of income payments and that the
securities offer an unusual opportunity for capital appreciation.
Notwithstanding the respective portfolio manager's belief as to the resumption
of income, however, the purchase of any security on which payment of interest or
dividends is suspended involves a high degree of risk. Such risk includes, among
other things, the following:
Financial and Market Risks. Investments in securities that are in default
involve a high degree of financial and market risks that can result in
substantial or, at times, even total losses. Issuers of defaulted securities may
have substantial capital needs and may become involved in bankruptcy or
reorganization proceedings. Among the problems involved in investments in such
issuers is the fact that it may be difficult to obtain information about the
condition of such issuers. The market prices of such securities also are subject
to abrupt and erratic movements and above average price volatility, and the
spread between the bid and asked prices of such securities may be greater than
normally expected.
Disposition of Portfolio Securities. Although these Funds generally will
purchase securities for which their portfolio managers expect an active market
to be maintained, defaulted securities may be less actively traded than other
securities and it may be difficult to dispose of substantial holdings of such
securities at prevailing market prices. The Funds will limit holdings of any
such securities to amounts that the portfolio managers believe could be readily
sold, and holdings of such securities would, in any event, be limited so as not
to limit the Funds' ability to readily dispose of securities to meet
redemptions.
Other. Defaulted securities require active monitoring and may, at times,
require participation in bankruptcy or receivership proceedings on behalf of the
Funds.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS. The Funds may enter into contracts for the purchase or
sale for future delivery of fixed-income securities, foreign currencies or
contracts based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the CFTC and must be executed through a futures commission
merchant ("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.
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The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
certain other liquid assets by the Funds' custodian for the benefit of the FCM.
Initial margin payments are similar to good faith deposits or performance bonds.
Unlike margin extended by a securities broker, initial margin payments do not
constitute purchasing securities on margin for purposes of the Fund's investment
limitations. If the value of either party's position declines, that party will
be required to make additional "variation margin" payments for the benefit of
the FCM to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. In the event of
the bankruptcy of the FCM that holds margin on behalf of a Fund, that Fund may
be entitled to return of margin owed to such Fund only in proportion to the
amount received by the FCM's other customers. Janus Capital will attempt to
minimize the risk by careful monitoring of the creditworthiness of the FCMs with
which the Funds do business and by depositing margin payments in a segregated
account with the Funds' custodian.
The Funds intend to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Funds will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Funds hold positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of a Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.
Although a Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets would be
available to that Fund immediately upon closing out the futures position, while
settlement of securities transactions could take several days. However, because
a Fund's cash that may otherwise be invested would be held uninvested or
invested in other liquid assets so long as the futures position remains open,
such Fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.
A Fund's primary purpose in entering into futures contracts is to protect
that Fund from fluctuations in the value of securities or interest rates without
actually buying or selling the underlying debt or equity security. For example,
if the Fund anticipates an increase in the price of stocks, and it intends to
purchase stocks at a later time, that Fund could enter into a futures contract
to purchase a stock index as a temporary substitute for stock purchases. If an
increase in the market occurs that influences the stock index as anticipated,
the value of the futures contracts will increase, thereby serving as a hedge
against that Fund not participating in a market advance. This technique is
sometimes known as an anticipatory hedge. To the extent a Fund enters into
futures contracts for this purpose, the segregated assets maintained to cover
such Fund's obligations with respect to the futures contracts will consist of
other liquid assets
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from its portfolio in an amount equal to the difference between the contract
price and the aggregate value of the initial and variation margin payments made
by that Fund with respect to the futures contracts. Conversely, if a Fund holds
stocks and seeks to protect itself from a decrease in stock prices, the Fund
might sell stock index futures contracts, thereby hoping to offset the potential
decline in the value of its portfolio securities by a corresponding increase in
the value of the futures contract position. A Fund could protect against a
decline in stock prices by selling portfolio securities and investing in money
market instruments, but the use of futures contracts enables it to maintain a
defensive position without having to sell portfolio securities.
If a Fund owns Treasury bonds and the portfolio manager expects interest
rates to increase, that Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as that Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of
that Fund's interest rate futures contract will increase, thereby keeping the
net asset value of that Fund from declining as much as it may have otherwise.
If, on the other hand, a portfolio manager expects interest rates to decline,
that Fund may take a long position in interest rate futures contracts in
anticipation of later closing out the futures position and purchasing the bonds.
Although a Fund can accomplish similar results by buying securities with long
maturities and selling securities with short maturities, given the greater
liquidity of the futures market than the cash market, it may be possible to
accomplish the same result more easily and more quickly by using futures
contracts as an investment tool to reduce risk.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery of the instrument underlying a futures contract. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced and prices in the futures market distorted. Third, from the
point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of the foregoing
distortions, a correct forecast of general price trends by a portfolio manager
still may not result in a successful use of futures.
Futures contracts entail risks. Although the Funds believe that use of such
contracts will benefit the Funds, a Fund's overall performance could be worse
than if such Fund had not entered into futures contracts if the portfolio
manager's investment judgement proves incorrect. For example, if a Fund has
hedged against the effects of a possible decrease in prices of securities held
in its portfolio and prices increase instead, that Fund will lose part or all of
the benefit of the increased value of these securities because of offsetting
losses in its futures positions. In addition, if a Fund has insufficient cash,
it may have to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which
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reflect the rising market and may occur at a time when the sales are
disadvantageous to such Fund.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to a
Fund will not match exactly such Fund's current or potential investments. A Fund
may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically
invests -- for example, by hedging investments in portfolio securities with a
futures contract based on a broad index of securities -- which involves a risk
that the futures position will not correlate precisely with the performance of
such Fund's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with a Fund's
investments. Futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between a Fund's investments and its futures positions also may
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. A
Fund may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in a Fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
result in losses that are not offset by the gains in that Fund's other
investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance that a liquid secondary
market will exist for any particular futures contract at any particular time. In
addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, a Fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, such Fund's access to other assets held to cover its futures positions
also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Funds may buy and write put and call
options on futures contracts. An option on a future gives a Fund the right (but
not the obligation) to buy or sell a futures contract at a specified price on or
before a specified date. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or
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the price of the underlying instrument, ownership of the option may or may not
be less risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, when a Fund is not fully
invested it may buy a call option on a futures contract to hedge against a
market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures' price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in that Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures' price at expiration of the option is higher than the exercise
price, a Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which that Fund is
considering buying. If a call or put option a Fund has written is exercised,
such Fund will incur a loss which will be reduced by the amount of the premium
it received. Depending on the degree of correlation between the change in the
value of its portfolio securities and changes in the value of the futures
positions, a Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices or rising interest rates.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
FORWARD CONTRACTS. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated asset at
a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Funds may enter
into forward contracts to purchase and sell government securities, equity or
income securities, foreign currencies or other financial instruments. Forward
contracts generally are traded in an interbank market conducted directly between
traders (usually large commercial banks) and their customers. Unlike futures
contracts, which are standardized contracts, forward contracts can be
specifically drawn to meet the needs of the parties that enter into them. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated exchange.
The following discussion summarizes the Funds' principal uses of forward
foreign currency exchange contracts ("forward currency contracts"). A Fund may
enter into forward currency contracts with stated contract values of up to the
value of that Fund's assets. A forward currency contract is an obligation to buy
or sell an amount of a
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specified currency for an agreed price (which may be in U.S. dollars or a
foreign currency). A Fund will exchange foreign currencies for U.S. dollars and
for other foreign currencies in the normal course of business and may buy and
sell currencies through forward currency contracts in order to fix a price for
securities it has agreed to buy or sell ("transaction hedge"). A Fund also may
hedge some or all of its investments denominated in a foreign currency or
exposed to foreign currency fluctuations against a decline in the value of that
currency relative to the U.S. dollar by entering into forward currency contracts
to sell an amount of that currency (or a proxy currency whose performance is
expected to replicate or exceed the performance of that currency relative to the
U.S. dollar) approximating the value of some or all of its portfolio securities
denominated in that currency ("position hedge") or by participating in options
or futures contracts with respect to the currency. A Fund also may enter into a
forward currency contract with respect to a currency where the Fund is
considering the purchase or sale of investments denominated in that currency but
has not yet selected the specific investments ("anticipatory hedge"). In any of
these circumstances a Fund may, alternatively, enter into a forward currency
contract to purchase or sell one foreign currency for a second currency that is
expected to perform more favorably relative to the U.S. dollar if the portfolio
manager believes there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge").
These types of hedging minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on a Fund's foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting a Fund's currency exposure from one foreign
currency to another removes that Fund's opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
such Fund if its portfolio manager's projection of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for a Fund than if it had not entered into such
contracts.
The Funds will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in or whose value is tied to, the
currency underlying the forward contract or the currency being hedged. To the
extent that a Fund is not able to cover its forward currency positions with
underlying portfolio securities, the Funds' custodian will segregate cash or
other liquid assets having a value equal to the aggregate amount of such Fund's
commitments under forward contracts entered into with respect to position
hedges, cross-hedges and anticipatory hedges. If the value of the securities
used to cover a position or the value of segregated assets declines, a Fund will
find alternative cover or segregate additional cash or liquid assets on a daily
basis so that the value of the covered and segregated assets will be equal to
the amount of such Fund's commitments with respect to such contracts. As an
alternative to segregating assets, a Fund may buy call options permitting such
Fund to buy the amount of foreign currency being hedged by a forward sale
contract or a Fund may buy put options permitting it to sell the amount of
foreign currency subject to a forward buy contract.
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While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contacts. In such event,
the Funds' ability to utilize forward contracts may be restricted. In addition,
a Fund may not always be able to enter into forward contracts at attractive
prices and may be limited in its ability to use these contracts to hedge Fund
assets.
OPTIONS ON FOREIGN CURRENCIES. The Funds may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Fund may buy put options on
the foreign currency. If the value of the currency declines, such Fund will have
the right to sell such currency for a fixed amount in U.S. dollars, thereby
offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to a Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent projected, a Fund could sustain losses on transactions in foreign
currency options that would require such Fund to forego a portion or all of the
benefits of advantageous changes in those rates.
The Funds may also write options on foreign currencies. For example, to
hedge against a potential decline in the U.S. dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, a Fund
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised and the decline in value of portfolio securities will be offset by the
amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, a Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, should expire unexercised and allow that Fund to hedge the increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and a Fund would be required to
buy or sell the underlying currency at a loss which may not be offset by the
amount of the premium. Through the writing of options on foreign currencies, a
Fund also may lose all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.
The Funds may write covered call options on foreign currencies. A call
option written on a foreign currency by a Fund is "covered" if that Fund owns
the foreign currency underlying the call or has an absolute and immediate right
to acquire that
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foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other foreign currencies held in its portfolio. A call option is
also covered if a Fund has a call on the same foreign currency in the same
principal amount as the call written if the exercise price of the call held (i)
is equal to or less than the exercise price of the call written or (ii) is
greater than the exercise price of the call written, if the difference is
maintained by such Fund in cash or other liquid assets in a segregated account
with the Funds' custodian.
The Funds also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security which
a Fund owns or has the right to acquire and which is denominated in the currency
underlying the option. Call options on foreign currencies which are entered into
for cross-hedging purposes are not covered. However, in such circumstances, a
Fund will collateralize the option by segregating cash or other liquid assets in
an amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily.
OPTIONS ON SECURITIES. In an effort to increase current income and to
reduce fluctuations in net asset value, the Funds may write covered put and call
options and buy put and call options on securities that are traded on United
States and foreign securities exchanges and over-the-counter. The Funds may
write and buy options on the same types of securities that the Funds may
purchase directly.
A put option written by a Fund is "covered" if that Fund (i) segregates
cash not available for investment or other liquid assets with a value equal to
the exercise price of the put with the Funds' custodian or (ii) holds a put on
the same security and in the same principal amount as the put written and the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the buyer of an option will reflect, among
other things, the relationship of the exercise price to the market price and the
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates.
A call option written by a Fund is "covered" if that Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by the Funds'
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if a Fund holds a call on
the same security and in the same principal amount as the call written and the
exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by that Fund in cash and other liquid
assets in a segregated account with its custodian.
The Funds also may write call options that are not covered for
cross-hedging purposes. A Fund collateralizes its obligation under a written
call option for cross-hedging purposes by segregating cash or other liquid
assets in an amount not less than the market value of the underlying security,
marked-to-market daily. A Fund would write a call option for cross-hedging
purposes, instead of writing a covered call option,
21
<PAGE>
when the premium to be received from the cross-hedge transaction would exceed
that which would be received from writing a covered call option and its
portfolio manager believes that writing the option would achieve the desired
hedge.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or bought, in the case of
a put option, since with regard to certain options, the writer may be assigned
an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of
the premium. This amount, of course, may, in the case of a covered call option,
be offset by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will
permit a Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit a Fund to write another put
option to the extent that the exercise price is secured by other liquid assets.
Effecting a closing transaction also will permit a Fund to use the cash or
proceeds from the concurrent sale of any securities subject to the option for
other investments. If a Fund desires to sell a particular security from its
portfolio on which it has written a call option, such Fund will effect a closing
transaction prior to or concurrent with the sale of the security.
A Fund will realize a profit from a closing transaction if the price of the
purchase transaction is less than the premium received from writing the option
or the price received from a sale transaction is more than the premium paid to
buy the option. A Fund will realize a loss from a closing transaction if the
price of the purchase transaction is more than the premium received from writing
the option or the price received from a sale transaction is less than the
premium paid to buy the option. Because increases in the market of a call option
generally will reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by a Fund.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, the Fund
may not be able to effect closing transactions in particular options and the
Fund would have to exercise the options in order to realize any profit. If a
Fund is unable to effect a closing
22
<PAGE>
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise. The absence of a liquid secondary market may be due to
the following: (i) insufficient trading interest in certain options, (ii)
restrictions imposed by a national securities exchange ("Exchange") on which the
option is traded on opening or closing transactions or both, (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances that interrupt normal operations on an Exchange, (v)
the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume, or (vi) one or
more Exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
A Fund may write options in connection with buy-and-write transactions. In
other words, a Fund may buy a security and then write a call option against that
security. The exercise price of such call will depend upon the expected price
movement of the underlying security. The exercise price of a call option may be
below ("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money")
the current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it
is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
at-the-money call options may be used when it is expected that the price of the
underlying security will remain fixed or advance moderately during the option
period. Buy-and-write transactions using out-of-the-money call options may be
used when it is expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such
transactions, a Fund's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between that
Fund's purchase price of the security and the exercise price. If the options are
not exercised and the price of the underlying security declines, the amount of
such decline will be offset by the amount of premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and a Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, a Fund may elect to close the position or take
delivery of the security at the exercise price and that Fund's return will be
the premium received from the put options minus the amount by which the market
price of the security is below the exercise price.
A Fund may buy put options to hedge against a decline in the value of its
portfolio. By using put options in this way, a Fund will reduce any profit it
might
23
<PAGE>
otherwise have realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.
A Fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any, realized by such
Fund upon exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to that Fund.
EURODOLLAR INSTRUMENTS. A Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Fund might use Eurodollar futures contracts and options thereon to
hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.
SWAPS AND SWAP-RELATED PRODUCTS. A Fund may enter into interest rate swaps,
caps and floors on either an asset-based or liability-based basis, depending
upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are
netted out, with a Fund receiving or paying, as the case may be, only the net
amount of the two payments). The net amount of the excess, if any, of a Fund's
obligations over its entitlement with respect to each interest rate swap will be
calculated on a daily basis and an amount of cash or other liquid assets having
an aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Funds' custodian. If a Fund enters
into an interest rate swap on other than a net basis, it would maintain a
segregated account in the full amount accrued on a daily basis of its
obligations with respect to the swap. A Fund will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three
highest rating categories of at least one NRSRO at the time of entering into
such transaction. Janus Capital will monitor the creditworthiness of all
counterparties on an ongoing basis. If there is a default by the other party to
such a transaction, a Fund will have contractual remedies pursuant to the
agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Janus Capital has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent a
Fund sells (i.e., writes) caps and floors, it will segregate cash or other
liquid assets having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of its obligations with respect to any caps or
floors.
There is no limit on the amount of interest rate swap transactions that may
be entered into by a Fund. These transactions may in some instances involve the
delivery of securities or other underlying assets by a Fund or its counterparty
to collateralize
24
<PAGE>
obligations under the swap. Under the documentation currently used in those
markets, the risk of loss with respect to interest rate swaps is limited to the
net amount of the payments that a Fund is contractually obligated to make. If
the other party to an interest rate swap that is not collateralized defaults, a
Fund would risk the loss of the net amount of the payments that it contractually
is entitled to receive. A Fund may buy and sell (i.e., write) caps and floors
without limitation, subject to the segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND
FOREIGN INSTRUMENTS. Unlike transactions entered into by the Funds in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded on certain Exchanges, such as the Philadelphia
Stock Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded over-the-counter. In
an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As a
result, many of the protections provided to traders on organized Exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an Exchange are cleared and guaranteed
by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on an Exchange may be more readily available
than in the over-the-counter market, potentially permitting a Fund to liquidate
open positions at a profit prior to exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical
25
<PAGE>
changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
INVESTMENT ADVISER
As stated in the Prospectus, each Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Funds' investments, provide office space for
the Funds, and pay the salaries, fees and expenses of all Fund officers and of
those Trustees who are affiliated with Janus Capital. Janus Capital also may
make payments to selected broker-dealer firms or institutions which perform
recordkeeping or other services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital. Janus Capital is
also authorized to perform the management and administrative services necessary
for the operation of the Funds.
The Funds pay custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the
execution of portfolio transactions, legal and accounting expenses, interest and
taxes, registration fees, expenses of shareholders' meetings and reports to
shareholders, fees and expenses of Trustees who are not affiliated with Janus
Capital, costs of preparing, printing and mailing the Funds' Prospectuses and
SAI to current shareholders, and other costs of complying with applicable laws
regulating the sale of Fund shares. Pursuant to the Advisory Agreements, Janus
Capital furnishes certain other services, including net asset value
determination and fund accounting, recordkeeping, and blue sky registration and
monitoring services, for which the Funds may reimburse Janus Capital for its
costs.
Janus Fund, Janus Enterprise Fund, Janus Mercury Fund, Janus Olympus Fund,
Janus Special Situations Fund, Janus Twenty Fund, Janus Worldwide Fund, Janus
Overseas Fund, Janus Balanced Fund, Janus Equity Income Fund and Janus Growth
and Income Fund have each agreed to compensate Janus Capital for its services by
the monthly payment of a fee at the annual rate of 0.75% of the first $300
million of the average daily net assets of each Fund, 0.70% of the next $200
million of the average daily net assets of each Fund and 0.65% on the average
daily net assets of each Fund in excess of $500 million.
26
<PAGE>
Janus High Yield Fund has agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of 0.75% of the
first $300 million of average daily net assets of the Fund and 0.65% of the
average daily net assets in excess of $300 million. Janus Flexible Income Fund
and Janus Short-Term Bond Fund have each agreed to compensate Janus Capital for
its services by the monthly payment of a fee at the annual rate of 0.65% of the
first $300 million of the average daily net assets of the Fund, plus 0.55% of
the average daily net assets of the Fund in excess of $300 million. Janus
Federal Tax-Exempt Fund has agreed to compensate Janus Capital for its services
by the monthly payment of a fee at the annual rate of 0.60% of the first $300
million of average daily net assets of the Fund and 0.55% of the average daily
net assets in excess of $300 million. Janus Capital has agreed to waive the
advisory fee payable by any of these Funds in an amount equal to the amount, if
any, that such Fund's normal operating expenses chargeable to its income account
in any fiscal year, including the investment advisory fee but excluding
brokerage commissions, interest, taxes and extraordinary expenses, exceed 1% of
the average daily net assets for a fiscal year for Janus Flexible Income Fund
and Janus High-Yield Fund and 0.65% of the average daily net assets for a fiscal
year for Janus Short-Term Bond Fund and Janus Federal Tax-Exempt Fund.
The following table summarizes the advisory fees paid by the Funds and any
advisory fee waivers for the last three fiscal periods of each Fund. The
information below is for fiscal years ended October 31.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
Fund Name Advisory Fees Waiver Advisory Fees Waiver Advisory Fees Waiver
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Fund $114,245,282 - $89,848,418 - $69,101,695 -
Janus Enterprise Fund $ 4,438,870 - $ 4,348,549 - $ 3,078,635 -
Janus Mercury Fund $ 13,721,557 - $12,407,830 - $ 7,719,633 -
Janus Olympus Fund $ 3,801,421 - $ 1,783,296(3) - N/A N/A
Janus Special
Situations Fund $ 1,090,013(4) - N/A - N/A N/A
Janus Twenty Fund $ 32,875,794 - $22,477,667 - $18,127,825 -
Janus Worldwide Fund $ 51,015,512 - $19,645,721 - $11,013,534 -
Janus Overseas Fund $ 14,049,919 - $ 2,528,345 - $ 657,146 -
Janus Balanced Fund $ 2,167,710 - $ 1,264,551 - $ 879,437 -
Janus Equity Income
Fund $ 394,962 - $ 71,858(2) - N/A N/A
Janus Growth and
Income Fund $ 9,650,498 - $ 5,501,734 - $ 3,703,827 -
Janus Flexible Income
Fund $ 3,910,319 - $ 3,620,317 - $ 2,775,005 -
Janus High-Yield Fund $ 1,993,630 $ 18,746 $ 556,207(3) $122,504 N/A N/A
Janus Federal Tax-
Exempt Fund $ 321,447 $236,762 $ 217,873 $167,598 $ 175,910(1) $175,910
Janus Short-Term Bond
Fund $ 314,737 $258,118 $ 274,319 $238,092 $ 307,992 $268,791
</TABLE>
- -------------------------------------------------------------------------------
(1) Fee waiver by Janus Capital exceeded the advisory fee.
27
<PAGE>
(2) June 28, 1996 (inception) to October 31, 1996.
(3) December 29, 1995 (inception) to October 31, 1996.
(4) December 31, 1996 (inception) to October 31, 1997.
The Advisory Agreement for each of the Funds is dated July 1, 1997. Each
Advisory Agreement will continue in effect until July 1, 1998, and thereafter
from year to year so long as such continuance is approved annually by a majority
of the Funds' Trustees who are not parties to the Advisory Agreements or
interested persons of any such party, and by either a majority of the
outstanding voting shares or the Trustees of the Funds. Each Advisory Agreement
(i) may be terminated without the payment of any penalty by any Fund or Janus
Capital on 60 days' written notice; (ii) terminates automatically in the event
of its assignment; and (iii) generally, may not be amended without the approval
by vote of a majority of the Trustees of the affected Fund, including the
Trustees who are not interested persons of that Fund or Janus Capital and, to
the extent required by the 1940 Act, the vote of a majority of the outstanding
voting securities of that Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Funds, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account. Pursuant to an exemptive order granted by the SEC, the Funds and other
funds advised by Janus Capital may also transfer daily uninvested cash balances
into one or more joint trading accounts. Assets in the joint trading accounts
are invested in money market instruments and the proceeds are allocated to the
participating funds on a pro rata basis.
Each account managed by Janus Capital has its own investment objective and
policies and is managed accordingly by a particular portfolio manager or team of
portfolio managers. As a result, from time to time two or more different managed
accounts may pursue divergent investment strategies with respect to investments
or categories of investments.
As indicated in the Prospectuses, Janus Capital does not permit the Funds'
portfolio managers to purchase and sell securities for their own accounts except
under the limited exceptions contained in Janus Capital's policy regarding
personal investing by directors/Trustees, officers and employees of Janus
Capital and the Trust. The policy requires investment personnel and officers of
Janus Capital, inside directors/Trustees of Janus Capital and the Funds and
other designated persons deemed to have access to current trading information to
pre-clear all transactions in securities not otherwise exempt under the policy.
Requests for trading authority will be denied when, among other reasons, the
proposed personal transaction would be contrary to the provisions of the policy
or would be deemed to adversely affect any transaction then known to be under
consideration for or to have been effected on behalf of any client account,
including the Funds.
28
<PAGE>
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Trust to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.
CUSTODIAN, TRANSFER AGENT
AND CERTAIN AFFILIATIONS
State Street Bank and Trust Company ("State Street"), P.O. Box 0351,
Boston, Massachusetts 02117-0351 is the custodian of the domestic securities and
cash of the Fund. State Street and the foreign subcustodians selected by it and
approved by the Trustees, have custody of the assets of the Funds held outside
the U.S. and cash incidental thereto. The custodian and subcustodians hold the
Funds' assets in safekeeping and collect and remit the income thereon, subject
to the instructions of each Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds'
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Funds.
For transfer agency and other services, Janus Service receives a fee calculated
at an annual rate of 0.16% of average net assets of each Fund and, in addition,
$4 per open shareholder account for all of the Funds except Janus Fund. In
addition, the Funds pay DST Systems, Inc. ("DST"), a subsidiary of KCSI, license
fees at the rate of $3.06 per shareholder account for the growth and combination
funds and $3.98 per shareholder account for the fixed-income funds for the use
of DST's shareholder accounting system. The Funds also pay DST $1.10 per closed
shareholder account. The Funds pay DST for the use of its portfolio and fund
accounting system a monthly base fee of $250 to $1,250 per month based on the
number of Janus funds using the system and an asset charge of $1 per million
dollars of net assets (not to exceed $500 per month). In addition, the Funds pay
DST postage and forms costs of a DST affiliate incurred in mailing Fund
shareholder transaction confirmations.
The Trustees have authorized the Funds to use another affiliate of DST as
introducing broker for certain Fund portfolio transactions as a means to reduce
Fund expenses through credits against the charges of DST and its affiliates with
regard to commissions earned by such affiliate. See "Portfolio Transactions and
Brokerage."
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Funds. Janus Distributors is registered as a broker-dealer
under the Securities Exchange
29
<PAGE>
Act of 1934 (the "Exchange Act") and is a member of the National Association of
Securities Dealers, Inc. Janus Distributors acts as the agent of the Funds in
connection with the sale of their shares in all states in which the shares are
registered and in which Janus Distributors is qualified as a broker-dealer.
Under the Distribution Agreement, Janus Distributors continuously offers the
Funds' shares and accepts orders at net asset value. No sales charges are paid
by investors. Promotional expenses in connection with offers and sales of shares
are paid by Janus Capital.
PORTFOLIO TRANSACTIONS
AND BROKERAGE
Decisions as to the assignment of portfolio business for the Funds and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions. The Funds may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; rebates of commissions by a broker to a Fund or to a third
party service provider to the Fund to pay Fund expenses; and research products
or services provided. In recognition of the value of the foregoing factors,
Janus Capital may place portfolio transactions with a broker or dealer with whom
it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting that transaction if Janus
Capital determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research provided by such broker
or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of Janus Capital. Research may include furnishing
advice, either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel, industry
experts, economists and government officials; comparative performance evaluation
and technical measurement services and quotation services, and products and
other services (such as third party publications, reports and analyses, and
computer and electronic access, equipment, software, information and accessories
that deliver, process or otherwise utilize
30
<PAGE>
information, including the research described above) that assist Janus Capital
in carrying out its responsibilities. Research received from brokers or dealers
is supplemental to Janus Capital's own research efforts. Most brokers and
dealers used by Janus Capital provide research and other services described
above.
For the year ended October 31, 1997, the total brokerage commissions paid
by the Funds to brokers and dealers in transactions identified for execution
primarily on the basis of research and other services provided to the Funds are
summarized below:
<TABLE>
<CAPTION>
Fund Name Commissions Transactions
- ------------------------------------------------------------------------
<S> <C> <C>
Janus Fund $13,951,718 $14,043,222,546
Janus Enterprise Fund $ 362,139 $ 255,070,619
Janus Mercury Fund $ 1,377,594 $ 1,402,918,822
Janus Olympus Fund $ 295,772 $ 381,121,302
Janus Special Situations Fund $ 82,085 $ 75,148,095
Janus Twenty Fund $ 4,205,641 $ 5,051,678,730
Janus Worldwide Fund $ 795,661 $ 712,588,487
Janus Overseas Fund $ 122,777 $ 103,027,435
Janus Balanced Fund $ 108,321 $ 96,178,072
Janus Equity Income Fund $ 31,278 $ 25,876,481
Janus Growth and Income Fund $ 1,062,202 $ 1,091,709,588
Janus High-Yield Fund(1) $ 5,775 $ 1,689,141
- ------------------------------------------------------------------------
</TABLE>
(1) Most of the securities transactions for this Fund involved dealers acting as
principal.
Note: Funds that are not included in the table did not pay any commissions
related to research for the stated period.
Janus Capital may use research products and services in servicing other
accounts in addition to the Funds. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that it
has identified as providing superior executions and research, research-related
products or services which benefit its advisory clients, including the Funds.
Research products and services incidental to effecting securities transactions
furnished by brokers or dealers may be used in servicing any or all of Janus
Capital's clients and such research may not necessarily be used by Janus Capital
in connection with the accounts which paid commissions to the broker-dealer
providing such research products and services.
Janus Capital may consider sales of Fund shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Fund
shares as a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for a Fund i) to the Fund or ii) to other persons on behalf of the
Fund for services provided to the
31
<PAGE>
Fund for which it would be obligated to pay. In placing portfolio business with
such broker-dealers, Janus Capital will seek the best execution of each
transaction.
When the Funds purchase or sell a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
The Funds' Trustees have authorized Janus Capital to place transactions
with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of
DST. Janus Capital may do so if it reasonably believes that the quality of the
transaction and the associated commission are fair and reasonable and if,
overall, the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Certain Affiliations," are lower than those
that would otherwise be incurred.
The following table lists the total amount of brokerage commissions paid by
each Fund for the fiscal periods ending on October 31st of each year:
<TABLE>
<CAPTION>
Fund Name 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Fund $44,265,867 $29,000,380 $26,219,202
Janus Enterprise Fund $ 1,366,558 $ 1,188,690 $ 2,084,312
Janus Mercury Fund $ 5,379,505 $ 5,337,713 $ 5,712,916
Janus Olympus Fund $ 1,188,032 $ 713,190(2) -
Janus Special Situations Fund $ 833,811(3) - -
Janus Twenty Fund $ 8,145,093 $ 7,346,447 $ 7,647,982
Janus Worldwide Fund $26,537,096 $10,947,924 $ 7,493,192
Janus Overseas Fund $ 9,508,507 $ 1,900,947 $ 568,384
Janus Balanced Fund $ 642,234 $ 64,843 $ 305,855
Janus Equity Income Fund $ 179,800 $ 63,683(1) -
Janus Growth and Income Fund $ 3,401,847 $ 1,985,334 $ 1,498,178
Janus Flexible Income Fund $ 35,674 $ 15,386 $ 35,138
Janus High-Yield Fund $ 55,654 $ 39,981(2) -
Janus Short-Term Bond Fund $ 3,092 - $ 6,548
- ---------------------------------------------------------------------------------
</TABLE>
(1) June 28, 1996 (inception) to October 31, 1996.
(2) December 29, 1995 (inception) to October 31, 1996.
(3) December 31, 1996 (inception) to October 31, 1997.
Note: Funds that are not included in the table did not pay brokerage commissions
because securities transactions for such Funds involved dealers acting as
principals.
32
<PAGE>
Included in such brokerage commissions are the following amounts paid to
DSTS, which served to reduce each Fund's out-of-pocket expenses as follows:
<TABLE>
<CAPTION>
Commission Paid
through DSTS for
the Period Ended Reduction
October 31, of % of Total % of Total
Fund Name 1997* Expenses* Commissions+ Transactions
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Fund $1,118,869 $839,152 2.53% 2.73%
Janus Enterprise Fund $ 33,551 $ 28,388 2.46% 1.87%
Janus Mercury Fund $ 95,033 $ 71,275 1.77% 1.85%
Janus Olympus Fund $ 5,922 $ 4,442 .50% .68%
Janus Special Situations
Fund $ 7,855(1) $ 5,892 .94% .69%
Janus Twenty Fund $ 177,408 $133,056 2.18% 1.96%
Janus Worldwide Fund $ 177,943 $133,457 .67% 1.54%
Janus Overseas Fund $ 15,169 $ 11,377 .16% .35%
Janus Balanced Fund $ 2,636 $ 1,977 .41% .51%
Janus Equity Income Fund $ 1,920 $ 1,440 1.07% .87%
Janus Growth and Income
Fund $ 76,575 $ 57,431 2.25% 2.20%
- ------------------------------------------------------------------------------------
</TABLE>
(1) December 31, 1996 (inception) to October 31, 1997.
<TABLE>
<CAPTION>
Commission Paid Commission
through DSTS for Paid through DSTS
the Period Ended Reduction for the Period Reduction
October 31, of Ended of
Fund Name 1996* Expenses* October 31, 1995* Expenses*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Fund $470,414 $352,810 $1,125,368 $844,026
Janus Enterprise Fund $ 11,030 $ 8,273 $ 96,932 $ 72,699
Janus Mercury Fund $ 88,645 $ 66,483 $ 171,777 $128,833
Janus Olympus Fund $ 1,117(2) $ 838 -- --
Janus Twenty Fund $183,255 $137,441 $ 378,575 $283,931
Janus Worldwide Fund $104,173 $ 78,130 $ 164,193 $123,145
Janus Overseas Fund $ 5,123 $ 3,842 $ 2,783 $ 2,087
Janus Balanced Fund $ 9,591 $ 7,194 $ 9,143 $ 6,857
Janus Equity Income
Fund $ 83(1) $ 62 -- --
Janus Growth and
Income Fund $ 79,006 $ 59,254 $ 98,373 $ 73,780
- ------------------------------------------------------------------------------------
</TABLE>
* The difference between commissions paid through DSTS and expenses reduced
constitute commissions paid to an unaffiliated clearing broker.
+ Differences in the percentage of total commissions versus the percentage of
total transactions is due, in part, to variations among share prices and
number of shares traded, while average price per share commission rates were
substantially the same.
(1) June 28, 1996 (inception) to October 31, 1996.
(2) December 29, 1995 (inception) to October 31, 1996.
Note: Funds that did not execute trades with DSTS during the stated periods are
not included in the table.
33
<PAGE>
As of October 31, 1997, certain Funds owned securities of their regular
broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Value of
Name of Securities
Fund Name Broker-Dealer Owned
- ------------------------------------------------------------------------
<S> <C> <C>
Janus Fund Charles Schwab Corp. 266,206,975
Janus Enterprise Fund Charles Schwab Corp. 12,113,931
Janus Mercury Fund Charles Schwab Corp. 16,958,419
Janus Olympus Fund Charles Schwab Corp. 11,943,750
Merrill Lynch & Co., Inc. 5,212,197
Janus Special Situations Fund Charles Schwab Corp. 3,412,500
Janus Twenty Fund Merrill Lynch & Co., Inc. 247,551,456
Janus Balanced Fund Charles Schwab Corp. 4,135,950
Janus Equity Income Fund Charles Schwab Corp. 1,399,125
Janus Growth and Income Fund Charles Schwab Corp. 18,768,750
Merrill Lynch & Co., Inc. 42,265,625
</TABLE>
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc.
(both separate Maryland corporations) and the Janus Income Series (a
Massachusetts business trust comprised of Janus Flexible Income Fund series)
were reorganized into separate series of the Trust. In general, all references
to Trust offices in this section include comparable offices with the respective
predecessor funds, unless a Trust office was filled subsequent to the
reorganization.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4928
Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief
Executive Officer, Director and President of Janus Capital. Director of
Janus Distributors, Inc. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
34
<PAGE>
David J. Corkins*+ - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Growth and Income
Fund. Executive Vice President of Janus Aspen Series. Vice President of
Janus Capital. Formerly, research analyst and assistant portfolio manager
at Janus Capital (1995-1997). Formerly, Chief Financial Officer of Chase
U.S. Consumer Services, Inc., a Chase Manhattan mortgage business
(1993-1995).
James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice Chairman and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund. Executive Vice
President and Co-Manager of Janus Venture Fund.
David C. Decker* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Special Situations
Fund. Assistant Portfolio Manager of Janus Fund. Vice President of Janus
Capital. Formerly, research analyst at Janus Capital (1992-1996).
James P. Goff* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Enterprise Fund.
Executive Vice President of Janus Aspen Series. Vice President of Janus
Capital. Formerly, Executive Vice President and Portfolio Manager of Janus
Venture Fund (December 1993 to February 1997).
Warren B. Lammert*+ - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Mercury Fund. Vice
President of Janus Capital. Formerly, Executive Vice President and
Portfolio Manager of Janus Venture Fund (December 1993-December 1996) and
Janus Balanced Fund (September 1992-December 1993).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
+Mr. Corkins and Mr. Lammert are related by marriage.
35
<PAGE>
Ronald V. Speaker* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Flexible Income
Fund. Executive Vice President of Janus Aspen Series. Vice President of
Janus Capital. Formerly, Co-Manager of Janus High-Yield Fund (December
1995-February 1998). Formerly, Portfolio Manager of Janus Short-Term Bond
Fund (September 1992-December 1995) and Janus Federal Tax-Exempt Fund (May
1993-December 1995).
Helen Young Hayes*+ - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Worldwide Fund and
Janus Overseas Fund. Executive Vice President of Janus Aspen Series. Vice
President of Janus Capital. Formerly securities analyst at Janus Capital
(1987 to 1993).
Blaine P. Rollins* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Balanced Fund and
Janus Equity Income Fund. Assistant Portfolio Manager of Janus Fund.
Executive Vice President of Janus Aspen Series. Vice President of Janus
Capital. Formerly, fixed-income trader and equity securities analyst at
Janus Capital (1990-1995).
Sandy R. Rufenacht* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Short-Term Bond
Fund and Janus High-Yield Fund. Executive Vice President of Janus Aspen
Series. Vice President of Janus Capital. Formerly, Co-Manager of Janus
Flexible Income Fund (June 1996-February 1998). Formerly senior accountant,
fixed-income trader and fixed-income research analyst at Janus Capital
(1990-1995).
Scott W. Schoelzel* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Twenty Fund.
Executive Vice President of Janus Aspen Series. Vice President of Janus
Capital. Formerly (1995-1997), Executive Vice President and Portfolio
Manager of Janus Olympus Fund. Formerly (January 1994-June 1995), Vice
President of Investments at Janus Capital. Formerly (1991-1993) a Portfolio
Manager with Founders Asset Management, Denver, Colorado.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+Ms. Hayes and Ms. Young are sisters.
36
<PAGE>
Darrell W. Watters* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Federal Tax-Exempt
Fund. Executive Vice President of Janus Aspen Series. Vice President of
Janus Capital. Formerly, municipal bond trader and research analyst at
Janus Capital (1993-1995).
Claire Young*+ - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Olympus Fund. Vice
President of Janus Capital. Formerly, research analyst and assistant
portfolio manager at Janus Capital (1992-1997).
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4928
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service Corporation, Janus Distributors, Inc. and Janus Capital. Director
of IDEX, Janus Service Corporation and Janus Distributors, Inc. Director,
Treasurer and Vice President of Finance of Janus Capital International Ltd.
Formerly (May 1992-January 1996), Treasurer of Janus Investment Fund and
Janus Aspen Series.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4928
Treasurer and Chief Accounting Officer of Janus Aspen Series. Vice
President of Janus Capital. Formerly (1991-1997) Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4928
Secretary of Janus Aspen Series. Director and President of Janus
Distributors, Inc. Assistant Vice President and Associate Counsel of Janus
Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc.,
Boston, Massachusetts (mutual fund administration services).
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+Ms. Young and Ms. Hayes are sisters.
#Member of the Trust's Executive Committee.
37
<PAGE>
Gary O. Loo# - Trustee
102 N. Cascade, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and Director of High Valley Group,
Inc., Colorado Springs, Colorado (investments).
Dennis B. Mullen - Trustee
14103 Denver West Parkway
Golden, CO 80401
Trustee of Janus Aspen Series. President and Chief Executive Officer, BCE
West L.P., Phoenix, AZ (restaurant chain). Formerly (1997-1998), Chief
Financial Officer-Boston Market Concepts, Boston Chicken, Inc., Golden,
Colorado (restaurant chain); (1993 to 1997), President and Chief Executive
Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc.,
Bellevue, Washington (restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 to 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, California. Formerly (1989 to 1993), President and Chief Executive
Officer of Bridgecliff Management Services, Campbell, California (a
condominium association management company).
James T. Rothe - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm). Formerly
(1986-1994), Dean of the College of Business, University of Colorado,
Colorado Springs, Colorado.
The Trustees are responsible for major decisions relating to each Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Funds by their officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Trust's Executive Committee shall have and may exercise all the powers
and authority of the Trustees except for matters requiring action by all
Trustees pursuant to the Trust's Bylaws or Agreement and Declaration of Trust
("Declaration of Trust"), Massachusetts law or the 1940 Act.
- --------------------------------------------------------------------------------
#Member of the Trust's Executive Committee.
38
<PAGE>
The following table shows the aggregate compensation earned by and paid to
each Trustee by the Funds described in this SAI and all funds advised and
sponsored by Janus Capital (collectively, the "Janus Funds") for the periods
indicated. None of the Trustees receive any pension or retirement benefits from
the Funds or the Janus Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Funds for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position October 31, 1997 December 31, 1997**
<S> <C> <C>
- -----------------------------------------------------------------------------
Thomas H. Bailey,
Chairman and Trustee* $0 $0
James P. Craig, Trustee* $0 $0
John W. Shepardson,
Trustee+ $25,795 $14,500
William D. Stewart,
Trustee $56,833 $70,667
Gary O. Loo, Trustee $51,792 $60,667
Dennis B. Mullen, Trustee $55,599 $67,167
Martin H. Waldinger,
Trustee $54,360 $67,667
James T. Rothe, Trustee++ $39,476 $64,833
- -----------------------------------------------------------------------------
</TABLE>
* An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.
** As of December 31, 1997, Janus Funds consisted of two registered investment
companies comprised of a total of 31 funds.
+ Mr. Shepardson retired as a Fund Trustee on March 31, 1997.
++ Mr. Rothe began serving as a Fund Trustee on January 1, 1997.
PURCHASE OF SHARES
As stated in the Prospectus, Janus Distributors is a distributor of the
Funds' shares. Shares of the Funds are sold at the net asset value per share as
determined at the close of the regular trading session of the New York Stock
Exchange (the "NYSE") next occurring after a purchase order is received and
accepted by a Fund. The Shareholder's Manual Section of the Prospectus contains
detailed information about the purchase of shares.
NET ASSET VALUE DETERMINATION
As stated in the Prospectus, the net asset value ("NAV") of Fund shares is
determined once each day on which the NYSE is open, at the close of its regular
trading session (normally 4:00 p.m., New York time, Monday through Friday). The
NAV of Fund shares is not determined on days the NYSE is closed (generally, New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas). The per share NAV of
each Fund is determined by dividing the total value of a Fund's securities and
other assets, less liabilities, by the total number of shares outstanding. In
determining NAV, securities listed on an Exchange, the NASDAQ National Market
and foreign markets are valued at the closing prices on such markets, or if such
price is lacking for the trading period immediately preceding the time of
determination, such securities are valued at their current bid price. Municipal
securities held by the Funds are traded primarily in the over-the-counter
market. Valuations of such securities are furnished by one or more
39
<PAGE>
pricing services employed by the Funds and are based upon a computerized matrix
system or appraisals obtained by a pricing service, in each case in reliance
upon information concerning market transactions and quotations from recognized
municipal securities dealers. Other securities that are traded on the
over-the-counter market are valued at their closing bid prices. Foreign
securities and currencies are converted to U.S. dollars using the exchange rate
in effect at the close of the NYSE. Each Fund will determine the market value of
individual securities held by it, by using prices provided by one or more
professional pricing services which may provide market prices to other funds,
or, as needed, by obtaining market quotations from independent broker-dealers.
Short-term securities maturing within 60 days are valued on an amortized cost
basis. Securities for which quotations are not readily available, and other
assets, are valued at fair values determined in good faith under procedures
established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the NYSE is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which a Fund's NAV is not calculated. A Fund calculates its NAV per
share, and therefore effects sales, redemptions and repurchases of its shares,
as of the close of the NYSE once on each day on which the NYSE is open. Such
calculation may not take place contemporaneously with the determination of the
prices of the foreign portfolio securities used in such calculation.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on a Fund's shares are reinvested automatically in additional shares of
that Fund at the NAV determined on the first business day following the record
date. Checks for cash dividends and distributions and confirmations of
reinvestments are usually mailed to shareholders within ten days after the
record date. Any election of the manner in which a shareholder wishes to receive
dividends and distributions (which may be made on the New Account Application
form or by phone) will apply to dividends and distributions the record dates of
which fall on or after the date that a Fund receives such notice. Changes to
distribution options must be received at least three days prior to the record
date to be effective for such date. Investors receiving cash distributions and
dividends may elect in writing or by phone to change back to automatic
reinvestment at any time.
REDEMPTION OF SHARES
Procedures for redemption of shares are set forth in the Shareholder's
Manual section of the Prospectuses. Shares normally will be redeemed for cash,
although each Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Funds are governed by Rule 18f-1
40
<PAGE>
under the 1940 Act, which requires each Fund to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the NAV of that Fund during any 90-day period
for any one shareholder. Should redemptions by any shareholder exceed such
limitation, a Fund will have the option of redeeming the excess in cash or in
kind. If shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The method of valuing
securities used to make redemptions in kind will be the same as the method of
valuing portfolio securities described under "Purchase of Shares -- Net Asset
Value Determination" and such valuation will be made as of the same time the
redemption price is determined.
The right to require the Funds to redeem its shares may be suspended, or
the date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
and specific types of accounts is set forth in the Prospectuses. Applications
for specific types of accounts may be obtained by calling the Funds at
1-800-525-3713 or writing to the Funds at P.O. Box 173375, Denver, Colorado
80217-3375.
TELEPHONE TRANSACTIONS
As stated in the Prospectuses, shareholders may initiate a number of
transactions by telephone. The Funds, their transfer agent and their distributor
disclaim responsibility for the authenticity of instructions received by
telephone. Such entities will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring personal identification prior to acting upon telephone
instructions, providing written confirmation of the transactions and tape
recording telephone conversations.
SYSTEMATIC REDEMPTIONS
As stated in the Shareholder's Manual section of the Prospectuses, if you
have a regular account or are eligible for distributions from a retirement plan,
you may establish a systematic redemption option. The payments will be made from
the proceeds of periodic redemptions of shares in the account at the NAV.
Depending on the size or frequency of the disbursements requested, and the
fluctuation in value of a Fund's portfolio, redemptions for the purpose of
making such disbursements may reduce or even exhaust the shareholder's account.
Either an investor or a Fund, by written notice to the other, may terminate the
investor's systematic redemption option without penalty at any time.
Information about requirements to establish a systematic redemption option
may be obtained by writing or calling the Funds at the address or phone number
shown above.
41
<PAGE>
TAX DEFERRED ACCOUNTS
The Funds offer several different types of tax-deferred accounts that an
investor may establish to invest in Fund shares, depending on rules prescribed
by the Code. Regular and Roth Individual Retirement Accounts ("IRAs") may be
used by most individuals who have taxable compensation. Simplified Employee
Pensions ("SEPs") and Defined Contribution Plans (Profit Sharing or Money
Purchase Pension Plans) may be used by most employers, including corporations,
partnerships and sole proprietors, for the benefit of business owners and their
employees. Education IRAs allow individuals, subject to certain income
limitations, to contribute up to $500 annually on behalf of any child under the
age of 18. In addition, the Funds offer a Section 403(b)(7) Plan for employees
of educational organizations and other qualifying tax-exempt organizations.
Investors should consult their tax advisor or legal counsel before selecting a
tax-deferred account.
Contributions under Regular and Roth IRAs, Education IRAs, SEPs, Defined
Contribution Plans and Section 403(b)(7) Plans are subject to specific
contribution limitations. Generally, such contributions may be invested at the
direction of the participant. The investment is then held by Investors Fiduciary
Trust Company as custodian. Each participant's account is charged an annual fee
of $12. There is a maximum annual fee of $24 per taxpayer identification number.
The Funds reserve the right to change the amount of this fee or to waive it in
whole or in part for certain types of accounts.
Distributions from tax-deferred accounts may be subject to ordinary income
tax and may be subject to an additional 10% tax if withdrawn prior to age 59 1/2
or used for a nonqualifying purpose. Additionally, shareholders generally must
start withdrawing retirement plan assets no later than April 1 of the year after
they reach age 70 1/2. Several exceptions to these general rules may apply and
several methods exist to determine the amount and timing of the minimum annual
distribution (if any). Shareholders should consult with their tax advisor or
legal counsel prior to receiving any distribution from any tax-deferred account,
in order to determine the income tax impact of any such distribution.
To receive additional information about Regular and Roth IRAs, SEPs,
Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary
materials to establish an account, please call the Funds at 1-800-525-3713 or
write to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. No
contribution to a Regular or Roth IRA, SEP, Defined Contribution Plan or Section
403(b)(7) Plan can be made until the appropriate forms to establish any such
plan have been completed.
42
<PAGE>
INCOME DIVIDENDS, CAPITAL
GAINS DISTRIBUTIONS
AND TAX STATUS
It is a policy of the Funds to make distributions of substantially all of
their investment income and any net realized capital gains. Any capital gains
realized during each fiscal year ended October 31, as defined by the Code, are
normally declared and payable to shareholders in December. Janus Fund, Janus
Enterprise Fund, Janus Mercury Fund, Janus Olympus Fund, Janus Overseas Fund,
Janus Special Situations Fund, Janus Twenty Fund and Janus Worldwide Fund
declare and make annual distributions of income (if any); Janus Equity Income
Fund, Janus Balanced Fund and Janus Growth and Income Fund declare and make
quarterly distributions of income and Janus Flexible Income Fund, Janus
High-Yield Fund, Janus Federal Tax-Exempt Fund and Janus Short-Term Bond Fund
declare dividends daily and make monthly distributions of income. If a month
begins on a Saturday, Sunday or holiday, dividends for daily dividend Funds for
those days are declared at the end of the preceding month. Janus Federal
Tax-Exempt Fund will use the "average annual method" to determine the designated
percentage of each distribution that is tax-exempt. Under this method, the
percentage of income designated as tax-exempt is based on the percentage of
tax-exempt income earned for each annual period, and may be substantially
different from the Fund's income that was tax-exempt during any monthly period.
The Funds intend to qualify as regulated investment companies by satisfying
certain requirements prescribed by Subchapter M of the Code.
The Funds may purchase securities of certain foreign corporations
considered to be passive foreign investment companies by the IRS. In order to
avoid taxes and interest that must be paid by the Funds if these instruments are
profitable, the Funds may make various elections permitted by the tax laws.
However, these elections could require that the Funds recognize taxable income,
which in turn must be distributed.
Some foreign securities purchased by the Funds may be subject to foreign
taxes which could reduce the yield on such securities. The amount of such
foreign taxes is expected to be insignificant. The Funds may from year to year
make the election permitted under section 853 of the Code to pass through such
taxes to shareholders, who will each decide whether to deduct such taxes or
claim a foreign tax credit. If such election is not made, foreign taxes paid or
accrued will represent an expense to each Fund which will reduce its investment
company taxable income.
PRINCIPAL SHAREHOLDERS
As of January 22,1998, the officers and Trustees of the Funds as a group
owned less than 1% of the outstanding shares of each of the Funds. In addition,
as of January 22, 1998, Charles Schwab & Co., Inc. ("Schwab"), 101 Montgomery
Street, San Francisco, CA 94104-4122, and National Financial Services Co.
("National
43
<PAGE>
Financial"), P.O. Box 3908, Church Street Station, New York, NY 10008-3908,
owned of record 5% or more of the outstanding shares of the Funds, as shown
below:
<TABLE>
<CAPTION>
Fund Name Held by Schwab
- -----------------------------------------------------------------------
<S> <C>
Janus Fund............................................. 14.16%
Janus Enterprise Fund.................................. 13.18%
Janus Mercury Fund..................................... 16.30%
Janus Olympus Fund..................................... 25.43%
Janus Special Situations Fund.......................... 12.63%
Janus Twenty Fund...................................... 9.05%
Janus Worldwide Fund................................... 25.99%
Janus Overseas Fund.................................... 33.69%
Janus Balanced Fund.................................... 16.45%
Janus Equity Income Fund............................... 11.58%
Janus Growth and Income Fund........................... 17.23%
Janus Flexible Income Fund............................. 36.50%
Janus High-Yield Fund.................................. 35.01%
Janus Federal Tax-Exempt Fund.......................... 13.94%
Janus Short-Term Bond Fund............................. 19.87%
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fund Name Held by National Financial
- ---------------------------------------------------------------------------
<S> <C>
Janus Olympus Fund............................. 7.01%
Janus Special Situations Fund.................. 6.50%
Janus Worldwide Fund........................... 10.09%
Janus Overseas Fund............................ 14.69%
Janus Equity Income Fund....................... 5.69%
Janus Flexible Income Fund..................... 6.94%
Janus High-Yield Fund.......................... 10.90%
- ---------------------------------------------------------------------------
</TABLE>
According to information provided by Schwab and National Financial, this
ownership is by nominee only and does not represent beneficial ownership of such
shares, because they have no investment discretion or voting power with respect
to such shares.
In addition, as of January 22, 1998, more than 5% of the outstanding shares
of the following funds were owned of record by the shareholders listed below:
<TABLE>
<CAPTION>
Shareholder and
Fund Address of Record Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Janus Balanced Fund Texas Commerce Bank Trust 5.18%
PO Box 2558
Houston, TX 77252-2558
Janus High-Yield Fund FTC & Co. 5.30%
PO Box 173736
Denver, CO 80217-3736
Janus Short-Term Bond Janus Capital Corporation 7.09%
Fund 100 Fillmore Street
Denver, CO 80206-4916
- -------------------------------------------------------------------------------
</TABLE>
To the knowledge of the Funds, no other shareholder owned more than 5% of
the outstanding shares of any Fund as of January 22, 1998.
44
<PAGE>
MISCELLANEOUS INFORMATION
Each Fund is a series of the Trust, a Massachusetts business trust that was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
offers 19 separate series. On June 16, 1986, the Trust assumed all the assets
and liabilities of its predecessor corporation, Janus Fund, Inc., which was
incorporated under the laws of Maryland on September 18, 1968. All references in
this SAI to Janus Fund and all financial and other information about Janus Fund
prior to June 16, 1986, are to the former Janus Fund, Inc.; all references after
June 16, 1986 are to the Janus Fund series of the Trust.
On August 7, 1992, in a tax-free reorganization, the Trust assumed all the
assets and liabilities of (i) the Janus Flexible Income Fund series of Janus
Income Series, a separate Massachusetts business trust created on May 28, 1986;
and (ii) Janus Twenty Fund, Inc., a Maryland corporation originally incorporated
as Janus Value Fund in 1984. Shareholders received shares of the series of the
Trust equal both in number and net asset value to their shares of the respective
predecessor entity. In connection with the reorganization, Janus Flexible Income
Fund changed its fiscal year end from December 31 to October 31. All references
in this SAI to Janus Flexible Income Fund and Janus Twenty Fund, and all
financial and other information about such Funds prior to August 7, 1992, are to
the respective predecessor entities; all references after August 7, 1992, are to
the respective series of the Trust.
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Funds, the
Funds must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Funds could, under certain
circumstances, be held liable for the obligations of their Fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Funds and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Funds or the
Trustees. The Declaration of Trust also provides for indemnification from the
assets of the Funds for all losses and expenses of any Fund shareholder held
liable for the obligations of their Fund. Thus, the risk of a shareholder
incurring a financial loss on account of its liability as a shareholder of one
of the Funds is limited to circumstances in which their Fund would be unable to
meet its obligations. The possibility that these circumstances would occur is
remote. The Trustees intend to conduct the operations of the Funds to avoid, to
the extent possible, liability of shareholders for liabilities of their Fund.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of each Fund are fully paid and nonassessable when issued. All
shares of a Fund participate equally in dividends and other distributions by
such Fund, and in residual assets of that Fund in the event of liquidation.
Shares of each Fund have no preemptive, conversion or subscription rights.
Shares of each Fund may be transferred by endorsement or stock
45
<PAGE>
power as is customary, but a Fund is not bound to recognize any transfer until
it is recorded on its books.
VOTING RIGHTS
The present Trustees were elected at a meeting of shareholders held on July
10, 1992, with the exception of Mr. Craig and Mr. Rothe who were appointed by
the Trustees as of June 30, 1995 and January 1, 1997, respectively. Under the
Declaration of Trust, each Trustee will continue in office until the termination
of the Trust or his earlier death, retirement, resignation, bankruptcy,
incapacity or removal. Vacancies will be filled by a majority of the remaining
Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Declaration
of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power
to vote to elect or remove Trustees, to terminate or reorganize their Fund, to
amend the Declaration of Trust, to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series of the
Trust will vote separately only with respect to those matters that affect only
that series or if a series' interest in the matter differs from the interests of
other series of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Funds, audit the Funds' annual financial
statements and prepare their tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Funds or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
PERFORMANCE INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for a Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in such Fund over periods of 1, 5, and 10 years (up to the life of
the Fund). These are the annual total rates of return that would equate the
initial amount invested to the ending redeemable value. These rates of return
are calculated pursuant to the following
46
<PAGE>
formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T
= the average annual total return, n = the number of years and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures reflect the deduction of a proportional share
of Fund expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid.
The average annual total return of each Fund, computed as of October 31,
1997, is shown in the table below:
<TABLE>
<CAPTION>
Average Annual Total Return
Date Number ----------------------------------
Available of Months One Five Ten Life of
Fund Name for Sale in Lifetime Year Years Years Fund
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Fund 2/5/70 333 24.18% 16.54% 18.01% 16.91%
Janus Enterprise Fund 9/1/92 62 3.31% 16.47% N/A 18.86%
Janus Mercury Fund 5/3/93 54 17.07% N/A N/A 22.06%
Janus Olympus Fund 12/29/95 22 24.98% N/A N/A 26.90%
Janus Special Situations Fund 12/31/96 10 N/A N/A N/A 40.80%(1)
Janus Twenty Fund 5/2/85 150 31.65% 18.44% 21.28% 17.64%
Janus Worldwide Fund 5/15/91 77.5 23.34% 21.06% N/A 20.27%
Janus Overseas Fund 5/2/94 42 23.56% N/A N/A 19.45%
Janus Balanced Fund 9/1/92 62 23.38% 15.56% N/A 16.41%
Janus Equity Income Fund 6/28/96 16 29.46% N/A N/A 33.19%
Janus Growth and Income Fund 5/15/91 77.5 37.78% 20.43% N/A 20.44%
Janus Flexible Income Fund 7/2/87 124 11.48% 10.21% 9.99% 9.47%
Janus High-Yield Fund 12/29/95 22 16.94% N/A N/A 20.12%
Janus Federal Tax-Exempt Fund 5/3/93 54 7.72% N/A N/A 5.56%
Janus Short-Term Bond Fund 9/1/92 62 7.70% 5.41% N/A 5.19%
- ------------------------------------------------------------------------------------
</TABLE>
(1) Cumulative total return from December 31, 1996 (inception) to October 31,
1997.
Quotations of a Fund's yield are based on the investment income per share
earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following formula:
YIELD = 2[(a - b + 1)(6) - 1]
----------------------------------------------
cd
where a = dividend and interest income
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during the period that
were
entitled to receive dividends
d = maximum net asset value per share on the last day of the period
The tax-equivalent yield used for Janus Federal Tax-Exempt Fund is the rate
that an investor would have to earn from a fully taxable investment after taxes
to equal the Fund's tax-free yield. Tax-equivalent yields are calculated by
dividing a Fund's yield by the result of one minus a stated federal or combined
federal and state tax rate. If only a portion of a Funds' yield is tax-exempt,
only that portion is adjusted in the calculation. Janus Federal Tax-Exempt Fund
may invest a portion of its assets in obligations that are
47
<PAGE>
subject to federal income tax. When the Fund invests in these obligations, its
tax-equivalent yield will be lower.
The yield for the 30-day period ending October 31, 1997, for the
Fixed-Income Funds is shown below:
<TABLE>
<S> <C>
Janus Flexible Income Fund 6.61%
Janus High-Yield Fund 7.87%
Janus Federal Tax-Exempt Fund 4.79%
Janus Short-Term Bond Fund 6.04%
</TABLE>
From time to time in advertisements or sales material, the Funds may
discuss their performance ratings or other information as published by
recognized mutual fund statistical rating services, including, but not limited
to, Lipper Analytical Services, Inc., Ibbotson Associates, Micropal or
Morningstar, Inc. or by publications of general interest such as Forbes, Money,
The Wall Street Journal, Mutual Funds Magazine, Kiplinger's, or Smart Money. The
Funds may also compare their performance to that of other selected mutual funds,
mutual fund averages or recognized stock market indicators, including, but not
limited to, the Standard & Poor's 500 Composite Stock Price Index, the Standard
& Poor's 400 Midcap Index, the Dow Jones Industrial Average, the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Government/ Corporate 1-3
Year Bond Index, the Lehman Brothers Long Government/Corporate Bond Index, the
Lehman Brothers Intermediate Government Bond Index, the Lehman Brothers
Municipal Bond Index, the Russell 2000 Index and the NASDAQ composite. In
addition, the Funds may compare their total return or yield to the yield on U.S.
Treasury obligations and to the percentage change in the Consumer Price Index.
Janus Worldwide Fund and Janus Overseas Fund may also compare their performance
to the record of global market indicators, such as the Morgan Stanley
International World Index or Morgan Stanley Capital International Europe,
Australasia, Far East Index (EAFE Index). Such performance ratings or
comparisons may be made with funds that may have different investment
restrictions, objectives, policies or techniques than the Funds and such other
funds or market indicators may be comprised of securities that differ
significantly from the Funds' investments.
48
<PAGE>
FINANCIAL STATEMENTS
The following audited financial statements for the period ended October 31,
1997 are hereby incorporated into this SAI by reference to the Funds' Annual
Reports dated October 31, 1997. Copies of such reports accompany this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS:
Schedules of Investments as of October 31, 1997
Statements of Operations for the period ended October 31, 1997
Statements of Assets and Liabilities as of October 31, 1997
Statements of Changes in Net Assets for the periods ended October 31, 1997
and 1996
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Reports of Independent Accountants
The portions of such Annual Reports that are not specifically listed above
are not incorporated by reference into this SAI and are not part of the
Registration Statement.
49
<PAGE>
APPENDIX A
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although Janus Capital 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
CCC, CC, C issuer's capacity to meet required interest and
principal payments. BB -- lowest degree of
speculation; C -- the highest degree of
speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk
exposure to adverse conditions.
D In default.
- ------------------------------------------------------------------------
</TABLE>
50
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
- ------------------------------------------------------------------------
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 will be treated as noninvestment grade securities unless
a portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
51
<PAGE>
JANUS INVESTMENT FUND
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Investor Shares
This Statement of Additional Information ("SAI") expands upon and
supplements the information contained in the current Prospectus for the Investor
Shares (the "Shares") of Janus Money Market Fund, Janus Government Money Market
Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and,
collectively, the "Funds"). The Funds are each a separate series of Janus
Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund
represents shares of beneficial interest in a separate portfolio of securities
and other assets with its own objective and policies, and is managed separately
by Janus Capital Corporation ("Janus Capital").
This SAI is not a Prospectus and should be read in conjunction with the
Prospectus dated February 17, 1998, which is incorporated by reference into this
SAI and may be obtained from the Trust at the above phone number or address.
This SAI contains additional and more detailed information about the Funds'
operations and activities than the Prospectus.
LOGO
<PAGE>
JANUS INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Investment Policies and Restrictions.......................................... 3
Types of Securities and Investment Techniques................................. 5
Performance Data............................................................. 10
Determination of Net Asset Value............................................. 12
Investment Adviser and Administrator......................................... 12
Custodian, Transfer Agent and Certain Affiliations........................... 15
Portfolio Transactions and Brokerage......................................... 15
Officers and Trustees........................................................ 17
Purchase of Shares........................................................... 20
Redemption of Shares......................................................... 21
Shareholder Accounts......................................................... 21
Tax-Deferred Accounts........................................................ 22
Dividends and Tax Status..................................................... 22
Principal Shareholders....................................................... 24
Miscellaneous Information.................................................... 24
Shares of the Trust..................................................... 24
Voting Rights........................................................... 25
Independent Accountants................................................. 25
Registration Statement.................................................. 25
Financial Statements......................................................... 26
Appendix A - Description of Securities Ratings............................... 27
Appendix B - Description of Municipal Securities............................. 30
- --------------------------------------------------------------------------------
2
<PAGE>
INVESTMENT POLICIES
AND RESTRICTIONS
INVESTMENT OBJECTIVES
As discussed in the Prospectus, the investment objective of each of Janus
Money Market Fund and Janus Government Money Market Fund is to seek maximum
current income to the extent consistent with stability of capital. The
investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum
current income that is exempt from federal income taxes to the extent consistent
with stability of capital. There can be no assurance that a Fund will achieve
its investment objective or maintain a stable net asset value of $1.00 per
share. The investment objectives of the Funds are not fundamental and may be
changed by the Trustees of the Trust (the "Trustees") without shareholder
approval.
INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS
As indicated in the Prospectus, each Fund has adopted certain fundamental
investment restrictions that cannot be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or a particular Fund or particular
class of Shares if a matter affects just that Fund or that class of Shares), or
(ii) 67% or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Trust (or a particular
Fund or class of Shares) are present or represented by proxy.
As used in the restrictions set forth below and as used elsewhere in this
SAI, the term "U.S. Government Securities" shall have the meaning set forth in
the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940 Act
defines U.S. Government Securities as securities issued or guaranteed by the
United States government, its agencies or instrumentalities. U.S. Government
Securities may also include repurchase agreements collateralized and municipal
securities escrowed with or refunded with escrowed U.S. government securities.
The Funds have adopted the following fundamental policies:
(1) With respect to 75% of its assets, a Fund may not purchase a security
other than a U.S. Government Security, if, as a result, more than 5% of the
Fund's total assets would be invested in the securities of a single issuer or
the Fund would own more than 10% of the outstanding voting securities of any
single issuer. (As noted in the Prospectus, the Funds are also currently subject
to the greater diversification standards of Rule 2a-7, which are not
fundamental.)
(2) A Fund may not purchase securities if 25% or more of the value of a
Fund's total assets would be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that: (i)
there is no limit on investments in U.S. Government Securities or in obligations
of domestic commercial banks (including U.S. branches of foreign banks subject
to regulations under U.S. laws applicable to domestic banks and, to the extent
that its parent is unconditionally liable for the obligation, foreign branches
of U.S. banks); (ii) this limitation shall not apply to
3
<PAGE>
a Fund's investments in municipal securities; (iii) there is no limit on
investments in issuers domiciled in a single country; (iv) financial service
companies are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance are each
considered to be a separate industry); and (v) utility companies are classified
according to their services (for example, gas, gas transmission, electric, and
telephone are each considered to be a separate industry).
(3) A Fund may not act as an underwriter of securities issued by others,
except to the extent that a Fund may be deemed an underwriter in connection with
the disposition of portfolio securities of such Fund.
(4) A Fund may not lend any security or make any other loan if, as a
result, more than 25% of a Fund's total assets would be lent to other parties
(but this limitation does not apply to purchases of commercial paper, debt
securities or repurchase agreements).
(5) A Fund may not purchase or sell real estate or any interest therein,
except that the Fund may invest in debt obligations secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein.
(6) A Fund may borrow money for temporary or emergency purposes (not for
leveraging) in an amount not exceeding 25% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings). If
borrowings exceed 25% of the value of a Fund's total assets by reason of a
decline in net assets, the Fund will reduce its borrowings within three business
days to the extent necessary to comply with the 25% limitation. Reverse
repurchase agreements or the segregation of assets in connection with such
agreements shall not be considered borrowing for the purposes of this limit.
(7) Each Fund may, notwithstanding any other investment policy or
restriction (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and restrictions as that
Fund.
Each Fund has adopted the following nonfundamental investment restrictions
that may be changed by the Trustees without shareholder approval:
(1) A Fund may not invest in securities or enter into repurchase agreements
with respect to any securities if, as a result, more than 10% of the Fund's net
assets would be invested in repurchase agreements not entitling the holder to
payment of principal within seven days and in other securities that are not
readily marketable ("illiquid securities"). The Trustees, or the Fund's
investment adviser acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for certain securities such as
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, or any successor to such rule, Section 4(2) commercial paper and municipal
lease obligations. Accordingly, such securities may not be subject to the
foregoing limitation.
(2) A Fund may not purchase securities on margin, or make short sales of
securities, except for short sales against the box and the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities.
4
<PAGE>
(3) A Fund may not pledge, mortgage, hypothecate or encumber any of its
assets except to secure permitted borrowings or in connection with permitted
short sales.
(4) A Fund may not invest in companies for the purpose of exercising
control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), each of the Funds may 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 limits. A Fund will borrow money through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of seven
days. A Fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements). A Fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
Fund could result in a lost investment opportunity or additional borrowing
costs.
For purposes of the Funds' restriction on investing in a particular
industry, the Funds will rely primarily on industry classifications as published
by Bloomberg L.P. To the extent that such classifications are so broad that the
primary economic characteristics in a single class are materially different, the
Funds may further classify issuers in accordance with industry classifications
as published by the SEC.
TYPES OF SECURITIES AND
INVESTMENT TECHNIQUES
Each of the Funds may invest only in "eligible securities" as defined in
Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a
security that (i) is denominated in U.S. dollars and has a remaining maturity of
397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is
issued by an issuer with short-term debt outstanding that is rated, in one of
the two highest rating categories by any two nationally recognized statistical
rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by
that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a
rated security, as determined by Janus Capital; and (iii) has been determined by
Janus Capital to present minimal credit risks pursuant to procedures approved by
the Trustees. In addition, the Funds will maintain a dollar-weighted average
portfolio maturity of 90 days or less. A description of the ratings of some
NRSROs appears in Appendix A.
Under Rule 2a-7, a Fund may not invest more than five percent of its total
assets in the securities of any one issuer other than U.S. Government
Securities, provided that in certain cases a Fund may invest more than 5% of its
assets in a single issuer for a period of up to three business days. Up to 25%
of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to
this limit until July 1, 1998. Investment in demand features, guarantees and
other types of instruments or features are subject to the diversification limits
under Rule 2a-7.
5
<PAGE>
Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market
Fund) will invest at least 95% of its total assets in "first-tier" securities.
First-tier securities are eligible securities that are rated, or are issued by
an issuer with short-term debt outstanding that is rated, in the highest rating
category by the Requisite NRSROs or are unrated and of comparable quality to a
rated security. In addition, a Fund may invest in "second-tier" securities which
are eligible securities that are not first-tier securities. However, a Fund
(except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest
in a second-tier security if immediately after the acquisition thereof the Fund
would have invested more than (i) the greater of one percent of its total assets
or one million dollars in second-tier securities issued by that issuer, or (ii)
five percent of its total assets in second-tier securities.
The following discussion of types of securities in which the Funds may
invest supplements and should be read in conjunction with the Prospectus.
PARTICIPATION INTERESTS
Each Fund may purchase participation interests in loans or securities in
which the Funds may invest directly. Participation interests are generally
sponsored or issued by banks or other financial institutions. A participation
interest gives a Fund an undivided interest in the underlying loans or
securities in the proportion that the Fund's interest bears to the total
principal amount of the underlying loans or securities. Participation interests,
which may have fixed, floating or variable rates, may carry a demand feature
backed by a letter of credit or guarantee of a bank or institution permitting
the holder to tender them back to the bank or other institution. For certain
participation interests, a Fund will have the right to demand payment, on not
more than seven days' notice, for all or a part of the Fund's participation
interest. The Funds intend to exercise any demand rights they may have upon
default under the terms of the loan or security, to provide liquidity or to
maintain or improve the quality of the Funds' investment portfolio. A Fund will
only purchase participation interests that Janus Capital determines present
minimal credit risks.
VARIABLE AND FLOATING RATE NOTES
Janus Money Market Fund also may purchase variable and floating rate demand
notes of corporations and other entities, which are unsecured obligations
redeemable upon not more than 30 days' notice. These obligations include master
demand notes that permit investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangements with the issuer of the instrument. The
issuer of these obligations often has the right, after a given period, to prepay
the outstanding principal amount of the obligations upon a specified number of
days' notice. These obligations generally are not traded, nor generally is there
an established secondary market for these obligations. To the extent a demand
note does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid investment.
MORTGAGE- AND ASSET-BACKED SECURITIES
The Funds may invest in mortgage-backed securities, which represent an
interest in a pool of mortgages made by lenders such as commercial banks,
savings and loan
6
<PAGE>
institutions, mortgage bankers, mortgage brokers and savings banks.
Mortgage-backed securities may be issued by governmental or government-related
entities or by non-governmental entities such as banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. In
contrast, mortgage-backed securities provide periodic payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the periodic payments and optional prepayments made by the
individual borrowers on their mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Additional payments to holders of
mortgage-backed securities are caused by prepayments resulting from the sale of
the underlying residential property, refinancing or foreclosure, net of fees or
costs which may be incurred.
As prepayment rates of individual pools of mortgage loans vary widely, it
is not possible to predict accurately the average life of a particular security.
Although mortgage-backed securities are issued with stated maturities of up to
forty years, unscheduled or early payments of principal and interest on the
underlying mortgages may shorten considerably the effective maturities.
Mortgage-backed securities may have varying assumptions for average life. The
volume of prepayments of principal on a pool of mortgages underlying a
particular security will influence the yield of that security, and the principal
returned to a Fund may be reinvested in instruments whose yield may be higher or
lower than that which might have been obtained had the prepayments not occurred.
When interest rates are declining, prepayments usually increase, with the result
that reinvestment of principal prepayments will be at a lower rate than the rate
applicable to the original mortgage-backed security.
The Funds may invest in mortgage-backed securities that are issued by
agencies or instrumentalities of the U.S. government. The Government National
Mortgage Association ("GNMA") is the principal federal government guarantor of
mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. GNMA Certificates are
debt securities which represent an interest in one mortgage or a pool of
mortgages which are insured by the Federal Housing Administration or the Farmers
Home Administration or are guaranteed by the Veterans Administration. The Funds
may also invest in pools of conventional mortgages which are issued or
guaranteed by agencies of the U.S. government. GNMA pass-through securities are
considered to be riskless with respect to default in that (i) the underlying
mortgage loan portfolio is comprised entirely of government-backed loans and
(ii) the timely payment of both principal and interest on the securities is
guaranteed by the full faith and credit of the U.S. government, regardless of
whether or not payments have been made on the underlying mortgages. GNMA
pass-through securities are, however, subject to the same market risk as
comparable debt securities. Therefore, the market value of a Fund's GNMA
securities can be expected to fluctuate in response to changes in prevailing
interest rate levels.
Residential mortgage loans are pooled also by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered
agency created by Congress in 1970 for the purpose of increasing the
availability of mortgage
7
<PAGE>
credit for residential housing. FHLMC issues participation certificates ("PCs")
which represent interests in mortgages from FHLMC's national portfolio. The
mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the
loans are either uninsured with loan-to-value ratios of 80% or less, or
privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the
timely payment of interest and ultimate collection of principal on FHLMC PCs;
the U.S. government does not guarantee any aspect of FHLMC PCs.
The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private shareholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved seller/servicers
which include savings and loan associations, savings banks, commercial banks,
credit unions and mortgage bankers. FNMA guarantees the timely payment of
principal and interest on the pass-through securities issued by FNMA; the U.S.
government does not guarantee any aspect of the FNMA pass-through securities.
The Funds may also invest in privately-issued mortgage-backed securities to
the extent permitted by their investment restrictions. Mortgage-backed
securities offered by private issuers include pass-through securities comprised
of pools of conventional residential mortgage loans; mortgage-backed bonds which
are considered to be debt obligations of the institution issuing the bonds and
which are collateralized by mortgage loans; and collateralized mortgage
obligations ("CMOs") which are collateralized by mortgage-backed securities
issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages.
Asset-backed securities represent direct or indirect participations in, or
are secured by and payable from, assets other than mortgage-backed assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit agreements (credit cards). Asset-backed securities have yield
characteristics similar to those of mortgage-backed securities and, accordingly,
are subject to many of the same risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate. The
Funds will use the proceeds of reverse repurchase agreements only to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities.
Generally, a reverse repurchase agreement enables the Fund to recover for
the term of the reverse repurchase agreement all or most of the cash invested in
the portfolio securities sold and to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of obtaining the cash otherwise. In
8
<PAGE>
addition, interest costs on the money received in a reverse repurchase agreement
may exceed the return received on the investments made by a Fund with those
monies.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery
basis. A Fund will enter into such transactions only when it has the intention
of actually acquiring the securities. To facilitate such acquisitions, the
Funds' custodian will segregate cash or high quality liquid assets in an amount
at least equal to such commitments. On delivery dates for such transactions, the
Fund will meet its obligations from maturities, sales of the segregated
securities or from other available sources of cash. If a Fund chooses to dispose
of the right to acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation, incur a gain
or loss due to market fluctuation. At the time a Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction as a purchase and thereafter reflect the value of such
securities in determining its net asset value.
INVESTMENT COMPANY SECURITIES
From time to time, the Funds may invest in securities of other investment
companies. The Funds are subject to the provisions of Section 12(d)(1) of the
1940 Act. Funds managed by Janus Capital ("Janus Funds") may invest in
securities of the Funds and any other money market funds managed by Janus
Capital subject to the terms of an exemptive order obtained by Janus Capital and
the Janus Funds which currently provides that each Janus Fund will limit its
aggregate investment in a Janus money market fund to the greater of (i) 5% of
its total assets or (ii) $2.5 million. The Janus funds are seeking an amended
and restated exemptive order that would permit the non-money market funds to
invest in the Janus money market funds in excess of the limitations of Section
12(d)(1) of the 1940 Act. There is no assurance that such amendment will be
granted.
MUNICIPAL LEASES
Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest
in municipal leases. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sales contracts (which normally provide for title to the
leased asset to pass eventually to the government issuer) have evolved as a
means for governmental issuers to acquire property and equipment without meeting
the constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. The Fund will only purchase municipal leases subject to a
non-appropriation clause when the payment of principal and accrued interest is
backed by an unconditional, irrevocable letter of credit, or guarantee of a bank
or other entity that meets the criteria described in the Prospectus under
"Taxable Investments".
9
<PAGE>
In evaluating municipal lease obligations, Janus Capital will consider such
factors as it deems appropriate, including: (a) whether the lease can be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding for
the leased property in the event such property is no longer considered essential
by the municipality; (e) the legal recourse of the lease obligee in the event of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are imposed
on the lease obligor's ability to utilize substitute property or services other
than those covered by the lease obligation. If a lease is backed by an
unconditional letter of credit or other unconditional credit enhancement, then
Janus Capital may determine that a lease is an eligible security solely on the
basis of its evaluation of the credit enhancement.
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among federal,
state and local governmental units. Such non-payment would result in a reduction
of income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of the Fund.
PERFORMANCE DATA
A Fund may provide current annualized and effective annualized yield
quotations based on its daily dividends. These quotations may from time to time
be used in advertisements, shareholder reports or other communications to
shareholders. All performance information supplied by the Funds in advertising
is historical and is not intended to indicate future returns.
In performance advertising, the Funds may compare their Shares' performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc., CDC/Wiesenberger, IBC/Donoghue's Money
Fund Report or other companies which track the investment performance of
investment companies ("Fund Tracking Companies"). The Funds may also compare
their Shares' performance information with the performance of recognized stock,
bond and other indices, including but not limited to the Municipal Bond Buyers
Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Funds may refer to general
market performance over past time periods such as those published by Ibbotson
Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook").
The Funds may also refer in such materials to mutual fund performance rankings
and other data published by Fund Tracking Companies. Performance advertising may
also refer to discussions of the Funds and comparative mutual fund data and
ratings reported in independent periodicals, such as newspapers and financial
magazines. The Funds may also compare the Shares' yield to those of certain U.S.
Treasury obligations or other money market instruments.
10
<PAGE>
Any current yield quotation of the Shares which is used in such a manner as
to be subject to the provisions of Rule 482(d) under the Securities Act of 1933,
as amended, shall consist of an annualized historical yield, carried at least to
the nearest hundredth of one percent, based on a specific seven calendar day
period. The Fund's current yield shall be calculated by (a) determining the net
change during a seven calendar day period in the value of a hypothetical account
having a balance of one share at the beginning of the period, (b) dividing the
net change by the value of the account at the beginning of the period to obtain
a base period return, and (c) multiplying the quotient by 365/7 (i.e.,
annualizing). For this purpose, the net change in account value would reflect
the value of additional Shares purchased with dividends declared on the original
Share and dividends declared on both the original Share and any such additional
Shares, but would not reflect any realized gains or losses from the sale of
securities or any unrealized appreciation or depreciation on portfolio
securities. In addition, the Shares may advertise effective yield quotations.
Effective yield quotations are calculated by adding 1 to the base period return,
raising the sum to a power equal to 365/7, and subtracting 1 from the result
(i.e., compounding).
Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an
investor would have to earn from a fully taxable investment in order to equal
such Shares' yield after taxes. Tax equivalent yields are calculated by dividing
Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or
combined federal and state tax rate. If only a portion of the Shares' yield is
tax-exempt, only that portion is adjusted in the calculation.
The Shares' current yield and effective yield for the seven-day period
ended October 31, 1997 is shown below:
<TABLE>
<CAPTION>
Seven-day Effective
Fund Name Yield Seven-day Yield
- ---------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund - Investor Shares 5.21% 5.35%
Janus Government Money Market Fund -
Investor Shares 5.13% 5.26%
Janus Tax-Exempt Money Market Fund -
Investor Shares* 3.15% 3.20%
- ---------------------------------------------------------------------------
</TABLE>
*Janus Tax-Exempt Money Market Fund Investor Shares' tax equivalent yield for
the seven day period ended October 31, 1997 was 4.37%.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Shares. Also, processing organizations or other institutions may charge
their customers direct fees in connection with an investment in a Fund, which
will have the effect of reducing the Fund's net yield to those shareholders. The
yield on a class of Shares is not fixed or guaranteed, and an investment in the
Shares is not insured. Accordingly, yield information may not necessarily be
used to compare Shares with investment alternatives which, like money market
instruments or bank accounts, may provide a fixed rate of interest. In addition,
because investments in the Funds are not insured or guaranteed, yield on the
Shares may
11
<PAGE>
not necessarily be used to compare the Shares with investment alternatives which
are insured or guaranteed.
DETERMINATION OF
NET ASSET VALUE
Pursuant to the rules of the SEC, the Trustees have established procedures
to stabilize each Fund's net asset value at $1.00 per Share. These procedures
include a review of the extent of any deviation of net asset value per Share as
a result of fluctuating interest rates, based on available market rates, from
the Fund's $1.00 amortized cost price per Share. Should that deviation exceed
1/2 of 1%, the Trustees will consider whether any action should be initiated to
eliminate or reduce material dilution or other unfair results to shareholders.
Such action may include redemption of Shares in kind, selling portfolio
securities prior to maturity, reducing or withholding dividends and utilizing a
net asset value per Share as determined by using available market quotations.
Each Fund i) will maintain a dollar-weighted average portfolio maturity of 90
days or less; ii) will not purchase any instrument with a remaining maturity
greater than 397 days or subject to a repurchase agreement having a duration of
greater than 397 days; iii) will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that Janus
Capital has determined present minimal credit risks pursuant to procedures
established by the Trustees; and iv) will comply with certain reporting and
recordkeeping procedures. The Trust has also established procedures to ensure
that portfolio securities meet the Funds' high quality criteria.
INVESTMENT ADVISER
AND ADMINISTRATOR
As stated in the Prospectus, each Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Funds' investments. The Funds have each
agreed to compensate Janus Capital for its advisory services by the monthly
payment of an advisory fee at the annual rate of .20% of the average daily net
assets of each Fund. However, Janus Capital has agreed to waive .10% of the
value of each Fund's average daily net assets of the advisory fee. Janus Capital
may modify or terminate the waiver at any time upon at least 90 days' notice to
the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads
and other expenses in connection with the execution of portfolio transactions.
On behalf of the Shares, each of the Funds has also entered into an
Administration Agreement with Janus Capital. Under the terms of the
Administration Agreements, each of the Funds has agreed to compensate Janus
Capital for administrative services at the annual rate of .50% of the value of
the average daily net assets of the Shares for certain services, including
custody, transfer agent fees and expenses, legal fees not related to litigation,
accounting expenses, net asset value determination and Fund accounting,
recordkeeping, and blue sky registration and monitoring services, registration
fees,
12
<PAGE>
expenses of shareholders' meetings and reports to shareholders, costs of
preparing, printing and mailing the Shares' Prospectuses and Statements of
Additional Information to current shareholders, and other costs of complying
with applicable laws regulating the sale of Shares. Each Fund will pay those
expenses not assumed by Janus Capital, including interest and taxes, fees and
expenses of Trustees who are not affiliated with Janus Capital, audit fees and
expenses, and extraordinary costs.
The following table summarizes the advisory fees paid by the Funds for the
fiscal years ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995(1)
----------------------- ----------------------- -----------------------
Advisory Advisory Advisory Advisory Advisory Advisory
Fees Prior Fees After Fees Prior Fees After Fees Prior Fees After
Fund Name to Waiver Waiver to Waiver Waiver to Waiver Waiver
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Money Market
Fund $6,858,596 $3,429,298 $3,101,530 $1,550,765 $874,302 $437,151
Janus Government
Money Market Fund $362,308 $181,154 $330,914 $165,457 $151,606 $75,803
Janus Tax-Exempt
Money Market Fund $158,812 $79,406 $140,898 $70,449 $82,622 $41,311
- ------------------------------------------------------------------------------------
</TABLE>
(1) February 15, 1995 (inception) to October 31, 1995.
The following table summarizes the administration fees paid by the Shares
for the fiscal years ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995(1)
-------------- -------------- --------------
Administration Administration Administration
Fund Name Fees Fees Fees
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund - Investor Shares $4,415,259 $3,381,669 $1,636,704
Janus Government Money Market Fund - Investor
Shares $615,966 $560,294 $311,887
Janus Tax-Exempt Money Market Fund - Investor
Shares $379,650 $343,475 $203,530
- ------------------------------------------------------------------------------------
</TABLE>
(1) February 15, 1995 (inception) to October 31, 1995.
Advisory fees are paid on the Fund level while administration fees are paid
on the class level.
The Advisory Agreements for each Fund were reexecuted on July 1, 1997
(without amendment other than effective dates) and will continue in effect until
July 1, 1998, and thereafter from year to year so long as such continuance is
approved annually by a majority of the Trustees who are not parties to the
Advisory Agreements or interested persons of any such party, and by either a
majority of the outstanding voting shares or the Trustees of the Funds. Each
Advisory Agreement i) may be terminated without the payment of any penalty by
any Fund or Janus Capital on 60 days' written notice; ii) terminates
automatically in the event of its assignment; and iii) generally, may not be
amended without the approval of a majority of the Trustees of the affected Fund,
including the Trustees who are not interested persons of that Fund or Janus
Capital and, to the extent required by the 1940 Act, the vote of a majority of
the outstanding voting securities of that Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Funds, are made independently
13
<PAGE>
from those for any other account that is or may in the future become managed by
Janus Capital or its affiliates. If, however, a number of accounts managed by
Janus Capital are contemporaneously engaged in the purchase or sale of the same
security, the orders may be aggregated and/or the transactions may be averaged
as to price and allocated equitably to each account. In some cases, this policy
might adversely affect the price paid or received by an account or the size of
the position obtained or liquidated for an account. Pursuant to an exemptive
order granted by the SEC, the Funds and other funds advised by Janus Capital may
also transfer daily uninvested cash balances into one or more joint trading
accounts. Assets in the joint trading accounts are invested in money market
instruments and the proceeds are allocated to the participating funds on a pro
rata basis.
Each account managed by Janus Capital has its own investment objective and
is managed in accordance with that objective by a particular portfolio manager
or team of portfolio managers. As a result, from time to time two or more
different managed accounts may pursue divergent investment strategies with
respect to investments or categories of investments.
As indicated in the Prospectus, Janus Capital 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 regarding personal
investing by directors, officers and employees of Janus Capital and the Funds.
The policy requires investment personnel and officers of Janus Capital, inside
directors of Janus Capital and the Funds and other designated persons deemed to
have access to current trading information to pre-clear all transactions in
securities not otherwise exempt under the policy. Requests for trading authority
will be denied when, among other reasons, the proposed personal transaction
would be contrary to the provisions of the policy or would be deemed to
adversely affect any transaction then known to be under consideration for or to
have been effected on behalf of any client account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Funds to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns 12% of
its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
14
<PAGE>
CUSTODIAN, TRANSFER AGENT
AND CERTAIN AFFILIATIONS
UMB Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the
Funds' custodian. The custodian holds the Funds' assets in safekeeping and
collects and remits the income thereon, subject to the instructions of each
Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds'
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Funds.
The Funds do not pay Janus Service a fee.
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Funds. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Funds in connection with the sale of their shares in all
states in which the shares are registered and in which Janus Distributors is
qualified as a broker-dealer. Under the Distribution Agreement, Janus
Distributors continuously offers the Funds' shares and accepts orders at net
asset value. No sales charges are paid by investors. Promotional expenses in
connection with offers and sales of shares are paid by Janus Capital.
Janus Capital also may make payments to selected broker-dealer firms or
institutions which were instrumental in the acquisition of shareholders for the
Funds or which performed services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital.
PORTFOLIO TRANSACTIONS
AND BROKERAGE
Decisions as to the assignment of portfolio business for the Funds and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; and research products or services provided. In recognition of
the value of the foregoing
15
<PAGE>
factors, Janus Capital may place portfolio transactions with a broker or dealer
with whom it has negotiated a commission that is in excess of the commission
another broker or dealer would have charged for effecting that transaction if
Janus Capital determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research provided by
such broker or dealer viewed in terms of either that particular transaction or
of the overall responsibilities of Janus Capital. These research and other
services may include, but are not limited to, general economic and security
market reviews, industry and company reviews, evaluations of securities,
recommendations as to the purchase and sale of securities, and access to third
party publications, computer and electronic equipment and software. Research
received from brokers or dealers is supplemental to Janus Capital's own research
efforts.
For the fiscal year ended October 31, 1997, the Funds paid no brokerage
commissions to brokers and dealers in transactions identified for execution
primarily on the basis of research and other services provided to the Funds.
For the fiscal years ended October 31, 1997, October 31, 1996 and October
31, 1995, the total brokerage commissions paid by the Funds are summarized
below:
<TABLE>
<CAPTION>
Fund Name 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund $0 $4,851 $0
Janus Government Money Market Fund $0 $0 $0
Janus Tax-Exempt Money Market Fund $0 $0 $0
- ---------------------------------------------------------------------------
</TABLE>
The Funds generally buy and sell securities in principal transactions, in
which no commissions are paid. However, the Funds may engage an agent and pay
commissions for such transactions if Janus Capital believes that the net result
of the transaction to the respective Fund will be no less favorable than that of
contemporaneously available principal transactions.
Janus Capital may use research products and services in servicing other
accounts in addition to the Funds. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may consider sales of Shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Shares as
a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for a Fund (i) to the Fund or (ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. In placing portfolio business with such broker-dealers, Janus Capital will
seek the best execution of each transaction.
When the Funds purchase or sell a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
16
<PAGE>
As of October 31, 1997, certain Funds owned securities of their regular
broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Name of Value of
Fund Name Broker-Dealer Securities Owned
- -------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund Bankers Trust Securities Corp. 129,982,478
BZW Securities, Inc. 205,000,000
Goldman Sachs Group L.P. 230,000,000
Lehman Brothers, Inc. 28,800,000
Merrill Lynch & Co. 50,000,000
Morgan Stanley Dean Witter 225,000,000
Nationsbank Discover and Co. 50,000,000
Janus Government Money CS First Boston 40,000,000
Market Fund HSBC Securities, Inc. 39,300,000
Lehman Brothers, Inc. 10,000,000
</TABLE>
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4928
Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief
Executive Officer, Director and President of Janus Capital. Director of
Janus Distributors, Inc. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee
100 Fillmore Street
Denver, CO 80206-4928
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice Chairman and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund. Executive Vice
President and Co-Manager of Janus Venture Fund.
Sharon S. Pichler* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Money Market Fund,
Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund.
Vice President of Janus Capital. Formerly, Assistant Vice President and
Portfolio Manager at USAA Investment Management Co. (1990-1994).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
17
<PAGE>
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4928
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service Corporation, Janus Distributors, Inc. and Janus Capital. Director
of IDEX, Janus Service Corporation and Janus Distributors, Inc. Director,
Treasurer and Vice President of Finance of Janus Capital International Ltd.
Formerly (May 1992-January 1996), Treasurer of Janus Investment Fund and
Janus Aspen Series.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4928
Treasurer and Chief Accounting Officer of Janus Aspen Series. Vice
President of Janus Capital. Formerly (1991-1997) Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4928
Secretary of Janus Aspen Series. Director and President of Janus
Distributors, Inc. Assistant Vice President and Associate Counsel of Janus
Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc.,
Boston Massachusetts (mutual fund administration services).
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
Gary O. Loo# - Trustee
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and Director of High Valley Group,
Inc., Colorado Springs, Colorado (investments).
Dennis B. Mullen - Trustee
14103 Denver West Parkway
Golden, CO 80401
Trustee of Janus Aspen Series. President and Chief Executive Officer, BCE
West L.P., Phoenix, AZ (restaurant chain). Formerly (1997-1998), Chief
Financial Officer-Boston Market Concepts, Boston Chicken, Inc., Golden,
Colorado (restaurant chain); (1993-1997), President and Chief Executive
Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc.,
Bellevue, Washington (restaurant chain).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
18
<PAGE>
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 to 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, California. Formerly (1989 to 1993), President and Chief Executive
Officer of Bridgecliff Management Services, Campbell, California (a
condominium association management company).
James T. Rothe -- Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm). Formerly
(1986-1994), Dean of the College of Business, University of Colorado,
Colorado Springs, Colorado.
The Trustees are responsible for major decisions relating to each Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Funds by their officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Trust's Executive Committee shall have and may exercise all the powers
and authority of the Trustees except for matters requiring action by all
Trustees pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts
Law or the 1940 Act.
The Money Market Funds Committee, consisting of Messrs. Loo, Mullen and
Rothe, monitors the compliance with policies and procedures adopted particularly
for money market funds.
The following table shows the aggregate compensation earned by and paid to
each Trustee by the Funds described in this SAI and all funds advised and
sponsored by Janus
19
<PAGE>
Capital (collectively, the "Janus Funds") for the periods indicated. None of the
Trustees receive any pension or retirement benefits from the Funds or the Janus
Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Funds for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position October 31, 1997 December 31, 1997**
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $0 $0
James P. Craig, Trustee* $0 $0
John W. Shepardson,
Trustee+ $2,402 $14,500
William D. Stewart,
Trustee $4,977 $70,667
Gary O. Loo, Trustee $4,533 $60,667
Dennis B. Mullen, Trustee $4,881 $67,167
Martin H. Waldinger,
Trustee $4,725 $67,667
James T. Rothe, Trustee++ $3,445 $64,833
- -----------------------------------------------------------------------------
</TABLE>
*An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.
**As of December 31, 1997, Janus Funds consisted of two registered investment
companies comprised of a total of 31 funds.
+Mr. Shepardson retired as a Fund Trustee on March 31, 1997.
++Mr. Rothe began serving as a Fund Trustee on January 1, 1997.
PURCHASE OF SHARES
As stated in the Prospectus, Janus Distributors is a distributor of the
Funds' shares. Shares are sold at the net asset value per share as determined at
the close of the regular trading session of the New York Stock Exchange (the
"NYSE" or the "Exchange") next occurring after a purchase order is received and
accepted by a Fund (except net asset value is normally determined at 5:00 p.m.
(New York time) for Janus Government Money Market Fund). A Fund's net asset
value is calculated each day that both the NYSE and the New York Federal Reserve
Bank are open. As stated in the Prospectus, the Funds each seek to maintain a
stable net asset value per share of $1.00. The Shareholder's Manual Section of
the Prospectus contains detailed information about the purchase of Shares.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on Shares are reinvested automatically in additional Shares of that Fund
at the NAV determined on the first business day following the record date.
Checks for cash dividends and distributions and confirmations of reinvestments
are usually mailed to shareholders within ten days after the record date. Any
election (which may be made on the New Account Application form or by phone)
will apply to dividends and distributions the record dates of which fall on or
after the date that a Fund receives such notice. Changes to distribution options
must be received at least three days prior to the record date to be effective
for such date. Investors receiving cash distributions and dividends may elect in
writing or by phone to change back to automatic reinvestment at any time.
20
<PAGE>
REDEMPTION OF SHARES
Procedures for redemption of Shares are set forth in the Shareholder's
Manual section of the Prospectus. Shares normally will be redeemed for cash,
although each Fund retains the right to redeem Shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to
redeem Shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of that Fund during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, their Fund will have the
option of redeeming the excess in cash or in kind. If Shares are redeemed in
kind, the redeeming shareholder might incur brokerage costs in converting the
assets to cash. The method of valuing securities used to make redemptions in
kind will be the same as the method of valuing portfolio securities described
under "Determination of Net Asset Value" and such valuation will be made as of
the same time the redemption price is determined.
The right to require the Funds to redeem Shares may be suspended, or the
date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
and specific types of accounts is set forth in the Prospectus. Applications for
specific types of accounts may be obtained by calling the Funds at
1-800-525-3713 or writing to the Funds at P.O. Box 173375, Denver, Colorado
80217-3375.
SYSTEMATIC REDEMPTIONS
As stated in the Shareholder's Manual section of the Prospectus, if you
have a regular account or are eligible for distributions from a retirement plan,
you may establish a systematic redemption option. The payments will be made from
the proceeds of periodic redemptions of Shares in the account at the net asset
value. Depending on the size or frequency of the disbursements requested, and
the fluctuation in value of the Shares in the Fund's portfolio, redemptions for
the purpose of making such disbursements may reduce or even exhaust the
shareholder's account. Either an investor or their Fund, by written notice to
the other, may terminate the investor's systematic redemption option without
penalty at any time.
Information about requirements to establish a systematic redemption option
may be obtained by writing or calling the Funds at the address or phone number
shown above.
21
<PAGE>
TAX-DEFERRED ACCOUNTS
The Funds offer several different types of tax-deferred retirement plans
that an investor may establish to invest in Shares, depending on rules
prescribed by the Internal Revenue Code of 1986 and the regulations thereunder
(the "Code"). Regular and Roth Individual Retirement Accounts ("IRAs") may be
used by most individuals who have taxable compensation. Simplified Employee
Pensions ("SEPs") and the Defined Contribution Plans may be used by most
employers, including corporations, partnerships and sole proprietors, for the
benefit of business owners and their employees. Education IRAs allow
individuals, subject to certain income limitations, to contribute up to $500
annually on behalf of any child under the age of 18. In addition, the Funds
offer a Section 403(b)(7) Plan for employees of educational organizations and
other qualifying tax-exempt organizations. Investors should consult their tax
advisor or legal counsel before selecting a tax-deferred account.
Contributions under Regular and Roth IRAs, Education IRAs, SEPs, Defined
Contribution Plans (Profit Sharing or Money Purchase Pension Plans) and Section
403(b)(7) Plans are subject to specific contribution limitations. Generally,
such contributions may be invested at the direction of the participant. The
investment is then held by Investors Fiduciary Trust Company as custodian. Each
participant's account is charged an annual fee of $12. There is a maximum annual
fee of $24 per taxpayer identification number.
Distributions from tax deferred accounts may be subject to ordinary income
tax and may be subject to an additional 10% tax if withdrawn prior to age 59 1/2
or used for a nonqualifying purpose. Several exceptions to the general rule may
apply. Additionally, shareholders generally must start withdrawing retirement
plan assets no later than April 1 of the year after they reach age 70 1/2.
Several exceptions to these general rules may apply and several methods exist to
determine the amount and timing of the minimum annual distribution (if any).
Shareholders should consult with their tax advisor or legal counsel prior to
receiving any distribution from any tax-deferred plan, in order to determine the
income tax impact of any such distribution.
To receive additional information about Regular and Roth IRAs, SEPs,
Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary
materials to establish an account, please call the Funds at 1-800-525-3713 or
write to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. No
contribution to a Regular or Roth IRA, SEP, Defined Contribution Plan or Section
403(b)(7) Plan can be made until the appropriate forms to establish any such
plan have been completed.
DIVIDENDS AND TAX STATUS
Dividends representing substantially all of the net investment income and
any net realized gains on sales of securities are declared daily, Saturdays,
Sundays and holidays included, and distributed on the last business day of each
month. If a month begins on a Saturday, Sunday, or holiday, dividends for those
days are declared at the end of the preceding month and distributed on the first
business day of the month. A shareholder may receive dividends in cash or may
choose to have dividends automatically reinvested
22
<PAGE>
in a Fund's Shares. As described in the Prospectus, Shares purchased by wire on
a bank business day will receive that day's dividend if the purchase is effected
at or prior to 3:00 p.m. (New York time) for Janus Money Market Fund, 5:00 p.m.
for Janus Government Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money
Market Fund. Otherwise, such Shares will begin to accrue dividends on the
following day. Orders for purchase accompanied by a check or other negotiable
bank draft will be accepted and effected as of 4:00 p.m. (New York time), (5:00
p.m. for Janus Government Money Market Fund) on the day of receipt and such
Shares will begin to accrue dividends on the first bank business day following
receipt of the order. Requests for redemption of Shares of a Fund will be
redeemed at the next determined net asset value. If processed by 4:00 p.m. (New
York time), (5:00 p.m. for Janus Government Money Market Fund) such redemption
will generally include dividends declared through the day of redemption.
However, redemption requests made by wire that are received prior to 3:00 p.m.
(New York time) for Janus Money Market Fund, 5:00 p.m. for Janus Government
Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money Market Fund will
result in Shares being redeemed that day and no dividend will be accrued for
such day. Proceeds of such a redemption will normally be sent to the
predesignated bank account on that day, but that day's dividend will not be
received. If shares of a Fund were originally purchased by check or through an
Automated Clearing House transaction, the Fund may delay transmittal of
redemption proceeds up to 15 days in order to ensure that purchase funds have
been collected. Closing times for purchase and redemption of Shares may be
changed for days in which the bond market or the NYSE close early.
Distributions for all of the Funds (except Janus Tax-Exempt Money Market
Fund) are taxable income and are subject to federal income tax (except for
shareholders exempt from income tax), whether such distributions are received in
cash or are reinvested in additional Shares. Full information regarding the tax
status of income dividends and any capital gains distributions will be mailed to
shareholders for tax purposes on or before January 31st of each year. As
described in detail in the Prospectus, Janus Tax-Exempt Money Market Fund
anticipates that substantially all income dividends it pays will be exempt from
federal income tax, although dividends attributable to interest on taxable
investments, together with distributions from any net realized short- or
long-term capital gains, are taxable.
The Funds intend to qualify as regulated investment companies by satisfying
certain requirements prescribed by Subchapter M of the Code.
Some money market securities employ a trust or other similar structure to
modify the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security, or
interest rate adjustment features can be used to enhance price stability. If the
structure does not perform as intended, adverse tax or investment consequences
may result. Neither the Internal Revenue Service nor any other regulatory
authority has ruled definitively on certain legal issues presented by structured
securities. Future tax or other regulatory determinations could adversely affect
the value, liquidity, or tax treatment of the income received from these
securities or the nature and timing of distributions made by a Fund.
23
<PAGE>
PRINCIPAL SHAREHOLDERS
As of January 22, 1998, the officers and Trustees as a group owned less
than 1% of the outstanding Shares.
As of January 22, 1998, Janus Capital Corporation, 100 Fillmore Street,
Denver, CO 80206-4916, owned 10.58% of the Shares of Janus Money Market Fund.
MISCELLANEOUS INFORMATION
Each Fund is a series of the Trust, a Massachusetts business trust that was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
consists of 19 separate series, three of which currently offer three classes of
shares. The Funds were added to the Trust as separate series on December 9,
1994.
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Funds, the
Funds must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Funds could, under certain
circumstances, be held liable for the obligations of their Fund. However, the
Agreement and Declaration of Trust (the "Declaration of Trust") disclaims
shareholder liability for acts or obligations of the Funds and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Funds or the Trustees. The Declaration of Trust
also provides for indemnification from the assets of the Funds for all losses
and expenses of any Fund shareholder held liable for the obligations of their
Fund. Thus, the risk of a shareholder incurring a financial loss on account of
its liability as a shareholder of one of the Funds is limited to circumstances
in which their Fund would be unable to meet its obligations. The possibility
that these circumstances would occur is remote. The Trustees intend to conduct
the operations of the Funds to avoid, to the extent possible, liability of
shareholders for liabilities of their Fund.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of each Fund are fully paid and nonassessable when issued. All
shares of a Fund participate equally in dividends and other distributions by
such Fund, and in residual assets of that Fund in the event of liquidation.
Shares of each Fund have no preemptive, conversion or subscription rights.
The Trust is authorized to issue multiple classes of shares for each Fund.
Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus
Tax-Exempt Money Market Fund each offer three classes of shares by separate
prospectuses. The Shares discussed in this SAI are offered to the general
public. A second class of shares, Service Shares, is offered through banks and
other financial
24
<PAGE>
institutions that meet minimum investment requirements in connection with trust
accounts, cash management programs and similar programs. A third class of
shares, Institutional Shares, is offered only to clients meeting certain minimum
investment criteria.
VOTING RIGHTS
The present Trustees were elected at a meeting of shareholders held on July
10, 1992 with the exception of Mr. Craig and Mr. Rothe who were appointed by the
Trustees as of June 30, 1995 and January 1, 1997, respectively. Under the
Declaration of Trust, each Trustee will continue in office until the termination
of the Trust or his earlier death, retirement, resignation, bankruptcy,
incapacity or removal. Vacancies will be filled by a majority of the remaining
Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Declaration
of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power
to vote to elect or remove Trustees, to terminate or reorganize their Fund, to
amend the Declaration of Trust, to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series or class of
the Trust will vote separately only with respect to those matters that affect
only that series or class or if the interest of the series or class in the
matter differs from the interests of other series or classes of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Funds, audit the Funds' annual financial
statements and prepare their tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Funds or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
25
<PAGE>
FINANCIAL STATEMENTS
The following audited financial statements of the Funds for the period
ended October 31, 1997 are hereby incorporated into this SAI by reference to the
Funds' Annual Report dated October 31, 1997. A copy of such report accompanies
this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of October 31, 1997
Statements of Operations for the period ended October 31, 1997
Statements of Assets and Liabilities as of October 31, 1997
Statements of Changes in Net Assets for the periods ended October 31, 1997
and 1996
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this SAI and are not part of the
Registration Statement.
26
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S AND STANDARD AND POOR'S
MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS
The two highest ratings of Standard & Poor's Ratings Services ("S&P") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest
rating assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only in a
small degree. The AA rating may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within that rating category.
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by
Moody's to be of the best quality. Bonds rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa bonds are rated
lower than the best bonds because margins of protection or other elements make
long-term risks appear somewhat larger than Aaa securities. The generic rating
Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of such rating category.
SHORT-TERM MUNICIPAL LOANS
S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have a strong
capacity to pay principal and interest. Those issues rated SP-1 which are
determined to possess a very strong capacity to pay debt service will be given a
plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay
principal and interest with some vulnerability to adverse financial and economic
changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of
the best quality, enjoying strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are
of high quality, with margins of protection ample although not so large as in
the MIG-1/VMIG-1 group.
OTHER SHORT-TERM DEBT SECURITIES
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for
other short-term debt securities and commercial paper, and A-1 and A-2 are the
two highest ratings for commercial paper assigned by S&P. Moody's uses the
numbers 1, 2 and 3 to denote relative strength within its highest classification
of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength
within its highest classification of A. Issuers rated Prime-1 by Moody's have a
superior ability for repayment of senior short-term debt obligations and have
many of the following characteristics: leading market positions in
well-established industries, high rates of
27
<PAGE>
return on funds employed, conservative capitalization structure with moderate
reliance on debt and ample asset protection, broad margins in earnings coverage
of fixed financial charges and high internal cash generation, and well
established access to a range of financial markets and assured sources of
alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for
repayment of senior short-term debt obligations and display many of the same
characteristics displayed by issuers rated Prime-1, but to a lesser degree.
Issuers rated A-1 by S&P carry a strong degree of safety regarding timely
repayment. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) designation. Issuers rated A-2 by
S&P carry a satisfactory degree of safety regarding timely repayment.
FITCH
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F-1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance for timely payment only slightly
less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1
ratings.
</TABLE>
DUFF & PHELPS INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
ready access to alternative sources of funds, is clearly
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental
protection factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
</TABLE>
THOMSON BANKWATCH, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated TBW-1.
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest in a
timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
</TABLE>
28
<PAGE>
IBCA, INC.
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<TABLE>
<S> <C>
A1+ Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong
credit feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely
repayment.
A3 Obligations supported by a satisfactory capacity for
timely repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
</TABLE>
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29
<PAGE>
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
MUNICIPAL NOTES generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the following:
1. PROJECT NOTES, which carry a U.S. government guarantee, are issued by
public bodies (called "local issuing agencies") created under the laws of a
state, territory, or U.S. possession. They have maturities that range up to one
year from the date of issuance. Project Notes are backed by an agreement between
the local issuing agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide range of financial
assistance programs for housing, redevelopment, and related needs (such as
low-income housing programs and renewal programs).
2. TAX ANTICIPATION NOTES are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various seasonal
tax revenues, such as income, sales, use and business taxes, and are payable
from these specific future taxes.
3. REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
types of revenues, such as Federal revenues available under the Federal Revenue
Sharing Programs.
4. BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.
5. CONSTRUCTION LOAN NOTES are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal National
Mortgage Association ("Fannie Mae") or the Government National Mortgage
Association ("Ginnie Mae").
6. TAX-EXEMPT COMMERCIAL PAPER is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term financing
in anticipation of longer term financing.
MUNICIPAL BONDS, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. GENERAL OBLIGATION BONDS are issued by such entities as states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
30
<PAGE>
2. REVENUE BONDS in recent years have come to include an increasingly wide
variety of types of municipal obligations. As with other kinds of municipal
obligations, the issuers of revenue bonds may consist of virtually any form of
state or local governmental entity, including states, state agencies, cities,
counties, authorities of various kinds, such as public housing or redevelopment
authorities, and special districts, such as water, sewer or sanitary districts.
Generally, revenue bonds are secured by the revenues or net revenues derived
from a particular facility, group of facilities, or, in some cases, the proceeds
of a special excise or other specific revenue source. Revenue bonds are issued
to finance a wide variety of capital projects including electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of these bonds provide additional
security in the form of a debt service reserve fund to be used to make principal
and interest payments. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Housing authorities have a wide range of security, including
partially or fully insured mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. PRIVATE ACTIVITY BONDS are considered municipal bonds if the interest
paid thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing and health. These bonds are
also used to finance public facilities such as airports, mass transit systems
and ports. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property as security for such
payment.
While, at one time, the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection with
virtually any type of commercial or industrial project (subject to various
restrictions as to authorized costs, size limitations, state per capita volume
restrictions, and other matters), the types of qualifying projects under the
Code have become increasingly limited, particularly since the enactment of the
Tax Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain privately
owned and operated rental multi-family housing facilities, nonprofit hospital
and nursing home projects, airports, docks and wharves, mass commuting
facilities and solid waste disposal projects, among others, and for the
refunding (that is, the tax-exempt refinancing) of various kinds of other
private commercial projects originally financed with tax-exempt bonds. In future
years, the types of projects qualifying under the Code for tax-exempt financing
are expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to as an
"industrial development bond," but more and more frequently revenue bonds have
become classified according
31
<PAGE>
to the particular type of facility being financed, such as hospital revenue
bonds, nursing home revenue bonds, multi-family housing revenues bonds, single
family housing revenue bonds, industrial development revenue bonds, solid waste
resource recovery revenue bonds, and so on.
OTHER MUNICIPAL OBLIGATIONS, incurred for a variety of financing purposes,
include: municipal leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. To reduce this risk, the Fund will only purchase municipal
leases subject to a non-appropriation clause when the payment of principal and
accrued interest is backed by an unconditional irrevocable letter of credit, or
guarantee of a bank or other entity that meets the criteria described in the
Prospectus.
Tax-exempt bonds are also categorized according to whether the interest is
or is not includible in the calculation of alternative minimum taxes imposed on
individuals, according to whether the costs of acquiring or carrying the bonds
are or are not deductible in part by banks and other financial institutions, and
according to other criteria relevant for Federal income tax purposes. Due to the
increasing complexity of Internal Revenue Code and related requirements
governing the issuance of tax-exempt bonds, industry practice has uniformly
required, as a condition to the issuance of such bonds, but particularly for
revenue bonds, an opinion of nationally recognized bond counsel as to the
tax-exempt status of interest on the bonds.
32
<PAGE>
JANUS VENTURE FUND
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
Janus Venture Fund (the "Fund") is a no-load mutual fund that seeks capital
appreciation. The Fund normally invests at least 50% of its equity assets in
securities issued by small-sized companies. Small-sized companies are those who
have market capitalizations of less than $1 billion or annual gross revenues of
less than $500 million. Subject to this policy, the Fund may also invest in
larger issuers. Depending upon its portfolio managers' opinion of prevailing
market, financial and economic conditions, the Fund may at times hold
substantial positions in cash or interest-bearing securities.
The Fund is a separate series of Janus Investment Fund, a Massachusetts
business trust (the "Trust"). Each series of the Trust represents shares of
beneficial interest in a separate portfolio of securities and other assets with
its own objective and policies. The Fund is managed by Janus Capital Corporation
("Janus Capital").
The Fund has discontinued public sales of its shares to new investors.
However, shareholders who maintain open Fund accounts are permitted to continue
to purchase shares of the Fund and to reinvest any dividends and/or capital
gains distributions in shares of the Fund. Once a shareholder's Fund account is
closed, it may not be possible for that shareholder to purchase additional Fund
shares. See the "Shareholder's Manual" section of the Prospectus for more
details. The Fund may resume sales of its shares at some future date, although
it has no present intention of doing so.
This Statement of Additional Information ("SAI") is not a Prospectus and
should be read in conjunction with the Fund's Prospectus dated February 17,
1998, which is incorporated by reference into this SAI and may be obtained from
the Trust at the above phone number or address. This SAI contains additional and
more detailed information about the Fund's operations and activities than the
Prospectus.
LOGO
<PAGE>
JANUS VENTURE FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Investment Policies, Restrictions and Techniques.............................. 3
Investment Objective..................................................... 3
Portfolio Policies....................................................... 3
Investment Restrictions.................................................. 3
Types of Securities and Investment Techniques................................. 5
Illiquid Investments................................................... 5
Zero Coupon, Pay-In-Kind and Step Coupon Securities.................... 6
Pass-Through Securities................................................ 7
Investment Company Securities.......................................... 8
Depositary Receipts.................................................... 8
Municipal Obligations.................................................. 9
Other Income-Producing Securities...................................... 9
High-Yield/High-Risk Securities....................................... 10
Repurchase and Reverse Repurchase Agreements.......................... 11
Futures, Options and Other Derivative Instruments..................... 11
Investment Adviser........................................................... 23
Custodian, Transfer Agent and Certain Affiliations........................... 25
Portfolio Transactions and Brokerage......................................... 26
Officers and Trustees........................................................ 28
Purchase of Shares........................................................... 31
Net Asset Value Determination........................................... 31
Reinvestment of Dividends and Distributions............................. 32
Redemption of Shares......................................................... 32
Shareholder Accounts......................................................... 33
Telephone Transactions.................................................. 33
Systematic Redemptions.................................................. 33
Tax-Deferred Accounts........................................................ 34
Income Dividends, Capital Gains Distributions and Tax Status................. 35
Principal Shareholders....................................................... 35
Miscellaneous Information.................................................... 35
Shares of the Trust..................................................... 36
Voting Rights........................................................... 36
Independent Accountants................................................. 37
Registration Statement.................................................. 37
Performance Information...................................................... 37
Financial Statements......................................................... 38
Appendix A................................................................... 39
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2
<PAGE>
INVESTMENT POLICIES,
RESTRICTIONS AND TECHNIQUES
INVESTMENT OBJECTIVE
As stated in the Prospectus, the Fund's investment objective is capital
appreciation. Realization of income is not a significant investment
consideration and any income realized on the Fund's investments therefore will
be incidental to the Fund's objective. There can be no assurance that the Fund
will, in fact, achieve its objective. The investment objective of the Fund is
not fundamental and may be changed by the Trustees without shareholder approval.
PORTFOLIO POLICIES
The Prospectus discusses the types of securities in which the Fund will
invest, portfolio policies of the Fund and the investment techniques of the
Fund. The Prospectus includes a discussion of portfolio turnover policies. The
Fund's portfolio turnover rates (total purchases or sales, whichever is less,
compared to average monthly value of portfolio securities) for the fiscal years
ended October 31, 1997 and October 31, 1996, were 146% and 136%, respectively.
INVESTMENT RESTRICTIONS
As indicated in the Prospectus, the Fund is subject to certain fundamental
policies and restrictions that may not be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or the Fund if a matter affects just
the Fund), or (ii) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of the Trust
(or the Fund) are present or represented by proxy. As fundamental policies, the
Fund may not:
(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to seventy-five percent (75%) of the value of its total assets,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the Investment Company Act of 1940, as amended (the
"1940 Act")), if immediately after and as a result of such purchase, the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of the
value of the Fund's total assets.
(2) Invest 25% or more of the value of its total assets in any particular
industry (other than U.S. government securities).
(3) Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies engaged in those
businesses.
(4) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the Fund from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities).
3
<PAGE>
(5) Lend any security or make any other loan if, as a result, more than 25%
of its total assets would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or repurchase
agreements).
(6) Act as an underwriter of securities issued by others, except to the
extent that the Fund may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
As a fundamental policy, the Fund may, notwithstanding any other investment
policy or limitation (whether or not fundamental), invest all of its assets in
the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Fund.
The Trustees have adopted additional investment restrictions for the Fund.
These restrictions are operating policies of the Fund and may be changed by the
Trustees without shareholder approval. The additional investment restrictions
adopted by the Trustees to date include the following:
(a) The Fund will not (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission ("CFTC") regulations if the
aggregate initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of the Fund's
net assets, after taking into account unrealized profits and unrealized losses
on any such contracts it has entered into; and (ii) enter into any futures
contracts if the aggregate amount of the Fund's commitments under outstanding
futures contracts positions would exceed the market value of its total assets.
(b) The Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward
contracts are not deemed to constitute selling securities short.
(c) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments and other deposits
in connection with transactions in futures, options, swaps and forward contracts
shall not be deemed to constitute purchasing securities on margin.
(d) The Fund may not mortgage or pledge any securities owned or held by the
Fund in amounts that exceed, in the aggregate, 15% of the Fund's net asset
value, provided that this limitation does not apply to reverse repurchase
agreements, deposits of assets to margin, guarantee positions in futures,
options, swaps or forward contracts, or the segregation of assets in connection
with such contracts.
(e) The Fund may borrow money for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 25% of the value of its
total assets (including the amount borrowed) less liabilities (other than
borrowings). If borrowings exceed 25% of the value of the Fund's total assets by
reason of a decline in net assets, the Fund will reduce its borrowings within
three business days to the extent necessary to comply with the 25% limitation.
This policy shall not prohibit reverse
4
<PAGE>
repurchase agreements, deposits of assets to margin or guarantee positions in
futures, options, swaps or forward contracts, or the segregation of assets in
connection with such contracts.
(f) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its net assets
would be invested in repurchase agreements not entitling the holder to payment
of principal and interest within seven days and in securities that are illiquid
by virtue of legal or contractual restrictions on resale or the absence of a
readily available market. The Trustees, or the Fund's investment adviser acting
pursuant to authority delegated by the Trustees, may determine that a readily
available market exists for securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to
such rule, Section 4(2) commercial paper and municipal lease obligations.
Accordingly, such securities may not be subject to the foregoing limitation.
(g) The Fund may not invest in companies for the purpose of exercising
control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC") the Fund may 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
limits. The Fund will borrow money through the program only when the costs are
equal to or lower than the cost of bank loans. Interfund loans and borrowings
normally extend overnight, but can have maximum duration of seven days. The Fund
will lend through the program only when the returns are higher than those
available from other short-term instruments (such as repurchase agreements). The
Fund may have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed. Any delay in repayment to a lending Fund could
result in a lost investment opportunity or additional borrowing costs.
For purposes of the Fund's restriction on investing in a particular
industry, the Fund will rely primarily on industry classifications as published
by Bloomberg L.P. To the extent that Bloomberg L.P. classifications are so broad
that the primary economic characteristics in a single class are materially
different, the Fund may further classify issuers in accordance with industry
classifications as published by the SEC.
TYPES OF SECURITIES AND
INVESTMENT TECHNIQUES
ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments
(i.e., securities that are not readily marketable). The Trustees have authorized
Janus Capital to make liquidity determinations with respect to certain
securities, including Rule 144A Securities, commercial paper and municipal lease
obligations purchased by the Fund. Under the guidelines established by the
Trustees, Janus Capital will consider the following factors: 1) the frequency of
trades and quoted prices for the obligation; 2) the number of dealers willing to
purchase or sell the security and the number of other
5
<PAGE>
potential purchasers; 3) the willingness of dealers to undertake to make a
market in the security; and 4) the nature of the security and the nature of
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer. In the case of
commercial paper, Janus Capital will also consider whether the paper is traded
flat or in default as to principal and interest and any ratings of the paper by
a Nationally Recognized Statistical Rating Organization ("NRSRO"). A foreign
security that may be freely traded on or through the facilities of an offshore
exchange or other established offshore securities market is not deemed to be a
restricted security subject to these procedures.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES
The Fund may invest up to 10% of its assets in zero coupon, pay-in-kind and
step coupon securities. Zero coupon bonds are issued and traded at a discount
from their face value. They do not entitle the holder to any periodic payment of
interest prior to maturity. Step coupon bonds trade at a discount from their
face value and pay coupon interest. The coupon rate is low for an initial period
and then increases to a higher coupon rate thereafter. The discount from the
face amount or par value depends on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind bonds normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the security a
similar bond with the same coupon rate and a face value equal to the amount of
the coupon payment that would have been made.
Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), the Fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds. Because the Fund will not
receive cash payments on a current basis in respect of accrued original issue
discount on zero coupon bonds or step coupon bonds during the period before
interest payments begin, in some years the Fund may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. The Fund might obtain such cash from selling other portfolio
holdings which might cause the Fund to incur capital gains or losses on the
sale. Additionally, these actions are likely to reduce the assets to which Fund
expenses could be allocated and to reduce the rate of return for the Fund. In
some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for the Fund to sell the securities at the time.
Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
6
<PAGE>
PASS-THROUGH SECURITIES
The Fund may invest in various types of pass-through securities, such as
mortgage-backed securities, asset-backed securities and participation interests.
A pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. The purchaser of a pass-through security receives an undivided
interest in the underlying pool of securities. The issuers of the underlying
securities make interest and principal payments to the intermediary which are
passed through to purchasers, such as the Fund. The most common type of
pass-through securities are mortgage-backed securities. Government National
Mortgage Association ("GNMA") Certificates are mortgage-backed securities that
evidence an undivided interest in a pool of mortgage loans. GNMA Certificates
differ from bonds in that principal is paid back monthly by the borrowers over
the term of the loan rather than returned in a lump sum at maturity. The Fund
will generally purchase "modified pass-through" GNMA Certificates, which entitle
the holder to receive a share of all interest and principal payments paid and
owned on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether or not the mortgagor actually makes the payment. GNMA
Certificates are backed as to the timely payment of principal and interest by
the full faith and credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. FHLMC guarantees timely payments of
interest on PCs and the full return of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semiannually and return principal once a year in guaranteed minimum payments.
This type of security is guaranteed by FHLMC as to timely payment of principal
and interest but it is not guaranteed by the full faith and credit of the U.S.
government.
The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro rata
share of all interest and principal payments made and owned on the underlying
pool. This type of security is guaranteed by FNMA as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.
Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as 20 or 30 years, the borrowers
can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. The Fund's portfolio managers will
consider estimated prepayment rates in calculating the average weighted maturity
of the Fund. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining interest
rates, higher yielding mortgage-backed securities held by the Fund might be
converted
7
<PAGE>
to cash and the Fund will be forced to accept lower interest rates when that
cash is used to purchase additional securities in the mortgage-backed securities
sector or in other investment sectors. Additionally, prepayments during such
periods will limit the Fund's ability to participate in as large a market gain
as may be experienced with a comparable security not subject to prepayment.
Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor or guarantor of the security and interest
and principal payments ultimately depend upon payment of the underlying loans by
individuals. Tax-exempt asset-backed securities include units of beneficial
interests in pools of purchase contracts, financing leases, and sales agreements
that may be created when a municipality enters into an installment purchase
contract or lease with a vendor. Such securities may be secured by the assets
purchased or leased by the municipality; however, if the municipality stops
making payments, there generally will be no recourse against the vendor. The
market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.
INVESTMENT COMPANY SECURITIES
From time to time, the Fund may invest in securities of other investment
companies, subject to the provisions of Section 12(d)(1) of the 1940 Act. The
Fund may invest in securities of money market funds managed by Janus Capital
subject to the terms of an exemptive order obtained by Janus Capital and the
Janus funds which currently provides that the Fund will limit its aggregate
investment in a Janus money market fund to the greater of (i) 5% of its total
assets or (ii) $2.5 million. The Janus funds are seeking an amended and restated
exemptive order that would permit the Fund to invest in Janus money market funds
in excess of the limitations of Section 12(d)(1) of the 1940 Act. There is no
assurance that such amendment will be granted.
DEPOSITARY RECEIPTS
The Fund may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain costs in a sponsored
ADR. The bank or trust company depositary of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the foreign
issuer or to pass through voting rights. The Fund may also invest in European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in other
similar instruments representing securities of foreign companies. EDRs are
receipts issued by a European financial institution evidencing an arrangement
similar to that of ADRs. EDRs, in bearer form, are designed for use in European
securities markets.
8
<PAGE>
MUNICIPAL OBLIGATIONS
The Fund may invest in municipal obligations issued by states, territories
and possessions of the United States and the District of Columbia. The value of
municipal obligations can be affected by changes in their actual or perceived
credit quality. The credit quality of municipal obligations can be affected by,
among other things, the financial condition of the issuer or guarantor, the
issuer's future borrowing plans and sources of revenue, the economic feasibility
of the revenue bond project or general borrowing purpose, political or economic
developments in the region where the security is issued, and the liquidity of
the security. Because municipal securities are generally traded
over-the-counter, the liquidity of a particular issue often depends on the
willingness of dealers to make a market in the security. The liquidity of some
municipal obligations may be enhanced by demand features, which would enable the
Fund to demand payment on short notice from the issuer or a financial
intermediary.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Fund may purchase
include, but are not limited to, the following types of securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities have
variable or floating rates of interest and, under certain limited circumstances,
may have varying principal amounts. Variable and floating rate securities pay
interest at rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index or market interest
rate (the "underlying index"). See also "Inverse Floaters."
STANDBY COMMITMENTS. These instruments, which are similar to a put, give
the Fund the option to obligate a broker, dealer or bank to repurchase a
security held by the Fund at a specified price.
TENDER OPTION BONDS. Tender option bonds are generally long-term securities
that are coupled with the option to tender the securities to a bank,
broker-dealer or other financial institution at periodic intervals and receive
the face value of the bond. This type of security is commonly used as a means of
enhancing the security's liquidity.
INVERSE FLOATERS. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security. Certain
inverse floaters may have an interest rate reset mechanism that multiplies the
effects of change in the underlying index. Such mechanism may increase the
volatility of the security's market value. Certain variable rate securities
(including certain mortgage-backed securities) pay interest at a rate that
varies inversely to prevailing short-term interest rates (sometimes referred to
as inverse floaters). For example, upon reset the interest rate payable on a
security may go down when the underlying index has risen. The Fund will not
invest more than 5% of its assets in inverse floaters.
The Fund will purchase standby commitments, tender option bonds and
instruments with demand features primarily for the purpose of increasing the
liquidity of its portfolio.
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HIGH-YIELD/HIGH-RISK SECURITIES
The Fund intends to invest less than 35% of its net assets in debt
securities that are rated below investment grade (e.g., securities rated BB or
lower by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower
by Moody's Investors Service, Inc. ("Moody's")). Lower rated securities involve
a higher degree of credit risk, which is the risk that the issuer will not make
interest or principal payments when due. In the event of an unanticipated
default, the Fund would experience a reduction in its income, and could expect a
decline in the market value of the securities so affected.
The Fund may also invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, Janus Capital may treat such securities as unrated debt. Because of
the size and perceived demand of the issue, among other factors, certain
municipalities may not incur the costs of obtaining a rating. The Fund's
portfolio managers will analyze the creditworthiness of the issuer, as well as
any financial institution or other party responsible for payments on the
security, in determining whether to purchase unrated municipal bonds. Unrated
debt securities will be included in the 35% limit unless the portfolio managers
deem such securities to be the equivalent of investment grade securities.
Subject to the above limits, the Fund may purchase defaulted securities
only when its portfolio managers believe, based upon their analysis of the
financial condition, results of operations and economic outlook of an issuer,
that there is potential for resumption of income payments and that the
securities offer an unusual opportunity for capital appreciation.
Notwithstanding the portfolio managers' belief as to the resumption of income,
however, the purchase of any security on which payment of interest or dividends
is suspended involves a high degree of risk. Such risk includes, among other
things, the following:
Financial and Market Risks. Investments in securities that are in default
involve a high degree of financial and market risks that can result in
substantial or, at times, even total losses. Issuers of defaulted securities may
have substantial capital needs and may become involved in bankruptcy or
reorganization proceedings. Among the problems involved in investments in such
issuers is the fact that it may be difficult to obtain information about the
condition of such issuers. The market prices of such securities also are subject
to abrupt and erratic movements and above average price volatility, and the
spread between the bid and asked prices of such securities may be greater than
normally expected.
Disposition of Portfolio Securities. Although the Fund generally will
purchase securities for which its portfolio managers expect an active market to
be maintained, defaulted securities may be less actively traded than other
securities and it may be difficult to dispose of substantial holdings of such
securities at prevailing market prices. The Fund will limit holdings of any such
securities to amounts that the portfolio managers believe could be readily sold,
and holdings of such securities would, in any event, be limited so as not to
limit the Fund's ability to readily dispose of securities to meet redemptions.
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Other. Defaulted securities require active monitoring and may, at times,
require participation in bankruptcy or receivership proceedings on behalf of the
Fund.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement, the Fund purchases a security and simultaneously
commits to resell that security to the seller at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon incremental amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and
marked-to-market daily) of the underlying security or "collateral." A risk
associated with repurchase agreements is the failure of the seller to repurchase
the securities as agreed, which may cause the Fund to suffer a loss if the
market value of such securities declines before they can be liquidated on the
open market. In the event of bankruptcy or insolvency of the seller, the Fund
may encounter delays and incur costs in liquidating the underlying security.
Repurchase agreements that mature in more than seven days will be subject to the
15% limit on illiquid investments. While it is possible to eliminate all risks
from these transactions, it is the policy of the Fund to limit repurchase
agreements to those parties whose creditworthiness has been reviewed and found
satisfactory by Janus Capital.
The Fund may use reverse repurchase agreements to provide cash to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities or to earn additional
income on portfolio securities, such as Treasury bills or notes. In a reverse
repurchase agreement, the Fund sells a portfolio security to another party, such
as a bank or broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase agreement
is outstanding, the Fund will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. The
Fund will enter into reverse repurchase agreements only with parties that Janus
Capital deems creditworthy. Using reverse repurchase agreements to earn
additional income involves the risk that the interest earned on the invested
proceeds is less than the expense of the reverse repurchase agreement
transaction. This technique may also have a leveraging effect on the Fund's
portfolio, although the Fund's intent to segregate assets in the amount of the
reverse repurchase agreement minimizes this effect.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS. The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities, foreign currencies or
contracts based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the CFTC and must be executed through a futures commission
merchant ("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.
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The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
certain other liquid assets by the Fund's custodian for the benefit of the FCM.
Initial margin payments are similar to good faith deposits or performance bonds.
Unlike margin extended by a securities broker, initial margin payments do not
constitute purchasing securities on margin for purposes of the Fund's investment
limitations. If the value of either party's position declines, that party will
be required to make additional "variation margin" payments for the benefit of
the FCM to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. In the event of
the bankruptcy of the FCM that holds margin on behalf of the Fund, the Fund may
be entitled to a return of margin owed to the Fund only in proportion to the
amount received by the FCM's other customers. Janus Capital will attempt to
minimize the risk by careful monitoring of the creditworthiness of the FCMs with
which the Fund does business and by depositing margin payments in a segregated
account with the Fund's custodian.
The Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Fund will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Fund holds positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.
Although the Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets would be
available to the Fund immediately upon closing out the futures position, while
settlement of securities transactions could take several days. However, because
the Fund's cash that may otherwise be invested would be held uninvested or
invested in other liquid assets so long as the futures position remains open,
the Fund's return could be diminished due to the opportunity losses of foregoing
other potential investments.
The Fund's primary purpose in entering into futures contracts is to protect
the Fund from fluctuations in the value of securities or interest rates without
actually buying or selling the underlying debt or equity security. For example,
if the Fund anticipates an increase in the price of stocks, and it intends to
purchase stocks at a later time, the Fund could enter into a futures contract to
purchase a stock index as a temporary substitute for stock purchases. If an
increase in the market occurs that influences the stock index as anticipated,
the value of the futures contracts will increase, thereby serving as a hedge
against the Fund not participating in a market advance. This technique is
sometimes known as an anticipatory hedge. To the extent the Fund enters into
futures contracts for this purpose, the segregated assets maintained to cover
the Fund's obligations with respect to the futures contracts will consist of
other liquid assets
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from its portfolio in an amount equal to the difference between the contract
price and the aggregate value of the initial and variation margin payments made
by the Fund with respect to the futures contracts. Conversely, if the Fund holds
stocks and seeks to protect itself from a decrease in stock prices, the Fund
might sell stock index futures contracts, thereby hoping to offset the potential
decline in the value of its portfolio securities by a corresponding increase in
the value of the futures contract position. The Fund could protect against a
decline in stock prices by selling portfolio securities and investing in money
market instruments, but the use of futures contracts enables it to maintain a
defensive position without having to sell portfolio securities.
If the Fund owns Treasury bonds and the portfolio managers expect interest
rates to increase, the Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as the Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of the
Fund's interest rate futures contract will increase, thereby keeping the net
asset value of the Fund from declining as much as it may have otherwise. If, on
the other hand, the portfolio managers expect interest rates to decline, the
Fund may take a long position in interest rate futures contracts in anticipation
of later closing out the futures position and purchasing bonds. Although the
Fund can accomplish similar results by buying securities with long maturities
and selling securities with short maturities, given the greater liquidity of the
futures market than the cash market, it may be possible to accomplish the same
result more easily and more quickly by using futures contracts as an investment
tool to reduce risk.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery of the instrument underlying a futures contract. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced and prices in the futures market distorted. Third, from the
point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of the foregoing
distortions, a correct forecast of general price trends by the portfolio
managers still may not result in a successful use of futures.
Futures contracts entail risks. Although the Fund believes that use of such
contracts will benefit the Fund, the Fund's overall performance could be worse
than if the Fund had not entered into futures contracts if the portfolio
managers' investment judgement proves incorrect. For example, if the Fund has
hedged against the effects of a possible decrease in prices of securities held
in its portfolio and prices increase instead, the Fund will lose part or all of
the benefit of the increased value of these securities because of offsetting
losses in its futures positions. In addition, if the Fund has insufficient cash,
it may have to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which
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reflect the rising market and may occur at a time when the sales are
disadvantageous to the Fund.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments. The
Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests D
for example, by hedging investments in portfolio securities with a futures
contract based on a broad index of securities D which involves a risk that the
futures position will not correlate precisely with the performance of the Fund's
investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with the
Fund's investments. Futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between the Fund's investments and its futures positions also may
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. The
Fund may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in the Fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
result in losses that are not offset by the gains in the Fund's other
investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance that a liquid secondary
market will exist for any particular futures contract at any particular time. In
addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the Fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures positions
also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Fund may buy and write put and call
options on futures contracts. An option on a future gives the Fund the right
(but not the obligation) to buy or sell a futures contract at a specified price
on or before a specified date. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it
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is based or the price of the underlying instrument, ownership of the option may
or may not be less risky than ownership of the futures contract or the
underlying instrument. As with the purchase of futures contracts, when the Fund
is not fully invested it may buy a call option on a futures contract to hedge
against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
future's price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures' price at expiration of the option is higher than the exercise
price, the Fund will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the Fund
is considering buying. If a call or put option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between the change
in the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices or rising interest rates.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
FORWARD CONTRACTS. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated asset at
a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Fund may enter into
forward contracts to purchase and sell government securities, equity or income
securities, foreign currencies or other financial instruments. Forward contracts
generally are traded in an interbank market conducted directly between traders
(usually large commercial banks) and their customers. Unlike futures contracts,
which are standardized contracts, forward contracts can be specifically drawn to
meet the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses of forward
foreign currency exchange contracts ("forward currency contracts"). The Fund may
enter into forward currency contracts with stated contract values of up to the
value of the Fund's assets. A forward currency contract is an obligation to buy
or sell an amount of a
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specified currency for an agreed price (which may be in U.S. dollars or a
foreign currency). The Fund will exchange foreign currencies for U.S. dollars
and for other foreign currencies in the normal course of business and may buy
and sell currencies through forward currency contracts in order to fix a price
for securities it has agreed to buy or sell ("transaction hedge"). The Fund also
may hedge some or all of its investments denominated in a foreign currency or
exposed to foreign currency fluctuations against a decline in the value of that
currency relative to the U.S. dollar by entering into forward currency contracts
to sell an amount of that currency (or a proxy currency whose performance is
expected to replicate or exceed the performance of that currency relative to the
U.S. dollar) approximating the value of some or all of its portfolio securities
denominated in that currency ("position hedge") or by participating in options
or futures contracts with respect to the currency. The Fund also may enter into
a forward currency contract with respect to a currency where the Fund is
considering the purchase or sale of investments denominated in that currency but
has not yet selected the specific investments ("anticipatory hedge"). In any of
these circumstances the Fund may, alternatively, enter into a forward currency
contract to purchase or sell one foreign currency for a second currency that is
expected to perform more favorably relative to the U.S. dollar if the portfolio
managers believe there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge").
These types of hedging minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on the Fund's foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting the Fund's currency exposure from one foreign
currency to another removes the Fund's opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
the Fund if its portfolio managers' projection of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for the Fund than if it had not entered into such
contracts.
The Fund will cover outstanding forward currency contracts by maintaining
liquid portfolio securities denominated in or whose value its tied to, the
currency underlying the forward contract or the currency being hedged. To the
extent that the Fund is not able to cover its forward currency positions with
underlying portfolio securities, the Fund's custodian will segregate cash or
other liquid assets having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with respect to position
hedges, cross-hedges and anticipatory hedges. If the value of the securities
used to cover a position or the value of segregated assets declines, the Fund
will find alternative cover or segregate additional cash or liquid assets on a
daily basis so that the value of the covered and segregated assets will be equal
to the amount of the Fund's commitments with respect to such contracts. As an
alternative to segregating assets, the Fund may buy call options permitting the
Fund to buy the amount of foreign currency being hedged by a forward sale
contract or the Fund may buy put options permitting it to sell the amount of
foreign currency subject to a forward buy contract.
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While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contacts. In such event,
the Fund's ability to utilize forward contracts may be restricted. In addition,
the Fund may not always be able to enter into forward contracts at attractive
prices and may be limited in its ability to use these contracts to hedge Fund
assets.
OPTIONS ON FOREIGN CURRENCIES. The Fund may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Fund may buy put options
on the foreign currency. If the value of the currency declines, the Fund will
have the right to sell such currency for a fixed amount in U.S. dollars, thereby
offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent projected, the Fund could sustain losses on transactions in
foreign currency options that would require the Fund to forego a portion or all
of the benefits of advantageous changes in those rates.
The Fund may also write options on foreign currencies. For example, to
hedge against a potential decline in the U.S. dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, the Fund
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised and the decline in value of portfolio securities will be offset by the
amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, should expire unexercised and allow the Fund to hedge the increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and the Fund would be required
to buy or sell the underlying currency at a loss which may not be offset by the
amount of the premium. Through the writing of options on foreign currencies, the
Fund also may lose all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.
The Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by the Fund is "covered" if the Fund owns
the foreign currency underlying the call or has an absolute and immediate right
to acquire that
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foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other foreign currencies held in its portfolio. A call option is
also covered if the Fund has a call on the same foreign currency in the same
principal amount as the call written if the exercise price of the call held (i)
is equal to or less than the exercise price of the call written or (ii) is
greater than the exercise price of the call written, if the difference is
maintained by the Fund in cash or other liquid assets in a segregated account
with the Fund's custodian.
The Fund also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security which
the Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. Call options on foreign currencies which are
entered into for cross-hedging purposes are not covered. However, in such
circumstances, the Fund will collateralize the option by segregating cash or
other liquid assets in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
OPTIONS ON SECURITIES. In an effort to increase current income and to
reduce fluctuations in net asset value, the Fund may write covered put and call
options and buy put and call options on securities that are traded on United
States and foreign securities exchanges and over-the-counter. The Fund may write
and buy options on the same types of securities that the Fund may purchase
directly.
A put option written by the Fund is "covered" if the Fund (i) segregates
cash not available for investment or other liquid assets with a value equal to
the exercise price of the put with the Fund's custodian or (ii) holds a put on
the same security and in the same principal amount as the put written and the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the buyer of an option will reflect, among
other things, the relationship of the exercise price to the market price and the
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates.
A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by the Fund's
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if the Fund holds a call
on the same security and in the same principal amount as the call written and
the exercise price of the call held (i) is equal to or less than the exercise
price of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and other liquid
assets in a segregated account with its custodian.
The Fund also may write call options that are not covered for cross-hedging
purposes. The Fund collateralizes its obligation under a written call option for
cross-hedging purposes by segregating cash or other liquid assets in an amount
not less than the market value of the underlying security, marked-to-market
daily. The Fund would write a call option for cross-hedging purposes, instead of
writing a covered call option,
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when the premium to be received from the cross-hedge transaction would exceed
that which would be received from writing a covered call option and its
portfolio managers believe that writing the option would achieve the desired
hedge.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or bought, in the case of
a put option, since with regard to certain options, the writer may be assigned
an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of
the premium. This amount, of course, may, in the case of a covered call option,
be offset by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit the Fund to write another put
option to the extent that the exercise price is secured by other liquid assets.
Effecting a closing transaction also will permit the Fund to use the cash or
proceeds from the concurrent sale of any securities subject to the option for
other investments. If the Fund desires to sell a particular security from its
portfolio on which it has written a call option, the Fund will effect a closing
transaction prior to or concurrent with the sale of the security.
The Fund will realize a profit from a closing transaction if the price of
the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option. The Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market of a call
option generally will reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security owned
by the Fund.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, the Fund
may not be able to effect closing transactions in particular options and the
Fund would have to
19
<PAGE>
exercise the options in order to realize any profit. If the Fund is unable to
effect a closing purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it delivers the
underlying security upon exercise. The absence of a liquid secondary market may
be due to the following: (i) insufficient trading interest in certain options,
(ii) restrictions imposed by a national securities exchange ("Exchange") on
which the option is traded on opening or closing transactions or both, (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities, (iv) unusual
or unforeseen circumstances that interrupt normal operations on an Exchange, (v)
the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may
not at all times be adequate to handle current trading volume, or (vi) one or
more Exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
The Fund may write options in connection with buy-and-write transactions.
In other words, the Fund may buy a security and then write a call option against
that security. The exercise price of such call will depend upon the expected
price movement of the underlying security. The exercise price of a call option
may be below ("in-the-money"), equal to ("at-the-money") or above
("out-of-the-money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period.
Buy-and-write transactions using at-the-money call options may be used when it
is expected that the price of the underlying security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the exercise
price. If the options are not exercised and the price of the underlying security
declines, the amount of such decline will be offset by the amount of premium
received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the position or take
delivery of the security at the exercise price and the Fund's return will be the
premium received from the put options minus the amount by which the market price
of the security is below the exercise price.
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<PAGE>
The Fund may buy put options to hedge against a decline in the value of its
portfolio. By using put options in this way, the Fund will reduce any profit it
might otherwise have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.
The Fund may buy call options to hedge against an increase in the price of
securities that it may buy in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund.
EURODOLLAR INSTRUMENTS. The Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.
SWAPS AND SWAP-RELATED PRODUCTS. The Fund may enter into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of the Fund's obligations over its entitlement with respect to each interest
rate swap will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Fund's custodian. If
the Fund enters into an interest rate swap on other than a net basis, it would
maintain a segregated account in the full amount accrued on a daily basis of its
obligations with respect to the swap. The Fund will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three
highest rating categories of at least one NRSRO at the time of entering into
such transaction. Janus Capital will monitor the creditworthiness of all
counterparties on an ongoing basis. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Janus Capital has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent the
Fund sells (i.e., writes) caps and floors, it will segregate cash or other
liquid assets having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of its obligations with respect to any caps or
floors.
21
<PAGE>
There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by the Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the payments that the Fund
is contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. The Fund
may buy and sell (i.e., write) caps and floors without limitation, subject to
the segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND
FOREIGN INSTRUMENTS. Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded on certain Exchanges, such as the Philadelphia
Stock Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded over the-counter. In
an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As a
result, many of the protections provided to traders on organized Exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an Exchange are cleared and guaranteed
by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on an Exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign
22
<PAGE>
currency option exercises, or would result in undue burdens on the OCC or its
clearing member, impose special procedures on exercise and settlement, such as
technical changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
INVESTMENT ADVISER
As stated in the Prospectus, the Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. The
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Fund's investments, provide office space for
the Fund, and pay the salaries, fees and expenses of all Fund officers and of
those Trustees who are affiliated with Janus Capital. Janus Capital also may
make payments to selected broker-dealer firms or institutions which perform
recordkeeping or other services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital. Janus Capital is
also authorized to perform the management and administrative services necessary
for the operation of the Fund.
The Fund pays custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the
execution of portfolio transactions, legal and accounting expenses, interest and
taxes, registration fees, expenses of shareholders' meetings and reports to
shareholders, fees and expenses of Trustees who are not affiliated with Janus
Capital, costs of preparing, printing and mailing the Fund's Prospectus and SAI
to current shareholders, and other costs of complying with applicable laws
regulating the sale of Fund shares. Pursuant to the Advisory Agreement, Janus
Capital furnishes certain other services, including net asset value
determination and Fund accounting, recordkeeping, and blue sky registration and
monitoring services, for which the Fund may reimburse Janus Capital for its
costs.
The Fund has agreed to compensate Janus Capital for its services by the
monthly payment of a fee at the annual rate of 0.75% of the first $300 million
of the Fund's average daily net assets, 0.70% of the next $200 million of the
Fund's average daily net assets, and 0.65% of the average daily net assets of
the Fund in excess of $500 million.
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<PAGE>
For the fiscal year ended October 31, 1997, the investment advisory fee was
$9,406,417. For the fiscal years ended October 31, 1996 and October 31, 1995,
the Fund incurred investment advisory fees of $12,316,252 and $10,947,796,
respectively. Janus Capital did not waive any portion of its fee in any of these
years.
The Advisory Agreement is dated July 1, 1997, and it will continue in
effect until July 1, 1998, and thereafter from year to year so long as such
continuance is approved annually by a majority of the Fund's Trustees who are
not parties to the Advisory Agreement or interested persons of any such party,
and by either a majority of the outstanding voting shares or the Trustees of the
Fund. The Advisory Agreement i) may be terminated without the payment of any
penalty by the Fund or Janus Capital on 60 days' written notice; ii) terminates
automatically in the event of its assignment; and iii) generally, may not be
amended without the approval by vote of a majority of the Trustees of the Fund,
including the Trustees who are not interested persons of the Fund or Janus
Capital and, to the extent required by the 1940 Act, the vote of a majority of
the outstanding voting securities of the Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Fund, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account. Pursuant to an exemptive order granted by the SEC, the Fund and other
funds advised by Janus Capital may also transfer daily uninvested cash balances
into one or more joint trading accounts. Assets in the joint trading accounts
are invested in money market instruments and the proceeds are allocated to the
participating Funds on a pro rata basis.
Each account managed by Janus Capital has its own investment objective and
policies and is managed accordingly by a particular portfolio manager or team of
portfolio managers. As a result, from time to time two or more different managed
accounts may pursue divergent investment strategies with respect to investments
or categories of investments.
As indicated in the Prospectus, Janus Capital does not permit the Fund's
portfolio managers to purchase and sell securities for their own accounts except
under the limited exceptions contained in Janus Capital's policy regarding
personal investing by directors/Trustees, officers and employees of Janus
Capital and the Trust. The policy requires investment personnel and officers of
Janus Capital, inside directors/Trustees of Janus Capital and the Fund and other
designated persons deemed to have access to current trading information to
pre-clear all transactions in securities not otherwise exempt under the policy.
Requests for trading authority will be denied when, among other reasons, the
proposed personal transaction would be contrary to the provisions of the policy
or would be deemed to adversely affect any transaction known to be under
consideration for or to have been effected on behalf of any client account,
including the Fund.
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<PAGE>
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Trust to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.
CUSTODIAN, TRANSFER AGENT
AND CERTAIN AFFILIATIONS
State Street Bank and Trust Company ("State Street"), P.O. Box 0351,
Boston, Massachusetts 02117-0351 is the custodian of the domestic securities and
cash of the Fund. State Street and the foreign subcustodians selected by it and
approved by the Trustees, have custody of the assets of the Fund held outside
the U.S. and cash incidental thereto. The custodian and subcustodians hold the
Fund's assets in safekeeping and collect and remit the income thereon, subject
to the instructions of the Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Fund's
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Fund.
For transfer agency and other services, Janus Service receives a fee calculated
at an annual rate of 0.16% of average net assets of the Fund. In addition, the
Fund pays DST Systems, Inc. ("DST"), a subsidiary of KCSI, license fees at the
rate of $3.06 per shareholder account for the use of DST's shareholder
accounting system. The fund also pays DST $1.10 per closed shareholder account.
The Fund pays DST for the use of its portfolio and fund accounting system a
monthly base fee of $250 to $1,250 based on the number of Janus funds using the
system and an asset charge of $1 per million dollars of net assets (not to
exceed $500 per month). In addition, the Fund pays DST postage and forms costs
of a DST affiliate incurred in mailing Fund shareholder transaction
confirmations.
The Trustees have authorized the Fund to use another affiliate of DST as
introducing broker for certain Fund portfolio transactions as a means to reduce
Fund expenses through credits against the charges of DST and its affiliates with
regard to commissions earned by such affiliate. See "Portfolio Transactions and
Brokerage."
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Fund. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Fund in connection
25
<PAGE>
with the sale of its shares in all states in which the shares are registered and
in which Janus Distributors is qualified as a broker-dealer. Under the
Distribution Agreement, Janus Distributors continuously offers the Fund's shares
and accepts orders at net asset value. No sales charges are paid by investors.
Promotional expenses in connection with offers and sales of shares are paid by
Janus Capital.
PORTFOLIO TRANSACTIONS
AND BROKERAGE
Decisions as to the assignment of portfolio business for the Fund and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions. The Fund may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; rebates of commissions by a broker to the Fund or to a third
party service provider to the Fund to pay Fund expenses; and research products
or services provided. In recognition of the value of the foregoing factors,
Janus Capital may place portfolio transactions with a broker or dealer with whom
it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting that transaction if Janus
Capital determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research provided by such broker
or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of Janus Capital. Research may include furnishing
advice, either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel, industry
experts, economists and government officials; comparative performance evaluation
and technical measurement services and quotation services, and products and
other services (such as third party publications, reports and analyses, and
computer and electronic access, equipment, software, information and accessories
that deliver, process or otherwise utilize information, including the research
described above) that assist Janus Capital in carrying out its responsibilities.
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<PAGE>
Most brokers and dealers used by Janus Capital provide research and other
services described above. For the year ended October 31, 1997, the Fund paid
$709,774 of its total brokerage commissions to brokers and dealers in
transactions identified for execution primarily on the basis of research and
other services provided to the Fund on transactions of $408,620,190. Research
received from brokers or dealers is supplemental to Janus Capital's own research
efforts.
Janus Capital may use research products and services in servicing other
accounts in addition to the Fund. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that it
has identified as providing superior executions and research, research-related
products or services which benefit its advisory clients, including the Fund.
Research products and services incidental to effecting securities transactions
furnished by brokers or dealers may be used in servicing any or all of Janus
Capital's clients and such research may not necessarily be used by Janus Capital
in connection with the accounts which paid commissions to the broker-dealer
providing such research products and services.
Janus Capital may consider sales of Fund shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Fund
shares as a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for the Fund i) to the Fund or ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. In placing portfolio business with such broker-dealers, Janus Capital will
seek the best execution of each transaction.
When the Fund purchases or sells a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
The Fund's Trustees have authorized Janus Capital to place transactions
with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of
DST. Janus Capital may do so if it reasonably believes that the quality of the
transaction and the associated commission are fair and reasonable and if,
overall, the associated transaction costs, net of any credits described above
under "Custodian, Transfer Agent and Certain Affiliations," are lower than those
that would otherwise be incurred.
The total amount of brokerage commissions paid by the Fund during the
fiscal year ended October 31, 1997, was $3,599,484. For the fiscal years ended
October 31, 1996 and October 31, 1995, the Fund paid brokerage commissions of
$3,945,142 and $3,920,258, respectively. Included in the brokerage commissions
paid for the fiscal year ended October 31, 1997, was $51,096 paid through DSTS,
which served to reduce by
27
<PAGE>
$38,322 certain out-of-pocket expenses paid by the Fund. Included in brokerage
commissions paid for the fiscal years ended October 31, 1996 and October 31,
1995, was $64,665 and $143,719, respectively, paid through DSTS which served to
reduce by $48,499 and $107,789, respectively, certain out-of-pocket expenses.
Brokerage commissions paid through DSTS for the 1997 fiscal year represented
1.42% of the Fund's aggregate brokerage commissions for such fiscal year, while
1.54% of the aggregate dollar amount of the Fund's portfolio transactions
involving a commission payment were executed through DSTS. The difference
between commissions paid through DSTS and expenses reduced constitute
commissions paid to an unaffiliated clearing broker. Differences in the
percentage of total commissions versus the percentage of total transactions is
due, in part, to variations among share prices and number of shares traded,
while average price per share commission rates were substantially the same.
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc.
(both separate Maryland corporations) and the Janus Income Series (a
Massachusetts business trust comprised of Janus Flexible Income Fund series)
were reorganized into separate series of the Trust. In general, all references
to Trust offices in this section include comparable offices with the respective
predecessor funds, unless a Trust office was filled subsequent to the
reorganization.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4928
Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief
Executive Officer, Director and President of Janus Capital. Director of
Janus Distributors, Inc. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice Chairman and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund. Executive Vice
President and Co-Manager of Janus Venture Fund.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
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<PAGE>
William H. Bales* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Venture Fund.
Formerly, research analyst at Janus Capital (1993-1996).
Jonathan D. Coleman* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Venture Fund.
Formerly, research analyst at Janus Capital (1994-1996). Fulbright Fellow
(1993-1994). Obtained a Bachelor of Arts in Political Economy and Spanish
from Williams College (1991-1993).
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4928
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service Corporation, Janus Distributors, Inc. and Janus Capital. Director
of IDEX, Janus Service Corporation and Janus Distributors, Inc. Director,
Treasurer and Vice President of Finance of Janus Capital International Ltd.
Formerly (May 1992-January 1996), Treasurer of Janus Investment Fund and
Janus Aspen Series.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4928
Treasurer and Chief Accounting Officer of Janus Aspen Series. Vice
President of Janus Capital. Formerly (1991 to 1997), Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4928
Secretary of Janus Aspen Series. Director and President of Janus
Distributors, Inc. Assistant Vice President and Associate Counsel of Janus
Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc.,
Boston, Massachusetts (mutual fund administration services).
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
29
<PAGE>
Gary O. Loo# - Trustee
102 N. Cascade, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and Director of High Valley Group,
Inc., Colorado Springs, Colorado (investments).
Dennis B. Mullen - Trustee
14103 Denver West Parkway
Golden, CO 80401
Trustee of Janus Aspen Series. President and Chief Executive Officer, BCE
West, L.P., Phoenix, AZ (restaurant chain). Formerly (1997-1998), Chief
Financial Officer - Boston Market Concepts, Boston Chicken, Inc., Golden,
Colorado (restaurant chain). Formerly (1993 to 1997), President and Chief
Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken,
Inc., Bellevue, Washington (restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 to 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, California. Formerly (1989 to 1993), President and Chief Executive
Officer of Bridgecliff Management Services, Campbell, California (a
condominium association management company).
James T. Rothe - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm). Formerly
(1986-1994), Dean of the College of Business, University of Colorado,
Colorado Springs, Colorado.
The Trustees are responsible for major decisions relating to the Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Fund by its officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Trust's Executive Committee shall have and may exercise all the powers
and authority of the Trustees except for matters requiring action by all
Trustees pursuant to the Trust's Bylaws or Agreement and Declaration of Trust
("Declaration of Trust"), Massachusetts law or the 1940 Act.
The following table shows the aggregate compensation earned by and paid to
each Trustee by the Fund described in this SAI and all funds advised and
sponsored by Janus
30
<PAGE>
Capital (collectively, the "Janus Funds") for the periods indicated. None of the
Trustees receive any pension or retirement benefits from the Fund or the Janus
Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Fund for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position October 31, 1997 December 31, 1997**
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $0 $0
James P. Craig, Trustee* $0 $0
John W. Shepardson,
Trustee+ $1,056 $14,500
William D. Stewart,
Trustee $2,001 $70,667
Gary O. Loo, Trustee $1,833 $60,667
Dennis B. Mullen, Trustee $1,965 $67,167
Martin H. Waldinger,
Trustee $1,905 $67,667
James T. Rothe, Trustee++ $1,277 $64,833
- -----------------------------------------------------------------------------
</TABLE>
*An interested person of the Fund and of Janus Capital. Compensated by Janus
Capital and not the Fund.
**As of December 31, 1997, Janus Funds consisted of two registered investment
companies comprised of a total of 31 funds.
+Mr. Shepardson retired as a Fund Trustee on March 31, 1997.
++Mr. Rothe began serving as a Fund Trustee on January 1, 1997.
PURCHASE OF SHARES
The Fund has discontinued public sales of its shares to new investors. Only
shareholders who maintain open accounts are permitted to continue to make
investments in the Fund and to reinvest any dividends and capital gains
distributions. Once a Fund account is closed, additional investments in the Fund
may not be possible. The Shareholder's Manual section of the Prospectus contains
detailed information about the purchase of shares.
NET ASSET VALUE DETERMINATION
As stated in the Prospectus, the net asset value ("NAV") of Fund shares is
determined once each day on which the New York Stock Exchange ("NYSE") is open,
at the close of its regular trading session (normally 4:00 p.m., New York time,
Monday through Friday). The NAV of Fund shares is not determined on days the
NYSE is closed (generally, New Year's Day, Presidents' Day, Martin Luther King
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas). The per share NAV of the Fund is determined by dividing the total
value of the Fund's securities and other assets, less liabilities, by the total
number of shares outstanding. In determining NAV, securities listed on an
Exchange, the NASDAQ National Market and foreign markets are valued at the
closing prices on such markets, or if such price is lacking for the trading
period immediately preceding the time of determination, such securities are
valued at their current bid price. Municipal securities held by the Fund are
traded primarily in the over-the-counter market. Valuations of such securities
are furnished by one or more pricing services employed by the Fund and are based
upon a computerized matrix system or appraisals obtained by a pricing service,
in each case in reliance upon information concerning market transactions and
quotations from
31
<PAGE>
recognized municipal securities dealers. Other securities that are traded on the
over-the-counter market are valued at their closing bid prices. Foreign
securities and currencies are converted to U.S. dollars using the exchange rate
in effect at the close of the NYSE. The Fund will determine the market value of
individual securities held by it, by using prices provided by one or more
professional pricing services which may provide market prices to other funds,
or, as needed, by obtaining market quotations from independent broker-dealers.
Short-term securities maturing within 60 days are valued on an amortized cost
basis. Securities for which quotations are not readily available, and other
assets, are valued at fair values determined in good faith under procedures
established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the NYSE is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which the Fund's NAV is not calculated. The Fund calculates its NAV per
share, and therefore effects sales, redemptions and repurchases of its shares,
as of the close of the NYSE once on each day on which the NYSE is open. Such
calculation may not take place contemporaneously with the determination of the
prices of the foreign portfolio securities used in such calculation.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
If investors do not elect in writing or by phone to receive their dividends
and distributions in cash, all income dividends and capital gains distributions,
if any, on the Fund's shares are reinvested automatically in additional shares
of the Fund at the NAV determined on the first business day following the record
date. Checks for cash dividends and distributions and confirmations of
reinvestments are usually mailed to shareholders within ten days after the
record date. Any election of the manner in which a shareholder wishes to receive
dividends and distributions (which may be made on the New Account Application
form or by phone) will apply to dividends and distributions the record dates of
which fall on or after the date that the Fund receives such notice. Changes to
distribution options must be received at least three days prior to the record
date to be effective for such date. Investors receiving cash distributions and
dividends may elect in writing or by phone to change back to automatic
reinvestment at any time.
REDEMPTION OF SHARES
Procedures for redemption of shares are set forth in the Shareholder's
Manual section of the Prospectus. Shares normally will be redeemed for cash,
although the Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Fund is governed by Rule 18f-1 under the 1940 Act, which requires the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of
the Fund during any 90-day period for any one
32
<PAGE>
shareholder. Should redemptions by any shareholder exceed such limitation, the
Fund will have the option of redeeming the excess in cash or in kind. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage costs in
converting the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "Purchase of Shares D Net Asset Value Determination"
and such valuation will be made as of the same time the redemption price is
determined.
The right to require the Fund to redeem its shares may be suspended, or the
date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
and specific types of accounts is set forth in the Prospectus. Applications for
specific types of accounts may be obtained by calling the Fund at 1-800-525-3713
or writing to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375.
TELEPHONE TRANSACTIONS
As stated in the Prospectus, shareholders may initiate a number of
transactions by telephone. The Fund, its transfer agent and its distributor
disclaim responsibility for the authenticity of instructions received by
telephone. Such entities will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include,
among others, requiring personal identification prior to acting upon telephone
instructions, providing written confirmation of the transactions and tape
recording telephone conversations.
SYSTEMATIC REDEMPTIONS
As stated in the Shareholder's Manual section of the Prospectus, if you
have a regular account or are eligible for distributions from a retirement plan,
you may establish a systematic redemption option. The payments will be made from
the proceeds of periodic redemptions of shares in the account at the NAV.
Depending on the size or frequency of the disbursements requested, and the
fluctuation in value of the Fund's portfolio, redemptions for the purpose of
making such disbursements may reduce or even exhaust the shareholder's account.
Either an investor or the Fund, by written notice to the other, may terminate
the investor's systematic redemption option without penalty at any time.
Information about requirements to establish a systematic redemption option
may be obtained by writing or calling the Fund at the address or phone number
shown above.
33
<PAGE>
TAX-DEFERRED ACCOUNTS
The Fund offers several different types of tax-deferred accounts that an
investor may establish to invest in Fund shares, depending on rules prescribed
by the Code. Regular and Roth Individual Retirement Accounts ("IRAs") may be
used by most individuals who have taxable compensation. Simplified Employee
Pensions ("SEPs") and Defined Contribution Plans (Profit Sharing or Money
Purchase Pension Plans) may be used by most employers, including corporations,
partnerships and sole proprietors, for the benefit of business owners and their
employees. Education IRAs allow individuals, subject to certain income
limitations, to contribute up to $500 annually on behalf of any child under the
age of 18. In addition, the Fund offers a Section 403(b)(7) Plan for employees
of educational organizations and other qualifying tax-exempt organizations.
Investors should consult their tax advisor or legal counsel before selecting a
tax-deferred account.
Contributions under Regular and Roth IRAs, Education IRAs, SEPs, Defined
Contribution Plans and Section 403(b)(7) Plans are subject to specific
contribution limitations. Generally, such contributions may be invested at the
direction of the participant. The investment is then held by Investors Fiduciary
Trust Company as custodian. Each participant's account is charged an annual fee
of $12. There is a maximum annual fee of $24 per taxpayer identification number.
The Fund reserves the right to change the amount of this fee or to waive it in
whole or in part for certain types of accounts.
Distributions from tax-deferred accounts may be subject to ordinary income
tax and may be subject to an additional 10% tax if withdrawn prior to age 59 1/2
or used for a nonqualifying purpose. Additionally, shareholders generally must
start withdrawing retirement plan assets no later than April 1 of the year after
they reach age 70 1/2. Several exceptions to these general rules may apply and
several methods exist to determine the amount and timing of the minimum annual
distribution (if any). Shareholders should consult with their tax advisor or
legal counsel prior to receiving any distribution from any tax-deferred account,
in order to determine the income tax impact of any such distribution.
To receive additional information about Regular and Roth IRAs, SEPs,
Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary
materials to establish an account, please call the Fund at 1-800-525-3713 or
write to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375. No
contribution to a Regular or Roth IRA, SEP, Defined Contribution Plan or Section
403(b)(7) Plan can be made until the appropriate forms to establish any such
plan have been completed.
34
<PAGE>
INCOME DIVIDENDS, CAPITAL
GAINS DISTRIBUTIONS AND
TAX STATUS
It is a policy of the Fund to make distributions of substantially all of
its investment income and any net realized capital gains. Any capital gains
realized during each fiscal year of the Fund ended October 31, as defined by the
Code, are normally declared and payable to shareholders in December. The Fund
intends to qualify as a regulated investment company by satisfying certain
requirements prescribed by Subchapter M of the Code.
The Fund may purchase securities of certain foreign corporations considered
to be passive foreign investment companies by the IRS. In order to avoid taxes
and interest that must be paid by the Fund, if these instruments are profitable,
the Fund may make various elections permitted by the tax laws. However, these
elections could require that the Fund recognize taxable income, which in turn
must be distributed.
Some foreign securities purchased by the Fund may be subject to foreign
taxes which could reduce the yield on such securities. The amount of such
foreign taxes is expected to be insignificant. Accordingly, the Fund does not
intend to make the election permitted under section 853 of the Code to pass
through such taxes to shareholders as a foreign tax credit as this would
increase the taxable income reported to shareholders and require shareholders to
take the credit on their tax returns, complicating the preparation of such
returns. As a result, any foreign taxes paid or accrued will represent an
expense to the Fund which will reduce its investment company taxable income.
PRINCIPAL SHAREHOLDERS
As of January 22, 1998, the officers and Trustees of the Fund as a group
owned less than 1% of the outstanding shares of the Fund. In addition, as of
January 22, 1998, Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104-4122, owned 8.58% of the outstanding shares of the Fund.
MISCELLANEOUS INFORMATION
The Fund was originally organized in 1984 as a Maryland corporation. On
August 7, 1992, the Fund was reorganized from a Maryland corporation into Janus
Venture Fund, a separate series of the Trust. Pursuant to this reorganization,
the Trust assumed all the assets and liabilities of Janus Venture Fund, Inc.,
and shareholders received shares of Janus Venture Fund series of the Trust equal
both in number and net asset value to their shares of Janus Venture Fund, Inc.
All references in this SAI to the Fund and all financial and other information
about the Fund prior to August 7, 1992 are to the former Janus Venture Fund,
Inc.; all references after August 7, 1992, are to the Janus Venture Fund series
of the Trust. As the result of the reorganization, the fiscal year end of the
Fund changed from July 31 to October 31. As of the date of this SAI, the Trust
consists of 18 other series.
35
<PAGE>
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Fund, the
Fund must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Fund could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or the Trustees.
The Declaration of Trust also provides for indemnification from the assets of
the Fund for all losses and expenses of any Fund shareholder held liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring a financial
loss on account of its liability as a shareholder of the Fund is limited to
circumstances in which the Fund would be unable to meet its obligations. The
possibility that these circumstances would occur is remote. The Trustees intend
to conduct the operations of the Fund to avoid, to the extent possible,
liability of shareholders for liabilities of the Fund.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of the Fund are fully paid and nonassessable when issued. All
shares of the Fund participate equally in dividends and other distributions by
the Fund, and in residual assets of the Fund in the event of liquidation. Shares
of the Fund have no preemptive, conversion or subscription rights. Shares of the
Fund may be transferred by endorsement or stock power as is customary, but the
Fund is not bound to recognize any transfer until it is recorded on its books.
VOTING RIGHTS
The present Trustees were elected at a meeting of shareholders held on July
10, 1992, with the exception of Mr. Craig and Mr. Rothe who were appointed by
the Trustees as of June 30, 1995 and January 1, 1997, respectively. Under the
Declaration of Trust, each Trustee will continue in office until the termination
of the Trust or his earlier death, retirement, resignation, bankruptcy,
incapacity or removal. Vacancies will be filled by a majority of the remaining
Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Declaration
of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power
to vote to elect or remove Trustees, to terminate or reorganize the Fund, to
amend the Declaration of Trust, to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of the Fund and of each other series of the Trust has one vote
(and fractional votes for fractional shares). Shares of all series of the Trust
have noncumulative voting rights, which means that the holders of more than 50%
of the shares of all series of the Trust voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so and, in such event, the
holders of the remaining shares will not be able to elect any Trustees. The Fund
and each other series of the Trust will vote separately
36
<PAGE>
only with respect to those matters that affect only that series or if a series'
interest in a matter differs from the interests of other series of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Fund, audit the Fund's annual financial
statements and prepare its tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Fund or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
PERFORMANCE INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5, and 10 years (up to the life of the
Fund). These are the annual total rates of return that would equate the initial
amount invested to the ending redeemable value. These rates of return are
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return,
n = the number of years and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). All total return figures
reflect the deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are reinvested when paid.
The Fund was made available for public sale on May 2, 1985. The one year,
five year, ten year and lifetime average annual total returns, computed as of
October 31, 1997, for each of those periods, are 13.38%, 13.31%, 16.42% and
16.50%, respectively.
From time to time in advertisements or sales material, the Fund may discuss
its performance ratings or other information as published by recognized mutual
fund statistical rating services, including, but not limited to, Lipper
Analytical Services, Inc., Ibbotson Associates, Micropal or Morningstar, Inc. or
by publications of general interest such as Forbes, Money, The Wall Street
Journal, Mutual Funds Magazine, Kiplinger's or Smart Money. The Fund may also
compare its performance to that of other selected mutual funds, mutual fund
averages or recognized stock market indicators, including, but not limited to,
the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400
Midcap Index, the Dow Jones Industrial Average, the Russell 2000 Index and the
NASDAQ composite. In addition, the Fund may compare its total return to the
yield on U.S. Treasury obligations and to the percentage change in the Consumer
Price Index. Such performance ratings or comparisons may be made with funds that
may have different investment restrictions, objectives, policies or techniques
than the Fund and
37
<PAGE>
such other funds or market indicators may be comprised of securities that differ
significantly from the Fund's investments.
FINANCIAL STATEMENTS
The following audited financial statements for the period ended October 31,
1997 are hereby incorporated into this SAI by reference to the Fund's Annual
Report dated October 31, 1997. A copy of such report accompanies this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT:
Schedule of Investments as of October 31, 1997
Statement of Operations for the period ended October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Statements of Changes in Net Assets for the periods ended October 31, 1997
and
1996
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this SAI and are not part of the
Registration Statement.
38
<PAGE>
APPENDIX A
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although Janus Capital 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
CCC, CC, C issuer's capacity to meet required interest and
principal payments. BB -- lowest degree of
speculation; C -- the highest degree of
speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk
exposure to adverse conditions.
D In default.
- ------------------------------------------------------------------------
</TABLE>
39
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
- ------------------------------------------------------------------------
INVESTMENT GRADE
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 will be treated as noninvestment grade securities unless
the portfolio managers determine that such securities are the equivalent of
investment grade securities. Securities that have received ratings from more
than one agency are considered investment grade if at least one agency has rated
the security investment grade.
40
<PAGE>
JANUS INVESTMENT FUND
100 Fillmore Street
Denver, CO 80206-4928
(800) 29JANUS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Institutional Shares
This Statement of Additional Information ("SAI") expands upon and
supplements the information contained in the current Prospectus for the
Institutional Shares (the "Shares") of Janus Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund"
and, collectively, the "Funds"). The Funds are each a separate series of Janus
Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund
represents shares of beneficial interest in a separate portfolio of securities
and other assets with its own objective and policies, and is managed separately
by Janus Capital Corporation ("Janus Capital").
This SAI is not a Prospectus and should be read in conjunction with the
Prospectus dated February 17, 1998, which is incorporated by reference into this
SAI and may be obtained from the Trust at the above phone number or address.
This SAI contains additional and more detailed information about the Funds'
operations and activities than the Prospectus.
LOGO
<PAGE>
JANUS INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Investment Policies and Restrictions.......................................... 3
Types of Securities and Investment Techniques................................. 5
Performance Data............................................................. 10
Determination of Net Asset Value............................................. 12
Investment Adviser and Administrator......................................... 12
Custodian, Transfer Agent and Certain Affiliations........................... 15
Portfolio Transactions and Brokerage......................................... 15
Officers and Trustees........................................................ 17
Purchase of Shares........................................................... 20
Redemption of Shares......................................................... 21
Tax Deferred Accounts........................................................ 21
Shareholder Accounts......................................................... 22
Dividends and Tax Status..................................................... 22
Principal Shareholders....................................................... 23
Miscellaneous Information.................................................... 23
Shares of the Trust..................................................... 24
Voting Rights........................................................... 24
Independent Accountants................................................. 25
Registration Statement.................................................. 25
Financial Statements......................................................... 25
Appendix A - Description of Securities Ratings............................... 26
Appendix B - Description of Municipal Securities............................. 29
- --------------------------------------------------------------------------------
2
<PAGE>
INVESTMENT POLICIES
AND RESTRICTIONS
INVESTMENT OBJECTIVES
As discussed in the Prospectus, the investment objective of each of Janus
Money Market Fund and Janus Government Money Market Fund is to seek maximum
current income to the extent consistent with stability of capital. The
investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum
current income that is exempt from federal income taxes to the extent consistent
with stability of capital. There can be no assurance that a Fund will achieve
its investment objective or maintain a stable net asset value of $1.00 per
share. The investment objectives of the Funds are not fundamental and may be
changed by the Trustees of the Trust (the "Trustees") without shareholder
approval.
INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS
As indicated in the Prospectus, each Fund has adopted certain fundamental
investment restrictions that cannot be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or a particular Fund or particular
class of Shares if a matter affects just that Fund or that class of Shares), or
(ii) 67% or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Trust (or a particular
Fund or class of Shares) are present or represented by proxy.
As used in the restrictions set forth below and as used elsewhere in this
SAI, the term "U.S. Government Securities" shall have the meaning set forth in
the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940 Act
defines U.S. Government Securities as securities issued or guaranteed by the
United States government, its agencies or instrumentalities. U.S. Government
Securities may also include repurchase agreements collateralized and municipal
securities escrowed with or refunded with escrowed U.S. government securities.
The Funds have adopted the following fundamental policies:
(1) With respect to 75% of its assets, a Fund may not purchase a security
other than a U.S. Government Security, if, as a result, more than 5% of the
Fund's total assets would be invested in the securities of a single issuer or
the Fund would own more than 10% of the outstanding voting securities of any
single issuer. (As noted in the Prospectus, the Funds are also currently subject
to the greater diversification standards of Rule 2a-7, which are not
fundamental.)
(2) A Fund may not purchase securities if 25% or more of the value of a
Fund's total assets would be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that: (i)
there is no limit on investments in U.S. Government Securities or in obligations
of domestic commercial banks (including U.S. branches of foreign banks subject
to regulations under U.S. laws applicable to domestic banks and, to the extent
that its parent is unconditionally liable for the obligation, foreign branches
of U.S. banks); (ii) this limitation shall not apply to
3
<PAGE>
a Fund's investments in municipal securities; (iii) there is no limit on
investments in issuers domiciled in a single country; (iv) financial service
companies are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance are each
considered to be a separate industry); and (v) utility companies are classified
according to their services (for example, gas, gas transmission, electric, and
telephone are each considered to be a separate industry).
(3) A Fund may not act as an underwriter of securities issued by others,
except to the extent that a Fund may be deemed an underwriter in connection with
the disposition of portfolio securities of such Fund.
(4) A Fund may not lend any security or make any other loan if, as a
result, more than 25% of a Fund's total assets would be lent to other parties
(but this limitation does not apply to purchases of commercial paper, debt
securities or repurchase agreements).
(5) A Fund may not purchase or sell real estate or any interest therein,
except that the Fund may invest in debt obligations secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein.
(6) A Fund may borrow money for temporary or emergency purposes (not for
leveraging) in an amount not exceeding 25% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings). If
borrowings exceed 25% of the value of a Fund's total assets by reason of a
decline in net assets, the Fund will reduce its borrowings within three business
days to the extent necessary to comply with the 25% limitation. Reverse
repurchase agreements or the segregation of assets in connection with such
agreements shall not be considered borrowing for the purposes of this limit.
(7) Each Fund may, notwithstanding any other investment policy or
restriction (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and restrictions as that
Fund.
Each Fund has adopted the following nonfundamental investment restrictions
that may be changed by the Trustees without shareholder approval:
(1) A Fund may not invest in securities or enter into repurchase agreements
with respect to any securities if, as a result, more than 10% of the Fund's net
assets would be invested in repurchase agreements not entitling the holder to
payment of principal within seven days and in other securities that are not
readily marketable ("illiquid investments"). The Trustees, or the Fund's
investment adviser acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for certain securities such as
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, or any successor to such rule, Section 4(2) commercial paper and municipal
lease obligations. Accordingly, such securities may not be subject to the
foregoing limitation.
(2) A Fund may not purchase securities on margin, or make short sales of
securities, except for short sales against the box and the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities.
4
<PAGE>
(3) A Fund may not pledge, mortgage, hypothecate or encumber any of its
assets except to secure permitted borrowings or in connection with permitted
short sales.
(4) A Fund may not invest in companies for the purpose of exercising
control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), each of the Funds may 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 limits. A Fund will borrow money through the program only when the
costs are equal to or lower than the costs of bank loans. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of seven
days. A Fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements). A Fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
Fund could result in a lost investment opportunity or additional borrowing
costs.
For purposes of the Funds' restriction on investing in a particular
industry, the Funds will rely primarily on industry classifications as published
by Bloomberg L.P. To the extent that such classifications are so broad that the
primary economic characteristics in a single class are materially different, the
Funds may further classify issuers in accordance with industry classifications
as published by the SEC.
TYPES OF SECURITIES AND
INVESTMENT TECHNIQUES
Each of the Funds may invest only in "eligible securities" as defined in
Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a
security that (i) is denominated in U.S. dollars and has a remaining maturity of
397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is
issued by an issuer with short-term debt outstanding that is rated, in one of
the two highest rating categories by any two nationally recognized statistical
rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by
that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a
rated security, as determined by Janus Capital; and (iii) has been determined by
Janus Capital to present minimal credit risks pursuant to procedures approved by
the Trustees. In addition, the Funds will maintain a dollar-weighted average
portfolio maturity of 90 days or less. A description of the ratings of some
NRSROs appears in Appendix A.
Under Rule 2a-7, a Fund may not invest more than five percent of its total
assets in the securities of any one issuer other than U.S. Government
Securities, provided that in certain cases a Fund may invest more than 5% of its
assets in a single issuer for a period of up to three business days. Up to 25%
of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to
this limit until July 1, 1998. Investment in demand features, guarantees, and
other types of instruments or features are subject to the diversification limits
under Rule 2a-7.
5
<PAGE>
Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market
Fund) will invest at least 95% of its total assets in "first-tier" securities.
First-tier securities are eligible securities that are rated, or are issued by
an issuer with short-term debt outstanding that is rated, in the highest rating
category by the Requisite NRSROs or are unrated and of comparable quality to a
rated security. In addition, a Fund may invest in "second-tier" securities which
are eligible securities that are not first-tier securities. However, a Fund
(except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest
in a second-tier security if immediately after the acquisition thereof the Fund
would have invested more than (i) the greater of one percent of its total assets
or one million dollars in second-tier securities issued by that issuer, or (ii)
five percent of its total assets in second-tier securities.
The following discussion of types of securities in which the Funds may
invest supplements and should be read in conjunction with the Prospectus.
PARTICIPATION INTERESTS
Each Fund may purchase participation interests in loans or securities in
which the Funds may invest directly. Participation interests are generally
sponsored or issued by banks or other financial institutions. A participation
interest gives a Fund an undivided interest in the underlying loans or
securities in the proportion that the Fund's interest bears to the total
principal amount of the underlying loans or securities. Participation interests,
which may have fixed, floating or variable rates, may carry a demand feature
backed by a letter of credit or guarantee of a bank or institution permitting
the holder to tender them back to the bank or other institution. For certain
participation interests, a Fund will have the right to demand payment, on not
more than seven days' notice, for all or a part of the Fund's participation
interest. The Funds intend to exercise any demand rights they may have upon
default under the terms of the loan or security, to provide liquidity or to
maintain or improve the quality of the Funds' investment portfolio. A Fund will
only purchase participation interests that Janus Capital determines present
minimal credit risks.
VARIABLE AND FLOATING RATE NOTES
Janus Money Market Fund also may purchase variable and floating rate demand
notes of corporations and other entities, which are unsecured obligations
redeemable upon not more than 30 days' notice. These obligations include master
demand notes that permit investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangements with the issuer of the instrument. The
issuer of these obligations often has the right, after a given period, to prepay
the outstanding principal amount of the obligations upon a specified number of
days' notice. These obligations generally are not traded, nor generally is there
an established secondary market for these obligations. To the extent a demand
note does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid investment.
MORTGAGE- AND ASSET-BACKED SECURITIES
The Funds may invest in mortgage-backed securities, which represent an
interest in a pool of mortgages made by lenders such as commercial banks,
savings and loan
6
<PAGE>
institutions, mortgage bankers, mortgage brokers and savings banks.
Mortgage-backed securities may be issued by governmental or government-related
entities or by non-governmental entities such as banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. In
contrast, mortgage-backed securities provide periodic payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the periodic payments and optional prepayments made by the
individual borrowers on their mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Additional payments to holders of
mortgage-backed securities are caused by prepayments resulting from the sale of
the underlying residential property, refinancing or foreclosure, net of fees or
costs which may be incurred.
As prepayment rates of individual pools of mortgage loans vary widely, it
is not possible to predict accurately the average life of a particular security.
Although mortgage-backed securities are issued with stated maturities of up to
forty years, unscheduled or early payments of principal and interest on the
underlying mortgages may shorten considerably the effective maturities.
Mortgage-backed securities may have varying assumptions for average life. The
volume of prepayments of principal on a pool of mortgages underlying a
particular security will influence the yield of that security, and the principal
returned to a Fund may be reinvested in instruments whose yield may be higher or
lower than that which might have been obtained had the prepayments not occurred.
When interest rates are declining, prepayments usually increase, with the result
that reinvestment of principal prepayments will be at a lower rate than the rate
applicable to the original mortgage-backed security.
The Funds may invest in mortgage-backed securities that are issued by
agencies or instrumentalities of the U.S. government. The Government National
Mortgage Association ("GNMA") is the principal federal government guarantor of
mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. GNMA Certificates are
debt securities which represent an interest in one mortgage or a pool of
mortgages which are insured by the Federal Housing Administration or the Farmers
Home Administration or are guaranteed by the Veterans Administration. The Funds
may also invest in pools of conventional mortgages which are issued or
guaranteed by agencies of the U.S. government. GNMA pass-through securities are
considered to be riskless with respect to default in that (i) the underlying
mortgage loan portfolio is comprised entirely of government-backed loans and
(ii) the timely payment of both principal and interest on the securities is
guaranteed by the full faith and credit of the U.S. government, regardless of
whether or not payments have been made on the underlying mortgages. GNMA
pass-through securities are, however, subject to the same market risk as
comparable debt securities. Therefore, the market value of a Fund's GNMA
securities can be expected to fluctuate in response to changes in prevailing
interest rate levels.
Residential mortgage loans are pooled also by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered
agency created by Congress in 1970 for the purpose of increasing the
availability of mortgage
7
<PAGE>
credit for residential housing. FHLMC issues participation certificates ("PCs")
which represent interests in mortgages from FHLMC's national portfolio. The
mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the
loans are either uninsured with loan-to-value ratios of 80% or less, or
privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the
timely payment of interest and ultimate collection of principal on FHLMC PCs;
the U.S. government does not guarantee any aspect of FHLMC PCs.
The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private shareholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved seller/servicers
which include savings and loan associations, savings banks, commercial banks,
credit unions and mortgage bankers. FNMA guarantees the timely payment of
principal and interest on the pass-through securities issued by FNMA; the U.S.
government does not guarantee any aspect of the FNMA pass-through securities.
The Funds may also invest in privately-issued mortgage-backed securities to
the extent permitted by their investment restrictions. Mortgage-backed
securities offered by private issuers include pass-through securities comprised
of pools of conventional residential mortgage loans; mortgage-backed bonds which
are considered to be debt obligations of the institution issuing the bonds and
which are collateralized by mortgage loans; and collateralized mortgage
obligations ("CMOs") which are collateralized by mortgage-backed securities
issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages.
Asset-backed securities represent direct or indirect participations in, or
are secured by and payable from, assets other than mortgage-backed assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit agreements (credit cards). Asset-backed securities have yield
characteristics similar to those of mortgage-backed securities and, accordingly,
are subject to many of the same risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate. The
Funds will use the proceeds of reverse repurchase agreements only to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities.
Generally, a reverse repurchase agreement enables the Fund to recover for
the term of the reverse repurchase agreement all or most of the cash invested in
the portfolio securities sold and to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of obtaining the cash otherwise. In
8
<PAGE>
addition, interest costs on the money received in a reverse repurchase agreement
may exceed the return received on the investments made by a Fund with those
monies.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery
basis. A Fund will enter into such transactions only when it has the intention
of actually acquiring the securities. To facilitate such acquisitions, the
Funds' custodian will segregate cash or high quality liquid assets in an amount
at least equal to such commitments. On delivery dates for such transactions, the
Fund will meet its obligations from maturities, sales of the segregated
securities or from other available sources of cash. If a Fund chooses to dispose
of the right to acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation, incur a gain
or loss due to market fluctuation. At the time a Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction as a purchase and thereafter reflect the value of such
securities in determining its net asset value.
INVESTMENT COMPANY SECURITIES
From time to time, the Funds may invest in securities of other investment
companies. The Funds are subject to the provisions of Section 12(d)(1) of the
1940 Act. Funds managed by Janus Capital ("Janus Funds") may invest in
securities of the Funds and any other money market funds managed by Janus
Capital subject to the terms of an exemptive order obtained by Janus Capital and
the Janus Funds which currently provides that each Janus Fund will limit its
aggregate investment in a Janus money market fund to the greater of (i) 5% of
its total assets or (ii) $2.5 million. The Janus funds are seeking an amended
and restated exemptive order that would permit the non-money market funds to
invest in the Janus money market funds in excess of the limitations of Section
12(d)(1) of the 1940 Act. There is no assurance that such amendment will be
granted.
MUNICIPAL LEASES
Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest
in municipal leases. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sale contracts (which normally provide for title to the
leased asset to pass eventually to the government issuer) have evolved as a
means for governmental issuers to acquire property and equipment without meeting
the constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. A Fund will only purchase municipal leases subject to a
non-appropriation clause when the payment of principal and accrued interest is
backed by an unconditional irrevocable letter of credit, or guarantee of a bank
or other entity that meets the criteria described in the Prospectus under
"Taxable Investments."
9
<PAGE>
In evaluating municipal lease obligations, Janus Capital will consider such
factors as it deems appropriate, including: (a) whether the lease can be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding for
the leased property in the event such property is no longer considered essential
by the municipality; (e) the legal recourse of the lease obligee in the event of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are imposed
on the lease obligor's ability to utilize substitute property or services other
than those covered by the lease obligation. If a lease is backed by an
unconditional letter of credit or other unconditional credit enhancement, then
Janus Capital may determine that a lease is an eligible security solely on the
basis of its evaluation of the credit enhancement.
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among federal,
state and local governmental units. Such non-payment would result in a reduction
of income to the Funds, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of a Fund.
PERFORMANCE DATA
A Fund may provide current annualized and effective annualized yield
quotations based on its daily dividends. These quotations may from time to time
be used in advertisements, shareholder reports or other communications to
shareholders. All performance information supplied by the Funds in advertising
is historical and is not intended to indicate future returns.
In performance advertising, the Funds may compare their Shares' performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc., or CDC/Wiesenberger, IBC/Donoghue's
Money Fund Report or other companies which track the investment performance of
investment companies ("Fund Tracking Companies"). The Funds may also compare
their Shares' performance information with the performance of recognized stock,
bond and other indices, including but not limited to the Municipal Bond Buyers
Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Funds may refer to general
market performance over past time periods such as those published by Ibbotson
Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook").
The Funds may also refer in such materials to mutual fund performance rankings
and other data published by Fund Tracking Companies. Performance advertising may
also refer to discussions of the Funds and comparative mutual fund data and
ratings reported in independent periodicals, such as newspapers and financial
magazines. The Funds may also compare the Shares' yield to those of certain U.S.
Treasury obligations or other money market instruments.
10
<PAGE>
Any current yield quotation of the Shares which is used in such a manner as
to be subject to the provisions of Rule 482(d) under the Securities Act of 1933,
as amended, shall consist of an annualized historical yield, carried at least to
the nearest hundredth of one percent, based on a specific seven calendar day
period. Current yield shall be calculated by (a) determining the net change
during a seven calendar day period in the value of a hypothetical account having
a balance of one Share at the beginning of the period, (b) dividing the net
change by the value of the account at the beginning of the period to obtain a
base period return, and (c) multiplying the quotient by 365/7 (i.e.,
annualizing). For this purpose, the net change in account value will reflect the
value of additional Shares purchased with dividends declared on the original
Share and dividends declared on both the original Share and any such additional
Shares, but will not reflect any realized gains or losses from the sale of
securities or any unrealized appreciation or depreciation on portfolio
securities. In addition, the Shares may advertise effective yield quotations.
Effective yield quotations are calculated by adding 1 to the base period return,
raising the sum to a power equal to 365/7, and subtracting 1 from the result
(i.e., compounding).
Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an
investor would have to earn from a fully taxable investment in order to equal
such Shares' yield after taxes. Tax equivalent yields are calculated by dividing
Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or
combined federal and state tax rate. If only a portion of the Shares' yield is
tax-exempt, only that portion is adjusted in the calculation.
The Shares' current yield and effective yield for the seven-day period
ended October 31, 1997 is shown below:
<TABLE>
<CAPTION>
Seven-day Effective
Fund Name Yield Seven-day Yield
- ---------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund - Institutional
Shares 5.66% 5.82%
Janus Government Money Market Fund -
Institutional Shares 5.58% 5.73%
Janus Tax-Exempt Money Market Fund -
Institutional Shares* 3.59% 3.65%
- ---------------------------------------------------------------------------
</TABLE>
*Janus Tax-Exempt Money Market Fund Institutional Shares' tax-equivalent yield
for the seven-day period ended October 31, 1997 was 4.98%.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Shares. Also, processing organizations or other institutions may charge
their customers direct fees in connection with an investment in a Fund, which
will have the effect of reducing the Fund's net yield to those shareholders. The
yield on a class of Shares is not fixed or guaranteed, and an investment in the
Shares is not insured. Accordingly, yield information may not necessarily be
used to compare Shares with investment alternatives which, like money market
instruments or bank accounts, may provide a fixed rate of interest. In addition,
because investments in the Funds are not insured or guaranteed, yield on the
Shares may
11
<PAGE>
not necessarily be used to compare the Shares with investment alternatives which
are insured or guaranteed.
DETERMINATION OF
NET ASSET VALUE
Pursuant to the rules of the SEC, the Trustees have established procedures
to stabilize each Fund's net asset value at $1.00 per Share. These procedures
include a review of the extent of any deviation of net asset value per Share as
a result of fluctuating interest rates, based on available market rates, from
the Fund's $1.00 amortized cost price per Share. Should that deviation exceed
1/2 of 1%, the Trustees will consider whether any action should be initiated to
eliminate or reduce material dilution or other unfair results to shareholders.
Such action may include redemption of Shares in kind, selling portfolio
securities prior to maturity, reducing or withholding dividends and utilizing a
net asset value per Share as determined by using available market quotations.
Each Fund (i) will maintain a dollar-weighted average portfolio maturity of 90
days or less; (ii) will not purchase any instrument with a remaining maturity
greater than 397 days or subject to a repurchase agreement having a duration of
greater than 397 days; (iii) will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that Janus
Capital has determined present minimal credit risks pursuant to procedures
established by the Trustees; and (iv) will comply with certain reporting and
recordkeeping procedures. The Trust has also established procedures to ensure
that portfolio securities meet the Funds' high quality criteria.
INVESTMENT ADVISER
AND ADMINISTRATOR
As stated in the Prospectus, each Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Funds' investments. The Funds have each
agreed to compensate Janus Capital for its advisory services by the monthly
payment of an advisory fee at the annual rate of .20% of the average daily net
assets of each Fund. However, Janus Capital has agreed to waive .10% of the
value of each Fund's average daily net assets of the advisory fee. Janus Capital
may modify or terminate the waiver at any time upon at least 90 days' notice to
the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads
and other expenses in connection with the execution of portfolio transactions.
On behalf of the Shares, each of the Funds has also entered into an
Administration Agreement with Janus Capital. Under the terms of the
Administration Agreements, each of the Funds has agreed to compensate Janus
Capital for administrative services at the annual rate of .15% of the value of
the average daily net assets of the Shares for certain services, including
custody, transfer agent fees and expenses, legal fees not related to litigation,
accounting expenses, net asset value determination and fund accounting,
12
<PAGE>
recordkeeping, and blue sky registration and monitoring services, registration
fees, expenses of shareholders' meetings and reports to shareholders, costs of
preparing, printing and mailing the Shares' Prospectuses and Statements of
Additional Information to current shareholders, and other costs of complying
with applicable laws regulating the sale of Shares. Each Fund will pay those
expenses not assumed by Janus Capital, including interest and taxes, fees and
expenses of Trustees who are not affiliated with Janus Capital, audit fees and
expenses, and extraordinary costs. Janus Capital has agreed to waive a portion
of the administration fee, and accordingly the effective rate for calculating
the administration fee payable by the Shares will be .05%. Janus Capital may
modify or terminate the waiver at any time upon at least 90 days' notice to the
Trustees.
The following table summarizes the advisory fees paid by the Funds for the
fiscal years ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995(1)
----------------------- ----------------------- -----------------------
Advisory Advisory Advisory Advisory Advisory Advisory
Fees Prior Fees After Fees Prior Fees After Fees Prior Fees After
Fund Name to Waiver Waiver to Waiver Waiver to Waiver Waiver
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Money Market
Fund $6,858,596 $3,429,298 $3,101,530 $1,550,765 $874,302 $437,151
Janus Government
Money Market Fund $362,308 $181,154 $330,914 $165,457 $151,606 $75,803
Janus Tax-Exempt
Money Market Fund $158,812 $79,406 $140,898 $70,449 $82,622 $41,311
- ------------------------------------------------------------------------------------
</TABLE>
(1) February 15, 1995 (inception of Funds) to October 31, 1995.
The following table summarizes the administration fees paid by the Shares
for the fiscal years ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995(1)
----------------------- ----------------------- ------------------------
Admin- Admin- Admin- Admin- Admin- Admin-
istration istration istration istration istration istration
Fees Prior Fees After Fees Prior Fees After Fees Prior Fees After
Fund Name to Waiver Waiver to Waiver Waiver to Waiver Waiver
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Money Market Fund -
Institutional Shares $3,818,091 $1,272,697 $1,311,645 $437,215 $164,715 $54,905
Janus Government Money Market
Fund - Institutional Shares $85,227 $28,409 $80,097 $26,699 $20,138 $6,712
Janus Tax-Exempt Money Market
Fund - Institutional Shares $5,199 $1,733 $2,631 $877 $907 $302
- ------------------------------------------------------------------------------------
</TABLE>
(1) April 17, 1995 (inception of Shares) to October 31, 1995.
Advisory fees are paid on the Fund level while administration fees are paid
on the class level.
The Advisory Agreements for each Fund were reexecuted on July 1, 1997
(without amendment other than effective dates) and will continue in effect until
July 1, 1998, and thereafter from year to year so long as such continuance is
approved annually by a majority of the Trustees who are not parties to the
Advisory Agreements or interested persons of any such party, and by either a
majority of the Funds' outstanding voting shares or the Trustees. Each Advisory
Agreement (i) may be terminated without the payment of any penalty by any Fund
or Janus Capital on 60 days' written notice;
13
<PAGE>
(ii) terminates automatically in the event of its assignment; and (iii)
generally, may not be amended without the approval of a majority of the Trustees
of the affected Fund, including the Trustees who are not interested persons of
that Fund or Janus Capital and, to the extent required by the 1940 Act, the vote
of a majority of the outstanding voting securities of that Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Funds, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account. Pursuant to an exemptive order granted by the SEC, the Funds and other
funds advised by Janus Capital may also transfer daily uninvested cash balances
into one or more joint trading accounts. Assets in the joint trading accounts
are invested in money market instruments and the proceeds are allocated to the
participating funds on a pro rata basis.
Each account managed by Janus Capital has its own investment objective and
is managed in accordance with that objective by a particular portfolio manager
or team of portfolio managers. As a result, from time to time two or more
different managed accounts may pursue divergent investment strategies with
respect to investments or categories of investments.
As indicated in the Prospectus, Janus Capital 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 regarding personal
investing by directors, officers and employees of Janus Capital and the Funds.
The policy requires investment personnel and officers of Janus Capital, inside
directors of Janus Capital and the Funds and other designated persons deemed to
have access to current trading information to pre-clear all transactions in
securities not otherwise exempt under the policy. Requests for trading authority
will be denied when, among other reasons, the proposed personal transaction
would be contrary to the provisions of the policy or would be deemed to
adversely affect any transaction then known to be under consideration for or to
have been effected on behalf of any client account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Funds to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the
14
<PAGE>
President and Chairman of the Board of Janus Capital, owns approximately 12% of
its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
CUSTODIAN, TRANSFER AGENT
AND CERTAIN AFFILIATIONS
UMB Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the
Funds' custodian. The custodian holds the Funds' assets in safekeeping and
collects and remits the income thereon, subject to the instructions of each
Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds'
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Funds.
The Funds do not pay Janus Service a fee.
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Funds. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Funds in connection with the sale of their shares in all
states in which the shares are registered and in which Janus Distributors is
qualified as a broker-dealer. Under the Distribution Agreement, Janus
Distributors continuously offers the Funds' shares and accepts orders at net
asset value. No sales charges are paid by investors. Promotional expenses in
connection with offers and sales of shares are paid by Janus Capital.
Janus Capital also may make payments to selected broker-dealer firms or
institutions which were instrumental in the acquisition of shareholders for the
Funds or which performed services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital.
PORTFOLIO TRANSACTIONS
AND BROKERAGE
Decisions as to the assignment of portfolio business for the Funds and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and
15
<PAGE>
expected in the market for the particular security; confidentiality; the quality
of the execution, clearance and settlement services; financial stability of the
broker or dealer; the existence of actual or apparent operational problems of
any broker or dealer; and research products or services provided. In recognition
of the value of the foregoing factors, Janus Capital may place portfolio
transactions with a broker or dealer with whom it has negotiated a commission
that is in excess of the commission another broker or dealer would have charged
for effecting that transaction if Janus Capital determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research provided by such broker or dealer viewed in terms of
either that particular transaction or of the overall responsibilities of Janus
Capital. These research and other services may include, but are not limited to,
general economic and security market reviews, industry and company reviews,
evaluations of securities, recommendations as to the purchase and sale of
securities and access to third party publications, computer and electronic
equipment and software. Research received from brokers or dealers is
supplemental to Janus Capital's own research efforts.
For the fiscal year ended October 31, 1997, the Funds paid no brokerage
commissions to brokers and dealers in transactions identified for execution
primarily on the basis of research and other services provided to the Funds.
For the fiscal years ended October 31, 1997, October 31, 1996 and October
31, 1995, the total brokerage commissions paid by the Funds are summarized
below:
<TABLE>
<CAPTION>
Fund Name 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund $0 $4,851 $0
Janus Government Money Market Fund $0 $0 $0
Janus Tax-Exempt Money Market Fund $0 $0 $0
- ---------------------------------------------------------------------------
</TABLE>
The Funds generally buy and sell securities in principal transactions, in
which no commissions are paid. However, the Funds may engage an agent and pay
commissions for such transactions if Janus Capital believes that the net result
of the transaction to the respective Fund will be no less favorable than that of
contemporaneously available principal transactions.
Janus Capital may use research products and services in servicing other
accounts in addition to the Funds. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may consider sales of Shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Shares as
a factor in the selection of broker-dealers to execute Fund portfolio
transactions. Janus Capital may also consider payments made by brokers effecting
transactions for a Fund (i) to the Fund or (ii) to other persons on behalf of
the Fund for services provided to the Fund for which it would be obligated to
pay. In placing portfolio business with such broker-dealers, Janus Capital will
seek the best execution of each transaction.
16
<PAGE>
When the Funds purchase or sell a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
As of October 31, 1997, certain Funds owned securities of their regular
broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Name of Value of
Fund Name Broker-Dealer Securities Owned
- --------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund Bankers Trust Securities Corp. 129,982,478
BZW Securities, Inc. 205,000,000
Goldman Sachs Group L.P. 230,000,000
Lehman Brothers, Inc. 28,800,000
Merrill Lynch & Co. 50,000,000
Morgan Stanley Dean Witter 225,000,000
Nationsbank Discover and Co. 50,000,000
Janus Government Money CS First Boston 40,000,000
Market Fund HSBC Securities, Inc. 39,300,000
Lehman Brothers, Inc. 10,000,000
</TABLE>
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4928
Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief
Executive Officer, Director and President of Janus Capital. Director of
Janus Distributors, Inc. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee
100 Fillmore Street
Denver, CO 80206-4928
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice Chairman and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund. Executive Vice
President and Co-Manager of Janus Venture Fund.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
17
<PAGE>
Sharon S. Pichler* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Money Market Fund,
Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund.
Vice President of Janus Capital. Formerly, Assistant Vice President and
Portfolio Manager at USAA Investment Management Co. (1990-1994).
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4928
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service Corporation, Janus Distributors, Inc. and Janus Capital. Director
of IDEX, Janus Service Corporation and Janus Distributors, Inc. Director,
Treasurer and Vice President of Finance of Janus Capital International Ltd.
Formerly (May 1992-January 1996), Treasurer of Janus Investment Fund and
Janus Aspen Series.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4928
Treasurer and Chief Accounting Officer of Janus Aspen Series. Vice
President of Janus Capital. Formerly, (1991-1997) Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4928
Secretary of Janus Aspen Series. Director and President of Janus
Distributors, Inc. Assistant Vice President and Associate Counsel of Janus
Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc.,
Boston Massachusetts (mutual fund administration services).
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
Gary O. Loo# - Trustee
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and Director of High Valley Group,
Inc., Colorado Springs, Colorado (investments).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
18
<PAGE>
Dennis B. Mullen - Trustee
14103 Denver West Parkway
Golden, CO 80401
Trustee of Janus Aspen Series. President and Chief Executive Officer, BCE
West L.P., Phoenix, AZ (restaurant chain). Formerly, (1997-1998), Chief
Financial Officer - Boston Market Concepts, Boston Chicken, Inc., Golden,
Colorado (restaurant chain); (1993-1997), President and Chief Executive
Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc.,
Bellevue, Washington (restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 to 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, California. Formerly (1989 to 1993), President and Chief Executive
Officer of Bridgecliff Management Services, Campbell, California (a
condominium association management company).
James T. Rothe - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm). Formerly
(1986-1994), Dean of the College of Business, University of Colorado,
Colorado Springs, Colorado.
The Trustees are responsible for major decisions relating to each Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Funds by their officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Trust's Executive Committee shall have and may exercise all the powers
and authority of the Trustees except for matters requiring action by all
Trustees pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts
Law or the 1940 Act.
The Money Market Funds Committee, consisting of Messrs. Loo, Mullen and
Rothe, monitors the compliance with policies and procedures adopted particularly
for money market funds.
19
<PAGE>
The following table shows the aggregate compensation earned by and paid to
each Trustee by the Funds described in this SAI and all funds advised and
sponsored by Janus Capital (collectively, the "Janus Funds") for the periods
indicated. None of the Trustees receive any pension or retirement benefits from
the Funds or the Janus Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Funds for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position October 31, 1997 December 31, 1997**
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $0 $0
James P. Craig, Trustee* $0 $0
John W. Shepardson,
Trustee+ $2,402 $14,500
William D. Stewart,
Trustee $4,977 $70,667
Gary O. Loo, Trustee $4,533 $60,667
Dennis B. Mullen, Trustee $4,881 $67,167
Martin H. Waldinger,
Trustee $4,725 $67,667
James T. Rothe, Trustee++ $3,445 $64,833
- -----------------------------------------------------------------------------
</TABLE>
*An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.
**As of December 31, 1997, Janus Funds consisted of two registered investment
companies comprised of a total of 31 funds.
+Mr. Shepardson retired as a Fund Trustee on March 31, 1997.
++Mr. Rothe began serving as a Fund Trustee on January 1, 1997.
PURCHASE OF SHARES
As stated in the Prospectus, Janus Distributors is a distributor of the
Funds' shares. Shares are sold at the net asset value per share as determined at
the close of the regular trading session of the New York Stock Exchange (the
"NYSE" or the "Exchange") next occurring after a purchase order is received and
accepted by a Fund (except net asset value is normally determined at 5:00 p.m.
(New York time) for Janus Government Money Market Fund). A Fund's net asset
value is calculated each day that both the NYSE and the New York Federal Reserve
Bank are open. As stated in the Prospectus, the Funds each seek to maintain a
stable net asset value per share of $1.00. The Shareholder's Guide Section of
the Prospectus contains detailed information about the purchase of Shares.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
If investors do not elect in writing or by phone to receive their dividends
and distributions via wire transfer, all income dividends and capital gains
distributions, if any, on Shares are reinvested automatically in additional
Shares of that Fund at the NAV determined on the first business day following
the record date. Any such election (which may be made on the Application or by
phone) will apply to dividends and distributions the record dates of which fall
on or after the date that a Fund receives such notice. Changes to distribution
options must be received at least three days prior to the record date to be
effective for such date. Investors receiving distributions and dividends via
wire transfer may elect in writing or by phone to change back to automatic
reinvestment at any time.
20
<PAGE>
REDEMPTION OF SHARES
Procedures for redemption of Shares are set forth in the Shareholder's
Guide section of the Prospectus. Shares normally will be redeemed for cash (via
wire), although each Fund retains the right to redeem Shares in kind under
unusual circumstances, in order to protect the interests of remaining
shareholders, by delivery of securities selected from its assets at its
discretion. However, the Funds are governed by Rule 18f-1 under the 1940 Act,
which requires each Fund to redeem Shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund during any 90-day period for
any one shareholder. Should redemptions by any shareholder exceed such
limitation, their Fund will have the option of redeeming the excess in cash or
in kind. If Shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The method of valuing
securities used to make redemptions in kind will be the same as the method of
valuing portfolio securities described under "Determination of Net Asset Value"
and such valuation will be made as of the same time the redemption price is
determined.
The right to require the Funds to redeem Shares may be suspended, or the
date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
TAX DEFERRED ACCOUNTS
The Funds offer tax-deferred retirement plans for rollover accounts in
excess of $250,000. The Individual Retirement Account ("IRA") may be used by
individuals who meet the above requirement.
Contributions under Regular and Roth IRAs, SEPs, Defined Contribution Plans
and Section 403(b)(7) Plans are subject to specific contribution limitations.
Generally, such contributions may be invested at the direction of the
participant. The investment is then held by Investors Fiduciary Trust Company as
custodian.
Distributions from tax-deferred accounts may be subject to ordinary income
tax and may be subject to an additional 10% tax if withdrawn prior to age 59 1/2
or used for a nonqualifying purpose. Additionally, shareholders generally must
start withdrawing retirement plan assets no later than April 1 of the year after
they reach age 70 1/2. Several exceptions to these general rules may apply and
several methods exist to determine the amount and timing of the minimum annual
distribution (if any). Shareholders should consult with their tax advisor or
legal counsel prior to receiving any distribution from any tax-deferred account,
in order to determine the income tax impact of any such distribution.
To receive additional information about IRAs along with the necessary
materials to establish an account, please call the Funds at 1-800-525-3713 or
write the Funds at P.O. Box 173375, Denver, CO 80217-3375. No contribution to
any IRA can be made until the appropriate forms to establish any such plan have
been completed.
21
<PAGE>
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
is set forth in the Prospectus. Applications to open accounts may be obtained by
calling the Funds at 1-800-29JANUS or writing to the Funds at 100 Fillmore
Street, Denver, Colorado 80206-4928, Attention: Extended Services.
DIVIDENDS AND TAX STATUS
Dividends representing substantially all of the net investment income and
any net realized gains on sales of securities are declared daily, Saturdays,
Sundays and holidays included, and distributed on the last business day of each
month. If a month begins on a Saturday, Sunday or holiday, dividends for those
days are declared at the end of the preceding month and distributed on the first
business day of the month. A shareholder may receive dividends via wire transfer
or may choose to have dividends automatically reinvested in a Fund's Shares. As
described in the Prospectus, Shares purchased by wire on a bank business day
will receive that day's dividend if the purchase is effected at or prior to 3:00
p.m. (New York time) for Janus Money Market Fund, 5:00 p.m. for Janus Government
Money Market Fund and 12:00 p.m. for Janus Tax-Exempt Money Market Fund.
Otherwise, such Shares will begin to accrue dividends on the first bank business
day following receipt of the order. Requests for redemption of Shares will be
redeemed at the next determined net asset value. Redemption requests made by
wire that are received prior to 3:00 p.m. (New York time) for Janus Money Market
Fund, 5:00 p.m. for Janus Government Money Market Fund and 12:00 p.m. for Janus
Tax-Exempt Money Market Fund will result in Shares being redeemed that day.
Proceeds of such a redemption will normally be sent to the predesignated bank
account on that day, but that day's dividend will not be received. Closing times
for purchase and redemption of Shares may be changed for days in which the bond
market or the NYSE close early.
Distributions for all of the Funds (except Janus Tax-Exempt Money Market
Fund) are taxable income and are subject to federal income tax (except for
shareholders exempt from income tax), whether such distributions are received
via wire transfer or are reinvested in additional Shares. Full information
regarding the tax status of income dividends and any capital gains distributions
will be mailed to shareholders for tax purposes on or before January 31st of
each year. As described in detail in the Prospectus, Janus Tax-Exempt Money
Market Fund anticipates that substantially all income dividends it pays will be
exempt from federal income tax, although dividends attributable to interest on
taxable investments, together with distributions from any net realized short- or
long-term capital gains, are taxable.
The Funds intend to qualify as regulated investment companies by satisfying
certain requirements prescribed by Subchapter M of the Internal Revenue Code of
1986.
Some money market securities employ a trust or other similar structure to
modify the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security, or
interest rate adjustment features can be used to enhance price stability. If the
structure does not perform as intended, adverse tax or investment consequences
may result. Neither the Internal
22
<PAGE>
Revenue Service nor any other regulatory authority has ruled definitively on
certain legal issues presented by structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity, or tax
treatment of the income received from these securities or the nature and timing
of distributions made by a Fund.
PRINCIPAL SHAREHOLDERS
As of January 22, 1998, the officers and Trustees as a group owned less
than 1% of the outstanding Shares.
As of January 22, 1998, the following Institution owned more than 5% of the
Shares of Janus Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Comerica Bank P.O. Box 75000, Detroit, MI 26.24%
Wells Fargo 45 Tremont St., San Francisco, CA 12.10%
Institutional Trust 94105-2204
Co.
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following Institutions owned more than 5% of
the Shares of Janus Government Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
UMB Bank P.O. Box 419226 69.84%
Kansas City, MO 64141-6226
United Postal Service 7905 Malcolm Road 4th Floor 29.33%
FCU Clinton, MD 20735-1734
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following Institution owned more than 5% of the
Shares of Janus Tax-Exempt Money Market Fund:
<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
First Trust N/A P.O. Box 64010 99.65%
St. Paul, MN 55164-0010
- -------------------------------------------------------------------------------
</TABLE>
MISCELLANEOUS INFORMATION
Each Fund is a series of the Trust, a Massachusetts Business Trust that was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
consists of 19 separate series, three of which currently offer three classes of
Shares. The Funds were added to the Trust as separate series on December 9,
1994.
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Funds, the
Funds must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Funds could, under certain
circumstances, be held liable for the obligations of their Fund. However, the
Agreement
23
<PAGE>
and Declaration of Trust (the "Declaration of Trust") disclaims shareholder
liability for acts or obligations of the Funds and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Funds or the Trustees. The Declaration of Trust also provides
for indemnification from the assets of the Funds for all losses and expenses of
any Fund shareholder held liable for the obligations of their Fund. Thus, the
risk of a shareholder incurring a financial loss on account of its liability as
a shareholder of one of the Funds is limited to circumstances in which their
Fund would be unable to meet its obligations. The possibility that these
circumstances would occur is remote. The Trustees intend to conduct the
operations of the Funds to avoid, to the extent possible, liability of
shareholders for liabilities of their Fund.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of each Fund are fully paid and nonassessable when issued. All
shares of a Fund participate equally in dividends and other distributions by
such Fund, and in residual assets of that Fund in the event of liquidation.
Shares of each Fund have no preemptive, conversion or subscription rights.
The Trust is authorized to issue multiple classes of shares for each Fund.
Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus
Tax-Exempt Money Market Fund each offer three classes of shares by separate
prospectuses. The Shares discussed in this SAI are offered only to individual,
institutional and corporate clients and foundations and trusts meeting certain
minimum investment criteria. A second class of shares, Service Shares, is
offered through banks and other financial institutions that meet minimum
investment requirements in connection with trust accounts, cash management
programs and similar programs. A third class of shares, Investor Shares, is
offered to the general public.
VOTING RIGHTS
The present Trustees were elected at a meeting of the Trust's shareholders
held on July 10, 1992, with the exception of Mr. Craig and Mr. Rothe who were
appointed by the Trustees as of June 30, 1995 and January 1, 1997, respectively.
Under the Declaration of Trust, each Trustee will continue in office until the
termination of the Trust or his earlier death, retirement, resignation,
bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the
remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular
meetings of shareholders normally will be held, unless otherwise required by the
Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders
have the power to vote to elect or remove Trustees, to terminate or reorganize
their Fund, to amend the Declaration of Trust, to bring certain derivative
actions and on any other matters on which a shareholder vote is required by the
1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do
24
<PAGE>
so and, in such event, the holders of the remaining shares will not be able to
elect any Trustees. Each series or class of the Trust will vote separately only
with respect to those matters that affect only that series or class or if the
interest of the series or class in the matter differs from the interests of
other series or classes of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Funds, audit the Funds' annual financial
statements and prepare their tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Funds or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
FINANCIAL STATEMENTS
The following audited financial statements of the Funds for the period
ended October 31, 1997 are hereby incorporated into this SAI by reference to the
Funds' Annual Report dated October 31, 1997. A copy of such report accompanies
this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of October 31, 1997
Statements of Operations for the period ended October 31, 1997
Statements of Assets and Liabilities as of October 31, 1997
Statements of Changes in Net Assets for the periods ended October 31, 1997
and 1996
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this SAI and are not part of the
Registration Statement.
25
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S AND STANDARD & POOR'S
MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS
The two highest ratings of Standard & Poor's Ratings Services ("S&P") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest
rating assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only in a
small degree. The AA rating may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within that rating category.
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by
Moody's to be of the best quality. Bonds rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa bonds are rated
lower than the best bonds because margins of protection or other elements make
long-term risks appear somewhat larger than Aaa securities. The generic rating
Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of such rating category.
SHORT TERM MUNICIPAL LOANS
S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have a strong
capacity to pay principal and interest. Those issues rated SP-1 which are
determined to possess a very strong capacity to pay debt service will be given a
plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay
principal and interest with some vulnerability to adverse financial and economic
changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of
the best quality, enjoying strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are
of high quality, with margins of protection ample although not so large as in
the MIG-1/VMIG-1 group.
OTHER SHORT-TERM DEBT SECURITIES
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for
other short-term debt securities and commercial paper, and A-1 and A-2 are the
two highest ratings for commercial paper assigned by S&P. Moody's uses the
numbers 1, 2 and 3 to denote relative strength within its highest classification
of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength
within its highest classification of A. Issuers rated Prime-1 by Moody's have a
superior ability for repayment of senior short-term debt obligations and have
many of the following characteristics: leading market positions in
well-established industries, high rates of
26
<PAGE>
return on funds employed, conservative capitalization structure with moderate
reliance on debt and ample asset protection, broad margins in earnings coverage
of fixed financial charges and high internal cash generation, and well
established access to a range of financial markets and assured sources of
alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for
repayment of senior short-term debt obligations and display many of the same
characteristics displayed by issuers rated Prime-1, but to a lesser degree.
Issuers rated A-1 by S&P carry a strong degree of safety regarding timely
repayment. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) designation. Issuers rated A-2 by
S&P carry a satisfactory degree of safety regarding timely repayment.
FITCH
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F-1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance for timely payment only slightly
less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1
ratings.
</TABLE>
DUFF & PHELPS INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
ready access to alternative sources of funds, is clearly
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental
protection factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
</TABLE>
THOMSON BANKWATCH, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated TBW-1.
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest in a
timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
</TABLE>
27
<PAGE>
IBCA, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A1+ Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong
credit feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely
repayment.
A3 Obligations supported by a satisfactory capacity for
timely repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
MUNICIPAL NOTES generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the following:
1. PROJECT NOTES, which carry a U.S. government guarantee, are issued by
public bodies (called "local issuing agencies") created under the laws of a
state, territory, or U.S. possession. They have maturities that range up to one
year from the date of issuance. Project Notes are backed by an agreement between
the local issuing agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide range of financial
assistance programs for housing, redevelopment, and related needs (such as
low-income housing programs and renewal programs).
2. TAX ANTICIPATION NOTES ARE issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various seasonal
tax revenues, such as income, sales, use and business taxes, and are payable
from these specific future taxes.
3. REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
types of revenues, such as Federal revenues available under the Federal Revenue
Sharing Programs.
4. BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.
5. CONSTRUCTION LOAN NOTES are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal National
Mortgage Association ("Fannie Mae") or the Government National Mortgage
Association ("Ginnie Mae").
6. TAX-EXEMPT COMMERCIAL PAPER is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term financing
in anticipation of longer term financing.
MUNICIPAL BONDS, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. GENERAL OBLIGATION BONDS are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
29
<PAGE>
2. REVENUE BONDS in recent years have come to include an increasingly wide
variety of types of municipal obligations. As with other kinds of municipal
obligations, the issuers of revenue bonds may consist of virtually any form of
state or local governmental entity, including states, state agencies, cities,
counties, authorities of various kinds, such as public housing or redevelopment
authorities, and special districts, such as water, sewer or sanitary districts.
Generally, revenue bonds are secured by the revenues or net revenues derived
from a particular facility, group of facilities, or, in some cases, the proceeds
of a special excise or other specific revenue source. Revenue bonds are issued
to finance a wide variety of capital projects including electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of these bonds provide additional
security in the form of a debt service reserve fund to be used to make principal
and interest payments. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Housing authorities have a wide range of security, including
partially or fully insured mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. PRIVATE ACTIVITY BONDS are considered municipal bonds if the interest
paid thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing and health. These bonds are
also used to finance public facilities such as airports, mass transit systems
and ports. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property as security for such
payment.
While, at one time, the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection with
virtually any type of commercial or industrial project (subject to various
restrictions as to authorized costs, size limitations, state per capita volume
restrictions, and other matters), the types of qualifying projects under the
Code have become increasingly limited, particularly since the enactment of the
Tax Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain privately
owned and operated rental multi-family housing facilities, nonprofit hospital
and nursing home projects, airports, docks and wharves, mass commuting
facilities and solid waste disposal projects, among others, and for the
refunding (that is, the tax-exempt refinancing) of various kinds of other
private commercial projects originally financed with tax-exempt bonds. In future
years, the types of projects qualifying under the Code for tax-exempt financing
are expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to as an
"industrial development bond," but more and more frequently revenue bonds have
become classified according
30
<PAGE>
to the particular type of facility being financed, such as hospital revenue
bonds, nursing home revenue bonds, multi-family housing revenue bonds, single
family housing revenue bonds, industrial development revenue bonds, solid waste
resource recovery revenue bonds, and so on.
OTHER MUNICIPAL OBLIGATIONS, incurred for a variety of financing purposes,
include: municipal leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. To reduce this risk, the Fund will only purchase municipal
leases subject to a non-appropriation clause when the payment of principal and
accrued interest is backed by an unconditional irrevocable letter of credit, or
guarantee of a bank or other entity that meets the criteria described in the
Prospectus.
Tax-exempt bonds are also categorized according to whether the interest is
or is not includible in the calculation of alternative minimum taxes imposed on
individuals, according to whether the costs of acquiring or carrying the bonds
are or are not deductible in part by banks and other financial institutions, and
according to other criteria relevant for Federal income tax purposes. Due to the
increasing complexity of Internal Revenue Code and related requirements
governing the issuance of tax-exempt bonds, industry practice has uniformly
required, as a condition to the issuance of such bonds, but particularly for
revenue bonds, an opinion of nationally recognized bond counsel as to the
tax-exempt status of interest on the bonds.
31
<PAGE>
JANUS INVESTMENT FUND
100 Fillmore Street
Denver, CO 80206-4928
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Service Shares
This Statement of Additional Information ("SAI") expands upon and
supplements the information contained in the current Prospectus for the Service
Shares (the "Shares") of Janus Money Market Fund, Janus Government Money Market
Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and,
collectively, the "Funds"). The Funds are each a separate series of Janus
Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund
represents shares of beneficial interest in a separate portfolio of securities
and other assets with its own objective and policies, and is managed separately
by Janus Capital Corporation ("Janus Capital").
This SAI is not a Prospectus and should be read in conjunction with the
Prospectus dated February 17, 1998, which is incorporated by reference into this
SAI and may be obtained from the Trust at the above phone number or address.
This SAI contains additional and more detailed information about the Funds'
operations and activities than the Prospectus.
LOGO
<PAGE>
JANUS INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Investment Policies and Restrictions.......................................... 3
Types of Securities and Investment Techniques................................. 5
Performance Data............................................................. 10
Determination of Net Asset Value............................................. 12
Investment Adviser and Administrator......................................... 12
Custodian, Transfer Agent and Certain Affiliations........................... 15
Portfolio Transactions and Brokerage......................................... 15
Officers and Trustees........................................................ 17
Purchase of Shares........................................................... 20
Redemptions of Shares........................................................ 20
Shareholder Accounts......................................................... 21
Dividends and Tax Status..................................................... 21
Principal Shareholders....................................................... 22
Miscellaneous Information.................................................... 23
Shares of the Trust..................................................... 23
Voting Rights........................................................... 23
Independent Accountants................................................. 24
Registration Statement.................................................. 24
Financial Statements......................................................... 25
Appendix A - Description of Securities Ratings............................... 26
Appendix B - Description of Municipal Securities............................. 29
- --------------------------------------------------------------------------------
2
<PAGE>
INVESTMENT POLICIES
AND RESTRICTIONS
INVESTMENT OBJECTIVES
As discussed in the Prospectus, the investment objective of each of Janus
Money Market Fund and Janus Government Money Market Fund is to seek maximum
current income to the extent consistent with stability of capital. The
investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum
current income that is exempt from federal income taxes to the extent consistent
with stability of capital. There can be no assurance that a Fund will achieve
its investment objective or maintain a stable net asset value of $1.00 per
share. The investment objectives of the Funds are not fundamental and may be
changed by the Trustees of the Trust (the "Trustees") without shareholder
approval.
INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS
As indicated in the Prospectus, each Fund has adopted certain fundamental
investment restrictions that cannot be changed without shareholder approval.
Shareholder approval means approval by the lesser of (i) more than 50% of the
outstanding voting securities of the Trust (or a particular Fund or particular
class of Shares if a matter affects just that Fund or that class of Shares), or
(ii) 67% or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Trust (or a particular
Fund or class of Shares) are present or represented by proxy.
As used in the restrictions set forth below and as used elsewhere in this
SAI, the term "U.S. Government Securities" shall have the meaning set forth in
the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940 Act
defines U.S. Government Securities as securities issued or guaranteed by the
United States government, its agencies or instrumentalities. U.S. Government
Securities may also include repurchase agreements collateralized and municipal
securities escrowed with or refunded with escrowed U.S. government securities.
The Funds have adopted the following fundamental policies:
(1) With respect to 75% of its assets, a Fund may not purchase a security
other than a U.S. Government Security, if, as a result, more than 5% of the
Fund's total assets would be invested in the securities of a single issuer or
the Fund would own more than 10% of the outstanding voting securities of any
single issuer. (As noted in the Prospectus, the Funds are also currently subject
to the greater diversification standards of Rule 2a-7, which are not
fundamental.)
(2) A Fund may not purchase securities if 25% or more of the value of a
Fund's total assets would be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that: (i)
there is no limit on investments in U.S. Government Securities or in obligations
of domestic commercial banks (including U.S. branches of foreign banks subject
to regulations under U.S. laws applicable to domestic banks and, to the extent
that its parent is unconditionally liable for the obligation, foreign branches
of U.S. banks); (ii) this limitation shall not apply to
3
<PAGE>
a Fund's investments in municipal securities; (iii) there is no limit on
investments in issuers domiciled in a single country; (iv) financial service
companies are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance are each
considered to be a separate industry); and (v) utility companies are classified
according to their services (for example, gas, gas transmission, electric, and
telephone are each considered to be a separate industry).
(3) A Fund may not act as an underwriter of securities issued by others,
except to the extent that a Fund may be deemed an underwriter in connection with
the disposition of portfolio securities of such Fund.
(4) A Fund may not lend any security or make any other loan if, as a
result, more than 25% of a Fund's total assets would be lent to other parties
(but this limitation does not apply to purchases of commercial paper, debt
securities or repurchase agreements).
(5) A Fund may not purchase or sell real estate or any interest therein,
except that the Fund may invest in debt obligations secured by real estate or
interests therein or securities issued by companies that invest in real estate
or interests therein.
(6) A Fund may borrow money for temporary or emergency purposes (not for
leveraging) in an amount not exceeding 25% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings). If
borrowings exceed 25% of the value of a Fund's total assets by reason of a
decline in net assets, the Fund will reduce its borrowings within three business
days to the extent necessary to comply with the 25% limitation. Reverse
repurchase agreements or the segregation of assets in connection with such
agreements shall not be considered borrowing for the purposes of this limit.
(7) Each Fund may, notwithstanding any other investment policy or
restriction (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and restrictions as that
Fund.
Each Fund has adopted the following nonfundamental investment restrictions
that may be changed by the Trustees without shareholder approval:
(1) A Fund may not invest in securities or enter into repurchase agreements
with respect to any securities if, as a result, more than 10% of the Fund's net
assets would be invested in repurchase agreements not entitling the holder to
payment of principal within seven days and in other securities that are not
readily marketable ("illiquid investments"). The Trustees, or the Fund's
investment adviser acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for certain securities such as
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, or any successor to such rule, Section 4(2) commercial paper and municipal
lease obligations. Accordingly, such securities may not be subject to the
foregoing limitation.
(2) A Fund may not purchase securities on margin, or make short sales of
securities, except for short sales against the box and the use of short-term
credit necessary for the clearance of purchases and sales of portfolio
securities.
4
<PAGE>
(3) A Fund may not pledge, mortgage, hypothecate or encumber any of its
assets except to secure permitted borrowings or in connection with permitted
short sales.
(4) A Fund may not invest in companies for the purpose of exercising
control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), each of the Funds may 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 limits. A Fund will borrow money through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of seven
days. A Fund will lend through the program only when the returns are higher than
those available from other short-term instruments (such as repurchase
agreements). A Fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
Fund could result in a lost investment opportunity or additional borrowing
costs.
For purposes of the Funds' restriction on investing in a particular
industry, the Funds will rely primarily on industry classifications as published
by Bloomberg L.P. To the extent that such classifications are so broad that the
primary economic characteristics in a single class are materially different, the
Funds may further classify issuers in accordance with industry classifications
as published by the SEC.
TYPES OF SECURITIES AND
INVESTMENT TECHNIQUES
Each of the Funds may invest only in "eligible securities" as defined in
Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a
security that (i) is denominated in U.S. dollars and has a remaining maturity of
397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is
issued by an issuer with short-term debt outstanding that is rated, in one of
the two highest rating categories by any two nationally recognized statistical
rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by
that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a
rated security, as determined by Janus Capital; and (iii) has been determined by
Janus Capital to present minimal credit risks pursuant to procedures approved by
the Trustees. In addition, the Funds will maintain a dollar-weighted average
portfolio maturity of 90 days or less. A description of the ratings of some
NRSROs appears in Appendix A.
Under Rule 2a-7, a Fund may not invest more than five percent of its total
assets in the securities of any one issuer other than U.S. Government
Securities, provided that in certain cases a Fund may invest more than 5% of its
assets in a single issuer for a period of up to three business days. Up to 25%
of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to
this limit until July 1, 1998. Investment in demand features, guarantees and
other types of instruments or features are subject to the diversification limits
under Rule 2a-7.
5
<PAGE>
Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market
Fund) will invest at least 95% of its total assets in "first-tier" securities.
First-tier securities are eligible securities that are rated, or are issued by
an issuer with short-term debt outstanding that is rated, in the highest rating
category by the Requisite NRSROs or are unrated and of comparable quality to a
rated security. In addition, a Fund may invest in "second-tier" securities which
are eligible securities that are not first-tier securities. However, a Fund
(except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest
in a second-tier security if immediately after the acquisition thereof the Fund
would have invested more than (i) the greater of one percent of its total assets
or one million dollars in second-tier securities issued by that issuer, or (ii)
five percent of its total assets in second-tier securities.
The following discussion of types of securities in which the Funds may
invest supplements and should be read in conjunction with the Prospectus.
PARTICIPATION INTERESTS
Each Fund may purchase participation interests in loans or securities in
which the Funds may invest directly. Participation interests are generally
sponsored or issued by banks or other financial institutions. A participation
interest gives a Fund an undivided interest in the underlying loans or
securities in the proportion that the Fund's interest bears to the total
principal amount of the underlying loans or securities. Participation interests,
which may have fixed, floating or variable rates, may carry a demand feature
backed by a letter of credit or guarantee of a bank or institution permitting
the holder to tender them back to the bank or other institution. For certain
participation interests, a Fund will have the right to demand payment, on not
more than seven days' notice, for all or a part of the Fund's participation
interest. The Funds intend to exercise any demand rights they may have upon
default under the terms of the loan or security, to provide liquidity or to
maintain or improve the quality of the Funds' investment portfolio. A Fund will
only purchase participation interests that Janus Capital determines present
minimal credit risks.
VARIABLE AND FLOATING RATE NOTES
Janus Money Market Fund also may purchase variable and floating rate demand
notes of corporations and other entities, which are unsecured obligations
redeemable upon not more than 30 days' notice. These obligations include master
demand notes that permit investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangements with the issuer of the instrument. The
issuer of these obligations often has the right, after a given period, to prepay
the outstanding principal amount of the obligations upon a specified number of
days' notice. These obligations generally are not traded, nor generally is there
an established secondary market for these obligations. To the extent a demand
note does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid investment.
MORTGAGE- AND ASSET-BACKED SECURITIES
The Funds may invest in mortgage-backed securities, which represent an
interest in a pool of mortgages made by lenders such as commercial banks,
savings and loan
6
<PAGE>
institutions, mortgage bankers, mortgage brokers and savings banks.
Mortgage-backed securities may be issued by governmental or government-related
entities or by non-governmental entities such as banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. In
contrast, mortgage-backed securities provide periodic payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the periodic payments and optional prepayments made by the
individual borrowers on their mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Additional payments to holders of
mortgage-backed securities are caused by prepayments resulting from the sale of
the underlying residential property, refinancing or foreclosure, net of fees or
costs which may be incurred.
As prepayment rates of individual pools of mortgage loans vary widely, it
is not possible to predict accurately the average life of a particular security.
Although mortgage-backed securities are issued with stated maturities of up to
forty years, unscheduled or early payments of principal and interest on the
underlying mortgages may shorten considerably the effective maturities.
Mortgage-backed securities may have varying assumptions for average life. The
volume of prepayments of principal on a pool of mortgages underlying a
particular security will influence the yield of that security, and the principal
returned to a Fund may be reinvested in instruments whose yield may be higher or
lower than that which might have been obtained had the prepayments not occurred.
When interest rates are declining, prepayments usually increase, with the result
that reinvestment of principal prepayments will be at a lower rate than the rate
applicable to the original mortgage-backed security.
The Funds may invest in mortgage-backed securities that are issued by
agencies or instrumentalities of the U.S. government. The Government National
Mortgage Association ("GNMA") is the principal federal government guarantor of
mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. GNMA Certificates are
debt securities which represent an interest in one mortgage or a pool of
mortgages which are insured by the Federal Housing Administration or the Farmers
Home Administration or are guaranteed by the Veterans Administration. The Funds
may also invest in pools of conventional mortgages which are issued or
guaranteed by agencies of the U.S. government. GNMA pass-through securities are
considered to be riskless with respect to default in that (i) the underlying
mortgage loan portfolio is comprised entirely of government-backed loans and
(ii) the timely payment of both principal and interest on the securities is
guaranteed by the full faith and credit of the U.S. government, regardless of
whether or not payments have been made on the underlying mortgages. GNMA
pass-through securities are, however, subject to the same market risk as
comparable debt securities. Therefore, the market value of a Fund's GNMA
securities can be expected to fluctuate in response to changes in prevailing
interest rate levels.
Residential mortgage loans are pooled also by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered
agency created by Congress in 1970 for the purpose of increasing the
availability of mortgage
7
<PAGE>
credit for residential housing. FHLMC issues participation certificates ("PCs")
which represent interests in mortgages from FHLMC's national portfolio. The
mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the
loans are either uninsured with loan-to-value ratios of 80% or less, or
privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the
timely payment of interest and ultimate collection of principal on FHLMC PCs;
the U.S. government does not guarantee any aspect of FHLMC PCs.
The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private shareholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved seller/servicers
which include savings and loan associations, savings banks, commercial banks,
credit unions and mortgage bankers. FNMA guarantees the timely payment of
principal and interest on the pass-through securities issued by FNMA; the U.S.
government does not guarantee any aspect of the FNMA pass-through securities.
The Funds may also invest in privately-issued mortgage-backed securities to
the extent permitted by their investment restrictions. Mortgage-backed
securities offered by private issuers include pass-through securities comprised
of pools of conventional residential mortgage loans; mortgage-backed bonds which
are considered to be debt obligations of the institution issuing the bonds and
which are collateralized by mortgage loans; and collateralized mortgage
obligations ("CMOs") which are collateralized by mortgage-backed securities
issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages.
Asset-backed securities represent direct or indirect participations in, or
are secured by and payable from, assets other than mortgage-backed assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit agreements (credit cards). Asset-backed securities have yield
characteristics similar to those of mortgage-backed securities and, accordingly,
are subject to many of the same risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate. The
Funds will use the proceeds of reverse repurchase agreements only to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities.
Generally, a reverse repurchase agreement enables the Fund to recover for
the term of the reverse repurchase agreement all or most of the cash invested in
the portfolio securities sold and to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than the
cost of obtaining the cash otherwise. In
8
<PAGE>
addition, interest costs on the money received in a reverse repurchase agreement
may exceed the return received on the investments made by a Fund with those
monies.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or delayed delivery
basis. A Fund will enter into such transactions only when it has the intention
of actually acquiring the securities. To facilitate such acquisitions, the
Funds' custodian will segregate cash or high quality liquid assets in an amount
at least equal to such commitments. On delivery dates for such transactions, the
Fund will meet its obligations from maturities, sales of the segregated
securities or from other available sources of cash. If a Fund chooses to dispose
of the right to acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation, incur a gain
or loss due to market fluctuation. At the time a Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction as a purchase and thereafter reflect the value of such
securities in determining its net asset value.
INVESTMENT COMPANY SECURITIES
From time to time, the Funds may invest in securities of other investment
companies. The Funds are subject to the provisions of Section 12(d)(1) of the
1940 Act. Funds managed by Janus Capital ("Janus Funds") may invest in
securities of the Funds and any other money market funds managed by Janus
Capital subject to the terms of an exemptive order obtained by Janus Capital and
the Janus Funds which currently provides that each Janus Fund will limit its
aggregate investment in a Janus money market fund to the greater of (i) 5% of
its total assets or (ii) $2.5 million. The Janus funds are seeking an amended
and restated exemptive order that would permit the non-money market funds to
invest in the Janus money market funds in excess of the limitations of Section
12(d)(1) of the 1940 Act. There is no assurance that such amendment will be
granted.
MUNICIPAL LEASES
Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest
in municipal leases. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sale contracts (which normally provide for title to the
leased asset to pass eventually to the government issuer) have evolved as a
means for governmental issuers to acquire property and equipment without meeting
the constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. A Fund will only purchase municipal leases subject to a
non-appropriation clause when the payment of principal and accrued interest is
backed by an unconditional irrevocable letter of credit, or guarantee of a bank
or other entity that meets the criteria described in the Prospectus under
"Taxable Investments."
9
<PAGE>
In evaluating municipal lease obligations, Janus Capital will consider such
factors as it deems appropriate, including: (a) whether the lease can be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding for
the leased property in the event such property is no longer considered essential
by the municipality; (e) the legal recourse of the lease obligee in the event of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are imposed
on the lease obligor's ability to utilize substitute property or services other
than those covered by the lease obligation. If a lease is backed by an
unconditional letter of credit or other unconditional credit enhancement, then
Janus Capital may determine that a lease is an eligible security solely on the
basis of its evaluation of the credit enhancement.
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among federal,
state and local governmental units. Such non-payment would result in a reduction
of income to the Funds, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of a Fund.
PERFORMANCE DATA
A Fund may provide current annualized and effective annualized yield
quotations based on its daily dividends. These quotations may from time to time
be used in advertisements, shareholder reports or other communications to
shareholders. All performance information supplied by the Funds in advertising
is historical and is not intended to indicate future returns.
In performance advertising, the Funds may compare their Shares' performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc., or CDC/Wiesenberger, IBC/Donoghue's
Money Fund Report or other companies which track the investment performance of
investment companies ("Fund Tracking Companies"). The Funds may also compare
their Shares' performance information with the performance of recognized stock,
bond and other indices, including but not limited to the Municipal Bond Buyers
Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Funds may refer to general
market performance over past time periods such as those published by Ibbotson
Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook").
The Funds may also refer in such materials to mutual fund performance rankings
and other data published by Fund Tracking Companies. Performance advertising may
also refer to discussions of the Funds and comparative mutual fund data and
ratings reported in independent periodicals, such as newspapers and financial
magazines. The Funds may also compare the Shares' yield to those of certain U.S.
Treasury obligations or other money market instruments.
10
<PAGE>
Any current yield quotation of the Shares which is used in such a manner as
to be subject to the provisions of Rule 482(d) under the Securities Act of 1933,
as amended, shall consist of an annualized historical yield, carried at least to
the nearest hundredth of one percent, based on a specific seven calendar day
period. Current yield shall be calculated by (a) determining the net change
during a seven calendar day period in the value of a hypothetical account having
a balance of one Share at the beginning of the period, (b) dividing the net
change by the value of the account at the beginning of the period to obtain a
base period return, and (c) multiplying the quotient by 365/7 (i.e.,
annualizing). For this purpose, the net change in account value will reflect the
value of additional Shares purchased with dividends declared on the original
Share and dividends declared on both the original Share and any such additional
Shares, but will not reflect any realized gains or losses from the sale of
securities or any unrealized appreciation or depreciation on portfolio
securities. In addition, the Shares may advertise effective yield quotations.
Effective yield quotations are calculated by adding 1 to the base period return,
raising the sum to a power equal to 365/7, and subtracting 1 from the result
(i.e., compounding).
Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an
investor would have to earn from a fully taxable investment in order to equal
such Shares' yield after taxes. Tax equivalent yields are calculated by dividing
Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or
combined federal and state tax rate. If only a portion of the Shares' yield is
tax-exempt, only that portion is adjusted in the calculation.
The Shares' current yield and effective yield for the seven day period
ended October 31, 1997 is shown below.
<TABLE>
<CAPTION>
Seven-day Effective
Fund Name Yield Seven-day Yield
- ---------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund - Service Shares 5.40% 5.55%
Janus Government Money Market
Fund - Service Shares 5.33% 5.47%
Janus Tax-Exempt Money Market
Fund - Service Shares* 3.36% 3.42%
- ---------------------------------------------------------------------------
</TABLE>
*Janus Tax-Exempt Money Market Fund - Service Shares tax equivalent yield for
the seven day period ended October 31, 1997 was 4.67%.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Shares. Also, Financial Institutions may charge their customers direct fees
in connection with an investment in a Fund, which will have the effect of
reducing the Fund's net yield to those shareholders. The yield on a class of
Shares is not fixed or guaranteed, and an investment in the Shares is not
insured. Accordingly, yield information may not necessarily be used to compare
Shares with investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. In addition, because investments
in the Funds are not insured or guaranteed, yield on the Shares may not
necessarily be used to compare the Shares with investment alternatives which are
insured or guaranteed.
11
<PAGE>
DETERMINATION OF
NET ASSET VALUE
Pursuant to the rules of the SEC, the Trustees have established procedures
to stabilize each Fund's net asset value at $1.00 per Share. These procedures
include a review of the extent of any deviation of net asset value per Share as
a result of fluctuating interest rates, based on available market rates, from
the Fund's $1.00 amortized cost price per Share. Should that deviation exceed
1/2 of 1%, the Trustees will consider whether any action should be initiated to
eliminate or reduce material dilution or other unfair results to shareholders.
Such action may include redemption of Shares in kind, selling portfolio
securities prior to maturity, reducing or withholding dividends and utilizing a
net asset value per Share as determined by using available market quotations.
Each Fund (i) will maintain a dollar-weighted average portfolio maturity of 90
days or less; (ii) will not purchase any instrument with a remaining maturity
greater than 397 days or subject to a repurchase agreement having a duration of
greater than 397 days; (iii) will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that Janus
Capital has determined present minimal credit risks pursuant to procedures
established by the Trustees; and (iv) will comply with certain reporting and
recordkeeping procedures. The Trust has also established procedures to ensure
that portfolio securities meet the Funds' high quality criteria.
INVESTMENT ADVISER
AND ADMINISTRATOR
As stated in the Prospectus, each Fund has an Investment Advisory Agreement
with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each
Advisory Agreement provides that Janus Capital will furnish continuous advice
and recommendations concerning the Funds' investments. The Funds have each
agreed to compensate Janus Capital for its advisory services by the monthly
payment of an advisory fee at the annual rate of .20% of the average daily net
assets of each Fund. However, Janus Capital has agreed to waive .10% of the
value of each Fund's average daily net assets of the advisory fee. Janus Capital
may modify or terminate the waiver at any time upon at least 90 days' notice to
the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads
and other expenses in connection with the execution of portfolio transactions.
On behalf of the Shares, each of the Funds has also entered into an
Administration Agreement with Janus Capital. Under the terms of the
Administration Agreements, each of the Funds has agreed to compensate Janus
Capital for administrative services at the annual rate of .40% of the value of
the average daily net assets of the Shares for certain services, including
custody, transfer agent fees and expenses, legal fees not related to litigation,
accounting expenses, net asset value determination and fund accounting,
recordkeeping, and blue sky registration and monitoring services, registration
fees, expenses of shareholders' meetings and reports to shareholders, costs of
preparing, printing and mailing the Shares' Prospectuses and Statements of
Additional Information
12
<PAGE>
to current shareholders, and other costs of complying with applicable laws
regulating the sale of Shares. Each Fund will pay those expenses not assumed by
Janus Capital, including interest and taxes, fees and expenses of Trustees who
are not affiliated with Janus Capital, audit fees and expenses, and
extraordinary costs. Janus Capital has agreed to waive a portion of the
administration fee, and accordingly the effective rate for calculating the
administration fee payable by the Shares will be .30%. Janus Capital may
terminate the waiver at any time upon at least 90 days' notice to the Trustees.
Janus Capital may use all or a portion of its administration fee to
compensate Financial Institutions for providing administrative services to their
customers who invest in the Shares. The types of services that the Financial
Institutions would provide include serving as the sole shareholder of record,
shareholder recordkeeping, processing and aggregating purchase and redemption
transactions, providing periodic statements, forwarding shareholder reports and
other materials, and providing other similar services that the Funds would have
to perform if they were dealing directly with the beneficial owners, rather than
the Financial Institutions, as shareholders of record.
The following table summarizes the advisory fees paid by the Funds for the
fiscal years ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995(1)
----------------------- ----------------------- -----------------------
Advisory Advisory Advisory
Fees Advisory Fees Advisory Fees Advisory
Prior Fees Prior Fees Prior Fees
to After to After to After
Fund Name Waiver Waiver Waiver Waiver Waiver Waiver
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Money Market
Fund $6,858,596 $3,429,298 $3,101,530 $1,550,765 $874,302 $437,151
Janus Government
Money Market Fund $362,308 $181,154 $330,914 $165,457 $151,606 $75,803
Janus Tax-Exempt
Money Market Fund $158,812 $79,406 $140,898 $70,449 $82,622 $41,311
- ------------------------------------------------------------------------------------
</TABLE>
(1)February 15, 1995 (inception of Funds) to October 31, 1995.
The following table summarizes the administration fees paid by the Shares
for the fiscal year ended October 31:
<TABLE>
<CAPTION>
1997(1)
-----------------------------------------
Administration Administration
Fees Prior to Fees After
Waiver Waiver
Fund Name ------------------- -------------------
- ------------------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund - Service Shares $3,432 $2,574
Janus Government Money Market Fund - Service
Shares $4,565 $3,424
Janus Tax-Exempt Money Market Fund - Service
Shares $35 $28
- ------------------------------------------------------------------------------------
</TABLE>
(1)November 22, 1996 (inception of Shares) to October 31, 1997.
Advisory fees are paid on the Fund level while administration fees are paid
on the class level.
The Advisory Agreements for each Fund were reexecuted on July 1, 1997
(without amendment other than effective dates) and will continue in effect until
July 1,
13
<PAGE>
1998, and thereafter from year to year so long as such continuance is approved
annually by a majority of the Trustees who are not parties to the Advisory
Agreements or interested persons of any such party, and by either a majority of
the Funds' outstanding voting shares or the Trustees. Each Advisory Agreement
(i) may be terminated without the payment of any penalty by any Fund or Janus
Capital on 60 days' written notice; (ii) terminates automatically in the event
of its assignment; and (iii) generally, may not be amended without the approval
of a majority of the Trustees of the affected Fund, including the Trustees who
are not interested persons of that Fund or Janus Capital and, to the extent
required by the 1940 Act, the vote of a majority of the outstanding voting
securities of that Fund.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Funds, are made independently from those for any other account that is or may in
the future become managed by Janus Capital or its affiliates. If, however, a
number of accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated and/or the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by an account or the size of the position obtained or liquidated for an
account. Pursuant to an exemptive order granted by the SEC, the Funds and other
funds advised by Janus Capital may also transfer daily uninvested cash balances
into one or more joint trading accounts. Assets in the joint trading accounts
are invested in money market instruments and the proceeds are allocated to the
participating funds on a pro rata basis.
Each account managed by Janus Capital has its own investment objective and
is managed in accordance with that objective by a particular portfolio manager
or team of portfolio managers. As a result, from time to time two or more
different managed accounts may pursue divergent investment strategies with
respect to investments or categories of investments.
As indicated in the Prospectus, Janus Capital 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 regarding personal
investing by directors, officers and employees of Janus Capital and the Funds.
The policy requires investment personnel and officers of Janus Capital, inside
directors of Janus Capital and the Funds and other designated persons deemed to
have access to current trading information to pre-clear all transactions in
securities not otherwise exempt under the policy. Requests for trading authority
will be denied when, among other reasons, the proposed personal transaction
would be contrary to the provisions of the policy or would be deemed to
adversely affect any transaction then known to be under consideration for or to
have been effected on behalf of any client account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Funds to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
14
<PAGE>
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.
CUSTODIAN, TRANSFER AGENT
AND CERTAIN AFFILIATIONS
UMB Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the
Funds' custodian. The custodian holds the Funds' assets in safekeeping and
collects and remits the income thereon, subject to the instructions of each
Fund.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds'
transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the Funds.
The Funds do not pay Janus Service a fee.
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a
distributor of the Funds. Janus Distributors is registered as a broker-dealer
under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. Janus Distributors acts
as the agent of the Funds in connection with the sale of their shares in all
states in which the shares are registered and in which Janus Distributors is
qualified as a broker-dealer. Under the Distribution Agreement, Janus
Distributors continuously offers the Funds' shares and accepts orders at net
asset value. No sales charges are paid by investors. Promotional expenses in
connection with offers and sales of shares are paid by Janus Capital.
Janus Capital also may make payments to selected broker-dealer firms or
institutions which were instrumental in the acquisition of shareholders for the
Funds or which performed services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital.
PORTFOLIO TRANSACTIONS
AND BROKERAGE
Decisions as to the assignment of portfolio business for the Funds and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions.
15
<PAGE>
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; and research products or services provided. In recognition of
the value of the foregoing factors, Janus Capital may place portfolio
transactions with a broker or dealer with whom it has negotiated a commission
that is in excess of the commission another broker or dealer would have charged
for effecting that transaction if Janus Capital determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research provided by such broker or dealer viewed in terms of
either that particular transaction or of the overall responsibilities of Janus
Capital. These research and other services may include, but are not limited to,
general economic and security market reviews, industry and company reviews,
evaluations of securities, recommendations as to the purchase and sale of
securities and access to third party publications, computer and electronic
equipment and software. Research received from brokers or dealers is
supplemental to Janus Capital's own research efforts.
For the fiscal year ended October 31, 1997, the Funds paid no brokerage
commissions to brokers and dealers in transactions identified for execution
primarily on the basis of research and other services provided to the Funds.
For the fiscal years ended October 31, 1997, October 31, 1996 and October
31, 1995, the total brokerage commissions paid by the Funds are summarized
below:
<TABLE>
<CAPTION>
Fund Name 1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund $0 $4,851 $0
Janus Government Money Market Fund $0 $0 $0
Janus Tax-Exempt Money Market Fund $0 $0 $0
- ----------------------------------------------------------------------------
</TABLE>
The Funds generally buy and sell securities in principal transactions, in
which no commissions are paid. However, the Funds may engage an agent and pay
commissions for such transactions if Janus Capital believes that the net result
of the transaction to the respective Fund will be no less favorable than that of
contemporaneously available principal transactions.
Janus Capital may use research products and services in servicing other
accounts in addition to the Funds. If Janus Capital determines that any research
product or service has a mixed use, such that it also serves functions that do
not assist in the investment decision-making process, Janus Capital may allocate
the costs of such service or product accordingly. Only that portion of the
product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may consider sales of Shares by a broker-dealer or the
recommendation of a broker-dealer to its customers that they purchase Shares as
a factor
16
<PAGE>
in the selection of broker-dealers to execute Fund portfolio transactions. Janus
Capital may also consider payments made by brokers effecting transactions for a
Fund (i) to the Fund or (ii) to other persons on behalf of the Fund for services
provided to the Fund for which it would be obligated to pay. In placing
portfolio business with such broker-dealers, Janus Capital will seek the best
execution of each transaction.
When the Funds purchase or sell a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
As of October 31, 1997, certain Funds owned securities of their regular
broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Name of Value of
Fund Name Broker-Dealer Securities Owned
- --------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund Bankers Trust Securities Corp. 129,982,478
BZW Securities, Inc. 205,000,000
Goldman Sachs Group L.P. 230,000,000
Lehman Brothers, Inc. 28,800,000
Merrill Lynch & Co. 50,000,000
Morgan Stanley Dean Witter 225,000,000
Nationsbank Discover and Co. 50,000,000
Janus Government Money CS First Boston 40,000,000
Market Fund HSBC Securities, Inc. 39,300,000
Lehman Brothers, Inc. 10,000,000
- --------------------------------------------------------------------------
</TABLE>
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4928
Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief
Executive Officer, Director and President of Janus Capital. Director of
Janus Distributors, Inc. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
17
<PAGE>
James P. Craig, III*# - Trustee
100 Fillmore Street
Denver, CO 80206-4928
Trustee and Executive Vice President of Janus Aspen Series. Chief
Investment Officer, Vice Chairman and Director of Janus Capital. Executive
Vice President and Portfolio Manager of Janus Fund. Executive Vice
President and Co-Manager of Janus Venture Fund.
Sharon S. Pichler* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4928
Executive Vice President and Portfolio Manager of Janus Money Market Fund,
Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund.
Vice President of Janus Capital. Formerly, Assistant Vice President and
Portfolio Manager at USAA Investment Management Co. (1990-1994).
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4928
Vice President and Chief Financial Officer of Janus Aspen Series. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service Corporation, Janus Distributors, Inc. and Janus Capital. Director
of IDEX, Janus Service Corporation and Janus Distributors, Inc. Director,
Treasurer and Vice President of Finance of Janus Capital International Ltd.
Formerly (May 1992-January 1996), Treasurer of Janus Investment Fund and
Janus Aspen Series.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4928
Treasurer and Chief Accounting Officer of Janus Aspen Series. Vice
President of Janus Capital. Formerly (1991-1997) Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4928
Secretary of Janus Aspen Series. Director and President of Janus
Distributors, Inc. Associate Counsel and Assistant Vice President of Janus
Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc.,
Boston Massachusetts (mutual fund administration services).
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
18
<PAGE>
Gary O. Loo# - Trustee
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. President and Director of High Valley Group,
Inc., Colorado Springs, Colorado (investments).
Dennis B. Mullen - Trustee
14103 Denver West Parkway
Golden, CO 80401
Trustee of Janus Aspen Series. President and Chief Executive Officer, BCE
West L.P., Phoenix, AZ (restaurant chain). Formerly (1997-1998), Chief
Financial Officer - Boston Market Concepts, Boston Chicken, Inc., Golden,
Colorado (restaurant chain); (1993-1997), President and Chief Executive
Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc.,
Bellevue, Washington (restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 to 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, California. Formerly (1989 to 1993), President and Chief Executive
Officer of Bridgecliff Management Services, Campbell, California (a
condominium association management company).
James T. Rothe - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm). Formerly
(1986-1994), Dean of the College of Business, University of Colorado,
Colorado Springs, Colorado.
The Trustees are responsible for major decisions relating to each Fund's
objective, policies and techniques. The Trustees also supervise the operation of
the Funds by their officers and review the investment decisions of the officers
although they do not actively participate on a regular basis in making such
decisions.
The Trust's Executive Committee shall have and may exercise all the powers
and authority of the Trustees except for matters requiring action by all
Trustees pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts
Law or the 1940 Act.
The Money Market Funds Committee, consisting of Messrs. Loo, Mullen and
Rothe, monitors the compliance with policies and procedures adopted particularly
for money market funds.
- --------------------------------------------------------------------------------
#Member of the Trust's Executive Committee.
19
<PAGE>
The following table shows the aggregate compensation earned by and paid to
each Trustee by the Funds described in this SAI and all funds advised and
sponsored by Janus Capital (collectively, the "Janus Funds") for the periods
indicated. None of the Trustees receive any pension or retirement benefits from
the Funds or the Janus Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Funds for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position October 31, 1997 December 31, 1997**
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $0 $0
James P. Craig, Trustee* $0 $0
John W. Shepardson,
Trustee+ $2,402 $14,500
William D. Stewart,
Trustee $4,977 $70,667
Gary O. Loo, Trustee $4,533 $60,667
Dennis B. Mullen, Trustee $4,881 $67,167
Martin H. Waldinger,
Trustee $4,725 $67,667
James T. Rothe, Trustee++ $3,445 $64,833
- -----------------------------------------------------------------------------
</TABLE>
*An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.
**As of December 31, 1997, Janus Funds consisted of two registered investment
companies comprised of a total of 31 funds.
+Mr. Shepardson retired as a Fund Trustee on March 31, 1997.
++Mr. Rothe began serving as a Fund Trustee on January 1, 1997.
PURCHASE OF SHARES
As stated in the Prospectus, Janus Distributors is a distributor of the
Funds' shares. Shares are sold at the net asset value per share as determined at
the close of the regular trading session of the New York Stock Exchange (the
"NYSE" or the "Exchange") next occurring after a purchase order is received and
accepted by a Fund (except net asset value is determined at 5:00 p.m. (New York
time) for Janus Government Money Market Fund). A Fund's net asset value is
calculated each day that both the NYSE and the New York Federal Reserve Bank are
open. As stated in the Prospectus, the Funds each seek to maintain a stable net
asset value per share of $1.00. The Shareholder's Guide Section of the
Prospectus contains detailed information about the purchase of Shares.
REDEMPTIONS OF SHARES
Redemptions, like purchases, may only be effected through the trust
accounts, cash management programs and similar programs of participating banks
and financial institutions. Shares normally will be redeemed for cash, although
each Fund retains the right to redeem its shares in kind under unusual
circumstances, in order to protect the interests of remaining shareholders, by
delivery of securities selected from its assets at its discretion. However, the
Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of
that Fund during any 90-day period for any one shareholder.
20
<PAGE>
Should redemptions by any shareholder exceed such limitation, a Fund will have
the option of redeeming the excess in cash or in kind. If shares are redeemed in
kind, the redeeming shareholder generally will incur brokerage costs in
converting the assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described under "Shares of the Trust" and such valuation will be made
as of the same time the redemption price is determined.
The right to require the Funds to redeem its shares may be suspended, or
the date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
SHAREHOLDER ACCOUNTS
Detailed information about the general procedures for shareholder accounts
is set forth in the Prospectus. Applications to open accounts may be obtained by
calling or writing your Financial Institution.
DIVIDENDS AND TAX STATUS
Dividends representing substantially all of the net investment income and
any net realized gains on sales of securities are declared daily, Saturdays,
Sundays and holidays included, and distributed on the last business day of each
month. If a month begins on a Saturday, Sunday or holiday, dividends for those
days are declared at the end of the preceding month and distributed on the first
business day of the month. A shareholder may receive dividends via wire transfer
or may choose to have dividends automatically reinvested in a Fund's Shares. As
described in the Prospectus, Shares purchased by wire on a bank business day
will receive that day's dividend if the purchase request is received from a
Financial Institution at or prior to 3:00 p.m. (New York time) for Janus Money
Market Fund, 5:00 p.m. for Janus Government Money Market Fund and 12:00 p.m. for
Janus Tax-Exempt Money Market Fund. Otherwise, such Shares will begin to accrue
dividends on the first bank business day following receipt of the order.
Requests for redemption of Shares will be redeemed at the next determined net
asset value. Redemption requests made by wire that are received from a Financial
Institution prior to 3:00 p.m. (New York time) for Janus Money Market Fund, 5:00
p.m. for Janus Government Money Market Fund and 12:00 p.m. for Janus Tax-Exempt
Money Market Fund will result in Shares being redeemed that day. Proceeds of
such a redemption will normally be sent to the predesignated bank account on
that day, but that day's dividend will not be received. Closing times for
purchase and redemption of Shares may be changed for days in which the bond
market or the NYSE close early.
Distributions for all of the Funds (except Janus Tax-Exempt Money Market
Fund) are taxable income and are subject to federal income tax (except for
shareholders exempt from income tax), whether such distributions are received
via wire transfer or
21
<PAGE>
are reinvested in additional Shares. Full information regarding the tax status
of income dividends and any capital gains distributions will be mailed to
shareholders for tax purposes on or before January 31st of each year. As
described in detail in the Prospectus, Janus Tax-Exempt Money Market Fund
anticipates that substantially all income dividends it pays will be exempt from
federal income tax, although dividends attributable to interest on taxable
investments, together with distributions from any net realized short- or
long-term capital gains, are taxable.
The Funds intend to qualify as regulated investment companies by satisfying
certain requirements prescribed by Subchapter M of the Internal Revenue Code of
1986.
Some money market securities employ a trust or other similar structure to
modify the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security, or
interest rate adjustment features can be used to enhance price stability. If the
structure does not perform as intended, adverse tax or investment consequences
may result. Neither the Internal Revenue Service nor any other regulatory
authority has ruled definitively on certain legal issues presented by structured
securities. Future tax or other regulatory determinations could adversely affect
the value, liquidity, or tax treatment of the income received from these
securities or the nature and timing of distributions made by a Fund.
PRINCIPAL SHAREHOLDERS
As of January 22, 1998, the officers and Trustees as a group owned less
than 1% of the outstanding Shares.
As of January 22, 1998, the following shareholder owned more than 5% of the
Shares of Janus Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Norwest Investment 608 Second Ave. S. 99.93%
Services Minneapolis, MN 55402-1916
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following shareholder owned more than 5% of the
Shares of Janus Government Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Trust Bank of 1200 17th St. 24th Floor 98.27%
Colorado Denver, CO 80202-5835
- -------------------------------------------------------------------------------
</TABLE>
As of January 22, 1998, the following shareholder owned more than 5% of the
Shares of Janus Tax-Exempt Money Market Fund:
<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
Janus Capital 100 Fillmore Street 99.90%
Corporation Denver, CO 80206-4928
- -------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
MISCELLANEOUS INFORMATION
Each Fund is a series of the Trust, a Massachusetts Business Trust that was
created on February 11, 1986. The Trust is an open-end management investment
company registered under the 1940 Act. As of the date of this SAI, the Trust
consists of 19 separate series, three of which currently offer three classes of
Shares. The Funds were added to the Trust as separate series on December 9,
1994.
Janus Capital reserves the right to the name "Janus." In the event that
Janus Capital does not continue to provide investment advice to the Funds, the
Funds must cease to use the name "Janus" as soon as reasonably practicable.
Under Massachusetts law, shareholders of the Funds could, under certain
circumstances, be held liable for the obligations of their Fund. However, the
Agreement and Declaration of Trust (the "Declaration of Trust") disclaims
shareholder liability for acts or obligations of the Funds and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Funds or the Trustees. The Declaration of Trust
also provides for indemnification from the assets of the Funds for all losses
and expenses of any Fund shareholder held liable for the obligations of their
Fund. Thus, the risk of a shareholder incurring a financial loss on account of
its liability as a shareholder of one of the Funds is limited to circumstances
in which their Fund would be unable to meet its obligations. The possibility
that these circumstances would occur is remote. The Trustees intend to conduct
the operations of the Funds to avoid, to the extent possible, liability of
shareholders for liabilities of their Fund.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of one cent per share for each series of
the Trust. Shares of each Fund are fully paid and nonassessable when issued. All
shares of a Fund participate equally in dividends and other distributions by
such Fund, and in residual assets of that Fund in the event of liquidation.
Shares of each Fund have no preemptive, conversion or subscription rights.
The Trust is authorized to issue multiple classes of shares for each Fund.
Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus
Tax-Exempt Money Market Fund each offer three classes of shares by separate
prospectuses. The Shares discussed in this SAI are offered only through
Financial Institutions that meet minimum investment requirements in connection
with trust accounts, cash management programs and similar programs provided to
their customers. A second class of shares, Institutional Shares, is offered to
individual, institutional and corporate clients and foundations and trusts
meeting certain minimum investment criteria. A third class of shares, Investor
Shares, is offered to the general public.
VOTING RIGHTS
The present Trustees were elected at a meeting of the Trust's shareholders
held on July 10, 1992, with the exception of Mr. Craig and Mr. Rothe who were
appointed by the Trustees as of June 30, 1995 and January 1, 1997, respectively.
Under the
23
<PAGE>
Declaration of Trust, each Trustee will continue in office until the termination
of the Trust or his earlier death, resignation, bankruptcy, incapacity or
removal. Vacancies will be filled by a majority of the remaining Trustees,
subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Declaration
of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power
to vote to elect or remove Trustees, to terminate or reorganize their Fund, to
amend the Declaration of Trust, to bring certain derivative actions and on any
other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series or class of
the Trust will vote separately only with respect to those matters that affect
only that series or class or if the interest of the series or class in the
matter differs from the interests of other series or classes of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Funds, audit the Funds' annual financial
statements and prepare their tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Funds or such securities, reference is made to the Registration
Statement and the exhibits filed as a part thereof.
24
<PAGE>
FINANCIAL STATEMENTS
The following audited financial statements of the Funds for the period
ended October 31, 1997 are hereby incorporated by reference to the Funds' Annual
Report dated October 31, 1997. A copy of such report accompanies this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of October 31, 1997
Statements of Operations for the period ended October 31, 1997
Statements of Assets and Liabilities as of October 31, 1997
Statements of Changes in Net Assets for the periods ended October 31, 1997
and October 31, 1996
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this SAI and are not part of the
Registration Statement.
25
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S AND STANDARD & POOR'S
MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS
The two highest ratings of Standard & Poor's Ratings Services ("S&P") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest
rating assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only in a
small degree. The AA rating may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within that rating category.
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by
Moody's to be of the best quality. Bonds rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa bonds are rated
lower than the best bonds because margins of protection or other elements make
long-term risks appear somewhat larger than Aaa securities. The generic rating
Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of such rating category.
SHORT TERM MUNICIPAL LOANS
S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have a strong
capacity to pay principal and interest. Those issues rated SP-1 which are
determined to possess a very strong capacity to pay debt service will be given a
plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay
principal and interest with some vulnerability to adverse financial and economic
changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of
the best quality, enjoying strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are
of high quality, with margins of protection ample although not so large as in
the MIG-1/VMIG-1 group.
OTHER SHORT-TERM DEBT SECURITIES
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for
other short-term debt securities and commercial paper, and A-1 and A-2 are the
two highest ratings for commercial paper assigned by S&P. Moody's uses the
numbers 1, 2 and 3 to denote relative strength within its highest classification
of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength
within its highest classification of A. Issuers rated Prime-1 by Moody's have a
superior ability for repayment of senior short-term debt obligations and have
many of the following characteristics: leading market positions in
well-established industries, high rates of return on funds employed,
26
<PAGE>
conservative capitalization structure with moderate reliance on debt and ample
asset protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well established access to a range of
financial markets and assured sources of alternate liquidity. Issuers rated
Prime-2 by Moody's have a strong ability for repayment of senior short-term debt
obligations and display many of the same characteristics displayed by issuers
rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P carry a strong
degree of safety regarding timely repayment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+) designation.
Issuers rated A-2 by S&P carry a satisfactory degree of safety regarding timely
repayment.
FITCH
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F-1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance for timely payment only slightly
less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1
ratings.
</TABLE>
DUFF & PHELPS INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
ready access to alternative sources of funds, is clearly
outstanding, and safety is just below risk-free U.S.
Treasury short- term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental
protection factors. Risk factors are minor.
Duff 1 High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
</TABLE>
THOMSON BANKWATCH, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated TBW-1.
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest in a
timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
</TABLE>
27
<PAGE>
IBCA, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A1+ Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong
credit feature, a rating of A1+ is assigned.
A2 Obligations supported by a good capacity for timely
repayment.
A3 Obligations supported by a satisfactory capacity for
timely repayment.
B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C Obligations for which there is a high risk of default or
which are currently in default.
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
MUNICIPAL NOTES generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the following:
1. PROJECT NOTES, which carry a U.S. government guarantee, are issued by
public bodies (called "local issuing agencies") created under the laws of a
state, territory, or U.S. possession. They have maturities that range up to one
year from the date of issuance. Project Notes are backed by an agreement between
the local issuing agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide range of financial
assistance programs for housing, redevelopment, and related needs (such as
low-income housing programs and renewal programs).
2. TAX ANTICIPATION NOTES are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various seasonal
tax revenues, such as income, sales, use and business taxes, and are payable
from these specific future taxes.
3. REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
types of revenues, such as Federal revenues available under the Federal Revenue
Sharing Programs.
4. BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.
5. CONSTRUCTION LOAN NOTES are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal National
Mortgage Association ("Fannie Mae") or the Government National Mortgage
Association ("Ginnie Mae").
6. TAX-EXEMPT COMMERCIAL PAPER is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term financing
in anticipation of longer term financing.
MUNICIPAL BONDS, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. GENERAL OBLIGATION BONDS are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
29
<PAGE>
2. REVENUE BONDS in recent years have come to include an increasingly wide
variety of types of municipal obligations. As with other kinds of municipal
obligations, the issuers of revenue bonds may consist of virtually any form of
state or local governmental entity, including states, state agencies, cities,
counties, authorities of various kinds, such as public housing or redevelopment
authorities, and special districts, such as water, sewer or sanitary districts.
Generally, revenue bonds are secured by the revenues or net revenues derived
from a particular facility, group of facilities, or, in some cases, the proceeds
of a special excise or other specific revenue source. Revenue bonds are issued
to finance a wide variety of capital projects including electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of these bonds provide additional
security in the form of a debt service reserve fund to be used to make principal
and interest payments. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Housing authorities have a wide range of security, including
partially or fully insured mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. PRIVATE ACTIVITY BONDS are considered municipal bonds if the interest
paid thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing and health. These bonds are
also used to finance public facilities such as airports, mass transit systems
and ports. The payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and the pledge, if any, of real and personal property as security for such
payment.
While, at one time, the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection with
virtually any type of commercial or industrial project (subject to various
restrictions as to authorized costs, size limitations, state per capita volume
restrictions, and other matters), the types of qualifying projects under the
Code have become increasingly limited, particularly since the enactment of the
Tax Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain privately
owned and operated rental multi-family housing facilities, nonprofit hospital
and nursing home projects, airports, docks and wharves, mass commuting
facilities and solid waste disposal projects, among others, and for the
refunding (that is, the tax-exempt refinancing) of various kinds of other
private commercial projects originally financed with tax-exempt bonds. In future
years, the types of projects qualifying under the Code for tax-exempt financing
are expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to as an
"industrial development bond," but more and more frequently revenue bonds have
become classified according
30
<PAGE>
to the particular type of facility being financed, such as hospital revenue
bonds, nursing home revenue bonds, multi-family housing revenue bonds, single
family housing revenue bonds, industrial development revenue bonds, solid waste
resource recovery revenue bonds, and so on.
OTHER MUNICIPAL OBLIGATIONS, incurred for a variety of financing purposes,
include: municipal leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. To reduce this risk, the Fund will only purchase municipal
leases subject to a non-appropriation clause when the payment of principal and
accrued interest is backed by an unconditional irrevocable letter of credit, or
guarantee of a bank or other entity that meets the criteria described in the
Prospectus.
Tax-exempt bonds are also categorized according to whether the interest is
or is not includible in the calculation of alternative minimum taxes imposed on
individuals, according to whether the costs of acquiring or carrying the bonds
are or are not deductible in part by banks and other financial institutions, and
according to other criteria relevant for Federal income tax purposes. Due to the
increasing complexity of Internal Revenue Code and related requirements
governing the issuance of tax-exempt bonds, industry practice has uniformly
required, as a condition to the issuance of such bonds, but particularly for
revenue bonds, an opinion of nationally recognized bond counsel as to the
tax-exempt status of interest on the bonds.
31
<PAGE>
JANUS INVESTMENT FUND
PART C - OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a)(1) Financial Statements Included in the Prospectus:
Financial Highlights for all of the Funds (or classes of shares
thereof).
(a)(2) Financial Statements Incorporated by Reference into
the Statement of Additional Information:
The Financial Statements for all of the Funds dated October
31, 1997, are incorporated by reference into the respective
Statement of Additional Information.
(b) Exhibits:
Exhibit 1 (a) Agreement and Declaration of Trust dated
February 11, 1986 is incorporated herein
by reference to Exhibit 1(a) to
Post-Effective Amendment No. 79.
(b) Certificate of Designation for Janus
Growth and Income Fund is incorporated
herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 79.
(c) Certificate of Designation for Janus
Worldwide Fund is incorporated herein by
reference to Exhibit 1(c) to
Post-Effective Amendment No. 79.
(d) Certificate of Designation for Janus
Twenty Fund is incorporated herein by
reference to Exhibit 1(d) to
Post-Effective Amendment No. 80.
(e) Certificate of Designation for Janus
Flexible Income Fund is incorporated
herein by reference to Exhibit 1(e) to
Post-Effective Amendment No. 80.
(f) Certificate of Designation for Janus
Intermediate Government Securities Fund
filed as Exhibit 1(f) to Post-Effective
Amendment No. 46 has been withdrawn.
(g) Certificate of Designation for Janus
Venture Fund is incorporated herein by
reference to Exhibit 1(g) to
Post-Effective Amendment No. 80.
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(h) Certificate of Designation for Janus
Enterprise Fund is incorporated herein
by reference to Exhibit 1(h) to
Post-Effective Amendment No. 80.
(i) Certificate of Designation for Janus
Balanced Fund is incorporated herein by
reference to Exhibit 1(i) to
Post-Effective Amendment No. 80.
(j) Certificate of Designation for Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 1(j) to
Post-Effective Amendment No. 80.
(k) Certificate of Designation for Janus
Federal Tax-Exempt Fund is incorporated
herein by reference to Exhibit 1(k) to
Post-Effective Amendment No. 81.
(l) Certificate of Designation for Janus
Mercury Fund is incorporated herein by
reference to Exhibit 1(l) to
Post-Effective Amendment No. 81.
(m) Certificate of Designation for Janus
Overseas Fund is incorporated herein by
reference to Exhibit 1(m) to
Post-Effective Amendment No. 81.
(n) Form of Amendment to the Registrant's
Agreement and Declaration of Trust is
incorporated herein by reference to
Exhibit 1(n) to Post-Effective Amendment
No. 81.
(o) Form of Certificate of Designation for
Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund is
incorporated herein by reference to
Exhibit 1(o) to Post-Effective Amendment
No. 81.
(p) Form of Certificate of Designation for
Janus High-Yield Fund and Janus Olympus
Fund is incorporated herein by reference
to Exhibit 1(p) to Post-Effective
Amendment No. 68.
(q) Certificate of Designation for Janus
Equity Income Fund is incorporated
herein by reference to Exhibit 1(q) to
Post-Effective Amendment No. 72.
(r) Form of Certificate of Establishment and
Designation for Janus Special Situations
Fund is incorporated herein by reference
to Exhibit 1(r) to Post-Effective
Amendment No. 75.
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(s) Form of Amendment to Registrant's
Agreement and Declaration of Trust is
incorporated herein by reference to
Exhibit 1(s) to Post-Effective Amendment
No. 75.
(t) Certificate of Establishment and
Designation for Janus Global Life
Sciences Fund filed as Exhibit 1(t) to
Post-Effective Amendment No. 82 has been
withdrawn.
Exhibit 2 (a) Restated Bylaws are incorporated herein
by reference to Exhibit 2(a) to
Post-Effective Amendment No. 71.
(b) First Amendment to the Bylaws is
incorporated herein by reference to
Exhibit 2(b) to Post-Effective Amendment
No. 71.
Exhibit 3 Not Applicable.
Exhibit 4 (a) Specimen Stock Certificate for Janus
Fund(1) is incorporated herein by
reference to Exhibit 4(b) to
Post-Effective Amendment No. 79.
(b) Specimen Stock Certificate for Janus
Growth and Income Fund is incorporated
herein by reference to Exhibit 4(b) to
Post-Effective Amendment No. 79.
(c) Specimen Stock Certificate for Janus
Worldwide Fund is incorporated herein by
reference to Exhibit 4(c) to
Post-Effective Amendment No. 79.
(d) Specimen Stock Certificate for Janus
Twenty Fund(1) is incorporated herein by
reference to Exhibit 4(d) to
Post-Effective Amendment No. 80.
(e) Specimen Stock Certificate for Janus
Flexible Income Fund(1) is incorporated
herein by reference to Exhibit 4(e) to
Post-Effective Amendment No. 80.
(f) Specimen Stock Certificate for Janus
Intermediate Government Securities
Fund(1) filed as Exhibit 4(f) to
Post-Effective Amendment No. 46 has been
withdrawn.
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(1) Outstanding certificates representing shares of predecessor entity to this
series of the Trust are deemed to represent shares of this series.
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(g) Specimen Stock Certificate for Janus
Venture Fund(1) is incorporated herein
by reference to Exhibit 4(g) to
Post-Effective Amendment No. 80.
(h) Specimen Stock Certificate for Janus
Enterprise Fund is incorporated herein
by reference to Exhibit 4(h) to
Post-Effective Amendment No. 80.
(i) Specimen Stock Certificate for Janus
Balanced Fund is incorporated herein by
reference to Exhibit 4(i) to
Post-Effective Amendment No. 80.
(j) Specimen Stock Certificate for Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 4(j) to
Post-Effective Amendment No. 80.
(k) Specimen Stock Certificate for Janus
Federal Tax-Exempt Fund is incorporated
herein by reference to Exhibit 4(k) to
Post-Effective Amendment No. 81.
(l) Specimen Stock Certificate for Janus
Mercury Fund is incorporated herein by
reference to Exhibit 4(l) to
Post-Effective Amendment No. 81.
(m) Specimen Stock Certificate for Janus
Overseas Fund is incorporated herein by
reference to Exhibit 4(m) to
Post-Effective Amendment No. 81.
(n) Revised Specimen Stock Certificates for
Janus High-Yield Fund and Janus Olympus
Fund are incorporated herein by
reference to Exhibit 4(n) to
Post-Effective Amendment No. 79.
(o) Revised Specimen Stock Certificate for
Janus Equity Income Fund is incorporated
herein by reference to Exhibit 4(o) to
Post-Effective Amendment No. 79.
(p) Revised Specimen Stock Certificate for
Janus Special Situations Fund is
incorporated herein by reference to
Exhibit 4(p) to Post-Effective Amendment
No. 79.
(q) Specimen Stock Certificate for Janus
Global Life Sciences Fund filed as
Exhibit 4(q) to Post-Effective Amendment
No. 82 has been withdrawn.
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(1) Outstanding certificates representing shares of predecessor entity to this
series of the Trust are deemed to represent shares of this series.
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<PAGE>
Exhibit 5 (a) Investment Advisory Agreement for Janus
Fund dated July 1, 1997, is incorporated
herein by reference as Exhibit 5(a) to
Post-Effective Amendment No. 83.
(b) Investment Advisory Agreements for Janus
Growth and Income Fund and Janus
Worldwide Fund dated July 1, 1997, are
incorporated herein by reference as
Exhibit 5(b) to Post-Effective Amendment
No. 83.
(c) Investment Advisory Agreements for Janus
Twenty Fund and Janus Venture Fund dated
July 1, 1997, are incorporated herein by
reference as Exhibit 5(c) to
Post-Effective Amendment No. 83.
(d) Investment Advisory Agreement for Janus
Flexible Income Fund dated July 1, 1997,
is incorporated herein by reference as
Exhibit 5(d) to Post-Effective Amendment
No. 83.
(e) Investment Advisory Agreements for Janus
Enterprise Fund, Janus Balanced Fund,
and Janus Short-Term Bond Fund dated
July 1, 1997, are incorporated herein by
reference as Exhibit 5(e) to
Post-Effective Amendment No. 83.
(f) Investment Advisory Agreements for Janus
Federal Tax-Exempt Fund and Janus
Mercury Fund dated July 1, 1997, are
incorporated herein by reference as
Exhibit 5(f) to Post-Effective Amendment
No. 83.
(g) Investment Advisory Agreement for Janus
Overseas Fund dated July 1, 1997, is
incorporated herein by reference as
Exhibit 5(g) to Post-Effective Amendment
No. 83.
(h) Investment Advisory Agreements for Janus
Money Market Fund, Janus Government
Money Market Fund, and Janus Tax-Exempt
Money Market Fund dated July 1, 1997,
are incorporated herein by reference as
Exhibit 5(h) to Post-Effective Amendment
No. 83.
(i) Investment Advisory Agreement for Janus
High-Yield Fund dated July 1, 1997, is
incorporated herein by reference as
Exhibit 5(i) to Post-Effective Amendment
No. 83.
(j) Investment Advisory Agreement for Janus
Olympus Fund dated July 1, 1997, is
incorporated herein by reference as
Exhibit 5(j) to Post-Effective Amendment
No. 83.
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(k) Investment Advisory Agreement for Janus
Equity Income Fund dated July 1, 1997,
is incorporated herein by reference as
Exhibit 5(k) to Post-Effective Amendment
No. 83.
(l) Investment Advisory Agreement for Janus
Special Situations Fund dated July 1,
1997, is incorporated herein by
reference as Exhibit 5(l) to
Post-Effective Amendment No. 83.
(m) Investment Advisory Agreement for Janus
Global Life Sciences Fund filed as
Exhibit 5(m) to Post-Effective Amendment
No. 82 has been withdrawn.
Exhibit 6 Distribution Agreement between Janus
Investment Fund and Janus Distributors,
Inc., dated July 1, 1997, is
incorporated herein by reference as
Exhibit 6 to Post-Effective Amendment
No. 83.
Exhibit 7 Not Applicable.
Exhibit 8 (a) Custodian Contract between Janus
Investment Fund and State Street Bank
and Trust Company is incorporated herein
by reference to Exhibit 8(a) to
Post-Effective Amendment No. 79.
(b) Amendment dated April 25, 1990 of State
Street Custodian Contract is
incorporated herein by reference to
Exhibit 8(b) to Post-Effective Amendment
No. 79.
(c) Letter Agreement dated February 1, 1991
regarding State Street Custodian
Contract is incorporated herein by
reference to Exhibit 8(c) to
Post-Effective Amendment No. 79.
(d) Custodian Contract between Janus
Investment Fund and Investors Fiduciary
Trust Company filed as Exhibit 8(d) to
Post-Effective Amendment No. 79 has been
withdrawn.
(e) Letter Agreement dated October 9, 1992
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(e) to
Post-Effective Amendment No. 81.
(f) Letter Agreement dated April 28, 1993
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(f) to
Post-Effective Amendment No. 81.
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<PAGE>
(g) Letter Agreement dated April 4, 1994
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(g) to
Post-Effective Amendment No. 81.
(h) Form of Custody Agreement between Janus
Investment Fund, on behalf of Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund, and United Missouri
Bank, N.A. is incorporated herein by
reference to Exhibit 8(h) to
Post-Effective Amendment No. 81.
(i) Letter Agreement dated December 12, 1995
regarding State Street Custodian
Contract is incorporated herein by
reference to Exhibit 8(i) to
Post-Effective Amendment No. 72.
(j) Amendment dated October 11, 1995 of
State Street Custodian Contract is
incorporated herein by reference to
Exhibit 8(j) to Post-Effective Amendment
No. 71.
(k) Form of Amendment dated September 10,
1996 of State Street Custodian Contract
is incorporated herein by reference to
Exhibit 8(k) to Post-Effective Amendment
No. 75.
(l) Letter Agreement dated September 10,
1996 regarding State Street Custodian
Contract is incorporated herein by
reference to Exhibit 8(l) to
Post-Effective Amendment No. 75.
(m) Form of Subcustodian Contract between
United Missouri Bank, N.A., and State
Street Bank and Trust Company is
incorporated herein by reference to
Exhibit 8(m) to Post-Effective Amendment
No. 75.
(n) Form of Letter Agreement dated September
9, 1997, regarding State Street
Custodian Contract is incorporated
herein by reference to Exhibit 8(n) to
Post-Effective Amendment No. 82.
Exhibit 9 (a) Transfer Agency Agreement with Investors
Fiduciary Trust Company filed as Exhibit
9(a) to Post-Effective Amendment No. 79
has been withdrawn.
(b) Subagency Agreement between Janus
Service Corporation and Investors
Fiduciary Trust Company filed as Exhibit
9(b) to Post-Effective Amendment No. 79
has been withdrawn.
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<PAGE>
(c) Form of Administration Agreement with
Janus Capital Corporation for Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund is incorporated herein
by reference to Exhibit 9(c) to
Post-Effective Amendment No. 81.
(d) Transfer Agency Agreement dated December
9, 1994 with Janus Service Corporation
for Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund filed as
Exhibit 9(d) to Post-Effective Amendment
No. 64 has been withdrawn.
(e) Transfer Agency Agreement dated
September 27, 1995 with Janus Service
Corporation for Janus Money Market Fund,
Janus Government Money Market Fund,
Janus Tax-Exempt Money Market Fund,
Janus High-Yield Fund and Janus Olympus
Fund is incorporated herein by reference
to Exhibit 9(e) to Post-Effective
Amendment No. 70.
(f) Letter Agreement dated December 21, 1995
regarding Janus Service Corporation
Transfer Agency Agreement is
incorporated herein by reference to
Exhibit 9(f) to Post-Effective Amendment
No. 72.
(g) Letter Agreement dated May 21, 1996
regarding Janus Service Corporation
Transfer Agency Agreement is
incorporated by reference to Exhibit
9(g) to Post-Effective Amendment No. 73.
(h) Form of Amended Administration Agreement
with Janus Capital Corporation for Janus
Money Market Fund, Janus Government
Money Market Fund, and Janus Tax-Exempt
Money Market Fund is incorporated by
reference to Exhibit 9(h) to
Post-Effective Amendment No. 77.
(i) Letter Agreement dated September 10,
1996 regarding Janus Service Corporation
Transfer Agency Agreement is
incorporated herein by reference to
Exhibit 9(i) to Post-Effective Amendment
No. 76.
(j) Letter Agreement dated September 9,
1997, regarding Janus Service
Corporation Transfer Agency Agreement is
incorporated herein by reference to
Exhibit 9(j) to Post-Effective Amendment
No. 82.
Exhibit 10 (a) Opinion and Consent of Messrs. Davis,
Graham & Stubbs with respect to shares
of Janus Fund is incorporated herein by
reference to Exhibit 10 (a) to
Post-Effective Amendment No. 79.
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<PAGE>
(b) Opinion and Consent of Fund Counsel with
respect to shares of Janus Growth and
Income Fund and Janus Worldwide Fund is
incorporated herein by reference to
Exhibit 10(b) to Post-Effective
Amendment No. 79.
(c) Opinion and Consent of Fund Counsel with
respect to shares of Janus Enterprise
Fund, Janus Balanced Fund and Janus
Short-Term Bond Fund is incorporated
herein by reference to Exhibit 10(c) to
Post-Effective Amendment No. 80.
(d) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Twenty Fund is incorporated herein
by reference to Exhibit 10(d) to
Post-Effective Amendment No. 81.
(e) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Venture Fund is incorporated
herein by reference to Exhibit 10(e) to
Post-Effective Amendment No. 81.
(f) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Flexible Income Fund is
incorporated herein by reference to
Exhibit 10(f) to Post-Effective
Amendment No. 81.
(g) Opinion and Consent of Messrs. Sullivan
and Worcester with respect to shares of
Janus Intermediate Government Securities
Fund filed as Exhibit 10(g) to
Post-Effective Amendment No. 46 has been
withdrawn.
(h) Opinion and Consent of Fund Counsel with
respect to shares of Janus Federal
Tax-Exempt Fund and Janus Mercury Fund
is incorporated herein by reference to
Exhibit 10(h) to Post-Effective
Amendment No. 81.
(i) Opinion and Consent of Fund Counsel with
respect to shares of Janus Overseas Fund
is incorporated herein by reference to
Exhibit 10(i) to Post-Effective
Amendment No. 81.
(j) Opinion and Consent of Fund Counsel with
respect to shares of Janus Money Market
Fund, Janus Government Money Market Fund
and Janus Tax-Exempt Money Market Fund
is incorporated herein by reference to
Exhibit 10(j) to Post-Effective
Amendment No. 81.
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(k) Opinion and Consent of Fund Counsel with
respect to Institutional Shares of Janus
Money Market Fund, Janus Government
Money Market Fund and Janus Tax-Exempt
Money Market Fund is incorporated herein
by reference to Exhibit 10(k) to
Post-Effective Amendment No. 81.
(l) Opinion and Consent of Fund Counsel with
respect to shares of Janus High-Yield
Fund and Janus Olympus Fund is
incorporated herein by reference to
Exhibit 10(l) to Post-Effective
Amendment No. 68.
(m) Opinion and Consent of Fund Counsel with
respect to shares of Janus Equity Income
Fund is incorporated herein by reference
to Exhibit 10(m) to Post-Effective
Amendment No. 72.
(n) Opinion and Consent of Fund Counsel with
respect to shares of Janus Special
Situations Fund is incorporated herein
by reference to Exhibit 10(n) to
Post-Effective Amendment No. 75.
(o) Opinion and Consent of Fund Counsel with
respect to shares of Janus Money Market
Fund, Janus Government Money Market
Fund, and Janus Tax-Exempt Money Market
Fund is incorporated herein by reference
to Exhibit 10(o) to Post-Effective
Amendment No. 76.
(p) Opinion and Consent of Fund Counsel with
respect to shares of Janus Global Life
Sciences Fund filed as Exhibit 10(p) to
Post-Effective Amendment No. 82 has been
withdrawn.
Exhibit 11 Consent of Price Waterhouse LLP is filed
herein as Exhibit 11.
Exhibit 12 Not Applicable.
Exhibit 13 Not Applicable.
Exhibit 14 (a) Model Individual Retirement Plan is
incorporated herein by reference to
Exhibit 14(a) to Post-Effective
Amendment No. 81.
(b) Model Defined Contribution Retirement
Plan is filed herein as Exhibit 14(b).
(c) Model Section 403(b)(7) Plan is
incorporated herein by reference to
Exhibit 14(c) to Post-Effective
Amendment No. 81.
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Exhibit 15 Not Applicable.
Exhibit 16 (a) Computation of Total Return is
incorporated herein by reference as
Exhibit 16(a) to Post-Effective
Amendment No. 80.
(b) Computation of Current Yield and
Effective Yield is incorporated herein
by reference to Exhibit 16(b) to
Post-Effective Amendment No. 67.
Exhibit 17 Powers of Attorney dated as of May 20,
1997, are incorporated herein by
reference to Exhibit 17 to
Post-Effective Amendment No. 81.
Exhibit 18 (a) Form of plan entered into by Janus Money
Market Fund, Janus Government Money
Market Fund and Janus Tax-Exempt Money
Market Fund pursuant to Rule 18f-3
setting forth the separate arrangement
and expense allocation of each class of
such Funds filed as Exhibit 18 to
Post-Effective Amendment No. 66 has been
withdrawn.
(b) Restated form of Rule 18f-3 Plan entered
into by Janus Money Market Fund, Janus
Government Money Market Fund and Janus
Tax-Exempt Money Market Fund is
incorporated herein by reference to
Exhibit 18(b) to Post-Effective
Amendment No. 69.
(c) Amended and Restated form of Rule 18f-3
Plan entered into by Janus Money Market
Fund, Janus Government Money Market
Fund, and Janus Tax-Exempt Money Market
Fund is incorporated herein by reference
to Exhibit 18(c) to Post-Effective
Amendment No. 78.
Exhibit 27 Financial Data Schedules for all of the
Funds (or classes of shares thereof) are
filed herein as Exhibit 27.
ITEM 25. Persons Controlled by or Under Common Control with Registrant
None
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<PAGE>
ITEM 26. Number of Holders of Securities
The number of record holders of shares of the Registrant as of January 22,
1998, was as follows:
Number of
Title of Class Record Holders
Janus Fund shares 779,095
Janus Growth and Income Fund shares 146,096
Janus Worldwide Fund shares 372,964
Janus Overseas Fund shares 122,197
Janus Twenty Fund shares 362,544
Janus Flexible Income Fund shares 29,391
Janus Venture Fund shares 89,550
Janus Enterprise Fund shares 63,977
Janus Balanced Fund shares 27,538
Janus Short-Term Bond Fund shares 5,049
Janus Federal Tax-Exempt Fund shares 3,965
Janus Mercury Fund shares 178,458
Janus Money Market Fund - Investor Shares 76,638
Janus Money Market Fund - Institutional Shares 223
Janus Money Market Fund - Service Shares 3
Janus Government Money
Market Fund - Investor Shares 10,454
Janus Government Money
Market Fund - Institutional Shares 7
Janus Government Money
Market Fund - Service Shares 5
Janus Tax-Exempt Money
Market Fund - Investor Shares 5,280
Janus Tax-Exempt Money
Market Fund - Institutional Shares 10
Janus Tax-Exempt Money
Market Fund - Service Shares 2
Janus High-Yield Fund shares 10,955
Janus Olympus Fund shares 51,633
Janus Equity Income Fund shares 9,953
Janus Special Situations Fund shares 46,143
ITEM 27. Indemnification
Article VIII of Janus Investment Fund's Agreement and Declaration of Trust
provides for indemnification of certain persons acting on behalf of the Funds.
In general, Trustees and officers will be indemnified against liability and
against all expenses of litigation incurred by them in connection with any
claim, action, suit or proceeding (or settlement of the same) in which they
become involved by virtue of their Fund office, unless their conduct is
determined to constitute willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties, or unless it has been determined that they
have not acted in good faith in the reasonable belief that their actions were in
or not opposed to the best interests of the Funds. A determination that a person
covered by the indemnification provisions is entitled to indemnification may be
made by the court or other body before which the proceeding is brought, or by
either a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust nor parties to the proceeding or by an independent legal
counsel in a written opinion. The Funds also may advance money for these
expenses, provided that the Trustee or officer undertakes to repay the
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Funds if his conduct is later determined to preclude indemnification, and that
either he provide security for the undertaking, the Trust be insured against
losses resulting from lawful advances or a majority of a quorum of disinterested
Trustees, or independent counsel in a written opinion, determines that he
ultimately will be found to be entitled to indemnification. The Trust also
maintains a liability insurance policy covering its Trustees and officers.
ITEM 28. Business and Other Connections of Investment Adviser
The only business of Janus Capital Corporation is to serve as the
investment adviser of the Registrant and as investment adviser or subadviser to
several other mutual funds and private and retirement accounts. Business
backgrounds of the principal executive officers and directors of the adviser
that also hold positions with the Registrant are included under "Officers and
Trustees" in the currently effective Statements of Additional Information of the
Registrant. The remaining principal executive officers of the investment adviser
and their positions with the adviser and affiliated entities are: Mark B.
Whiston, Vice President and Chief Marketing Officer of Janus Capital
Corporation, Director and President of Janus Capital International Ltd.;
Marjorie G. Hurd, Vice President and Chief Operations Officer of Janus Capital
Corporation, Director and President of Janus Service Corporation; and Stephen L.
Stieneker, Assistant General Counsel, Chief Compliance Officer and Vice
President of Compliance of Janus Capital Corporation. Mr. Michael E. Herman, a
director of Janus Capital Corporation, is Chairman of the Finance Committee
(1990 to present) of Ewing Marion Kauffman Foundation, 4900 Oak, Kansas City,
Missouri 64112. Mr. Michael N. Stolper, a director of Janus Capital Corporation,
is President of Stolper & Company, Inc., 525 "B" Street, Suite 1080, San Diego,
California 92101, an investment performance consultant. Mr. Thomas A. McDonnell,
a director of Janus Capital Corporation, is President, Chief Executive Officer
and a Director of DST Systems, Inc., 333 West 11th Street, 5th Floor, Kansas
City, Missouri 64105, provider of data processing and recordkeeping services for
various mutual funds, and is Executive Vice President and a director of Kansas
City Southern Industries, Inc., 114 W. 11th Street, Kansas City, Missouri 64105,
a publicly traded holding company whose primary subsidiaries are engaged in
transportation, information processing and financial services. Mr. Landon H.
Rowland, a director of Janus Capital Corporation, is President and Chief
Executive Officer of Kansas City Southern Industries, Inc.
ITEM 29. Principal Underwriters
(a) Janus Distributors, Inc. ("Janus Distributors") serves as a
principal underwriter for the Registrant and the Retirement
Shares of Janus Aspen Series only.
(b) The principal business address, positions with Janus Distributors
and positions with Registrant of Kelley Abbott Howes and Steven
R. Goodbarn, officers and directors of Janus Distributors, are
described under "Officers and Trustees" in the Statement of
Additional Information included in this Registration Statement.
The remaining principal executive officer of Janus Distributors
is Jennifer A. Davis, Secretary. Ms. Davis does not hold any
positions with the Registrant. Ms.
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Davis's principal business address is 100 Fillmore Street,
Denver, Colorado 80206-4928.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by Janus Capital Corporation and Janus Service
Corporation, both of which are located at 100 Fillmore Street, Denver, Colorado
80206-4928, and by State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts 02101, and United Missouri Bank, P.O. Box 419226, Kansas City,
Missouri 64141-6226.
ITEM 31. Management Services
The Registrant has no management-related service contract which is not
discussed in Part A or Part B of this form.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Denver, and State of
Colorado, on the 17th day of February, 1998.
JANUS INVESTMENT FUND
By: /s/ Thomas H. Bailey
Thomas H. Bailey, President
Janus Investment Fund is organized under the Agreement and Declaration of
Trust of the Registrant dated February 11, 1986, a copy of which is on file with
the Secretary of State of The Commonwealth of Massachusetts. The obligations of
the Registrant hereunder are not binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant personally, but bind
only the trust property of the Registrant, as provided in the Agreement and
Declaration of Trust of the Registrant. The execution of this Amendment to the
Registration Statement has been authorized by the Trustees of the Registrant and
this Amendment to the Registration Statement has been signed by an authorized
officer of the Registrant, acting as such, and neither such authorization by
such Trustees nor such execution by such officer shall be deemed to have been
made by any of them personally, but shall bind only the trust property of the
Registrant as provided in its Declaration of Trust.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Thomas H. Bailey President February 17, 1998
Thomas H. Bailey (Principal Executive
Officer) and Trustee
/s/ Steven R. Goodbarn Vice President and February 17, 1998
Steven R. Goodbarn Chief Financial Officer
(Principal Financial
Officer)
<PAGE>
/s/ Glenn P. O'Flaherty Treasurer and Chief February 17, 1998
Glenn P. O'Flaherty Accounting Officer
(Principal Accounting
Officer)
/s/ James P. Craig, III Trustee February 17, 1998
James P. Craig, III
Gary O. Loo* Trustee February 17, 1998
Gary O. Loo
Dennis B. Mullen* Trustee February 17, 1998
Dennis B. Mullen
James T. Rothe* Trustee February 17, 1998
James T. Rothe
William D. Stewart* Trustee February 17, 1998
William D. Stewart
Martin H. Waldinger* Trustee February 17, 1998
Martin H. Waldinger
/s/ Steven R. Goodbarn
*By Steven R. Goodbarn
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit 11 Consent of Price Waterhouse
Exhibit 14(b) Model Defined Contribution Plan
Exhibit 27 Financial Data Schedules
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 84 to the registration statement on Form N-1A ("the "Registration
Statement") of our reports dated December 2, 1997, relating to the financial
statements and financial highlights appearing in the October 31, 1997 Annual
Reports to Shareholders of Janus Investment Fund, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Denver, Colorado
February 16, 1998
DEFINED CONTRIBUTION BASIC PLAN DOCUMENT 04
QUALIFIED RETIREMENT
PLAN & TRUST
AGREEMENT
(LOGO) J A N U S
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS
1.01 Adoption Agreement 1
1.02 Basic Plan Document 1
1.03 Beneficiary 1
1.04 Break In Eligibility Service 1
1.05 Break In Vesting Service 1
1.06 Code 1
1.07 Compensation 1
1.08 [Intentionally Omitted] 2
1.09 Disability 2
1.10 Early Retirement Age 2
1.11 Earned Income 2
1.12 Effective Date 2
1.13 Eligibility Computation Period 2
1.14 Employee 2
1.15 Employer 2
1.16 Employer Contribution 2
1.17 Employment Commencement Date 2
1.18 Employer Profit Sharing Contribution 2
1.19 Entry Dates 2
1.20 ERISA 2
1.21 Forfeiture 2
1.22 Fund 2
1.23 Highly Compensated Employee 3
1.24 Hours of Service Means 3
1.25 Individual Account 3
1.26 Investment Fund 3
1.27 Key Employee 3
1.28 Leased Employee 3
1.29 Nondeductible Employee Contributions 4
1.30 Normal Retirement Age 4
1.31 Owner Employee 4
1.32 Participant 4
1.33 Plan 4
1.34 Plan Administrator 4
1.35 Plan Year 4
1.36 Prior Plan 4
1.37 Prototype Sponsor 4
1.38 Qualifying Participant 4
1.39 Related Employer 4
1.40 Related Employer Participation Agreement 4
1.41 Self-Employed Individual 4
1.42 Separate Fund 4
1.43 Taxable Wage Base 4
1.44 Termination of Employment 4
1.45 Top-Heavy Plan 4
1.46 Trustee 4
1.47 Valuation Date 4
1.48 Vested 4
1.49 Year Of Eligibility Service 4
1.50 Year Of Vesting Service 4
SECTION 2 ELIGIBILITY AND PARTICIPATION
2.01 Eligibility To Participate 5
2.02 Plan Entry 5
2.03 Transfer To Or From Ineligible Class 5
2.04 Return As A Participant After Break In Eligibility Service 5
2.05 Determinations Under This Section 5
2.06 Terms Of Employment 5
2.07 Special Rules Where Elapsed Time Method Is Being Used 5
2.08 Election Not To Participate 6
TABLE OF CONTENTS i
<PAGE>
SECTION 3 CONTRIBUTIONS
3.01 Employer Contributions 6
3.02 Nondeductible Employee Contributions 7
3.03 Rollover Contributions 8
3.04 Transfer Contributions 8
3.05 Limitation On Allocations 8
SECTION 4 INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts 10
4.02 Valuation Of Fund 10
4.03 Valuation Of Individual Accounts 10
4.04 Modification Of Method For Valuing Individual Accounts 11
4.05 Segregation Of Assets 11
4.06 Statement of Individual Accounts 11
SECTION 5 TRUSTEE
5.01 Creation Of Fund 11
5.02 Investment Authority 11
5.03 Financial Organization Trustee
Without Full Trust Powers 11
5.04 [ Intentionally Omitted] 12
5.05 Division Of Fund Into Investment Funds 12
5.06 Compensation And Expenses 12
5.07 Not Obligated To Question Data 12
5.08 Liability For Withholding On Distributions 12
5.09 Resignation Or Removal Of Trustee 12
5.10 Degree Of Care Limitations Of Liability 12
5.11 Indemnification Of Prototype Sponsor And Trustee 12
5.12 Investment Managers 13
5.13 Matters Relating To Insurance 13
5.14 Direction Of Investments By Participant 13
SECTION 6 VESTING AND DISTRIBUTION
6.01 Distribution To Participant 14
6.02 Form Of Distribution To A Participant 15
6.03 Distributions Upon The Death Of A Participant 16
6.04 Form Of Distribution To Beneficiary 16
6.05 Joint And Survivor Annuity Requirements 16
6.06 Distribution Requirements 19
6.07 Annuity Contracts 21
6.08 Loans To Participants 21
6.09 Distribution In Kind 21
6.10 Direct Rollovers Of Eligible Rollover Distributions 21
6.11 Procedure For Missing Participants Or Beneficiaries 22
SECTION 7 CLAIMS PROCEDURE
7.01 Filing A Claim For Plan Distributions 22
7.02 Denial Of Claim 22
7.03 Remedies Available 22
SECTION 8 PLAN ADMINISTRATOR
8.01 Employer Is Plan Administrator 22
8.02 Powers And Duties Of The Plan Administrator 22
8.03 Expenses And Compensation 23
8.04 Information From Employer 23
SECTION 9 AMENDMENT AND TERMINATION
9.01 Right Of Prototype Sponsor To Amend The Plan 23
9.02 Right of Employer To Amend The Plan 23
9.03 Limitation On Power To Amend 23
9.04 Amendment Of Vesting Schedule 23
9.05 Permanency 24
9.06 Method And Procedure For Termination 24
9.07 Continuance Of Plan by Successor Employer 24
9.08 Failure Of Plan Qualification 24
TABLE OF CONTENTS ii
<PAGE>
SECTION 10 MISCELLANEOUS
10.01 State Community Property Laws 24
10.02 Headings 24
10.03 Gender And Number 24
10.04 Plan Merger Or Consolidation 24
10.05 Standard Of Fiduciary Conduct 24
10.06 General Undertaking Of All Parties 24
10.07 Agreement Binds Heirs, Etc. 24
10.08 Determination Of Top-Heavy Status 24
10.09 Special Limitations For Owner-Employees 25
10.10 Inalienability Of Benefits 26
10.11 Cannot Eliminate Protected Benefits 26
SECTION 11 401(k) PROVISIONS
11.100 Definitions 26
11.101 Actual Deferral Percentage (ADP) 26
11.102 Aggregate Limit 26
11.103 Average Contribution Percentage (ACP) 26
11.104 Contributing Participant 26
11.105 Contribution Percentage 26
11.106 Contribution Percentage Amounts 26
11.107 Elective Deferrals 26
11.108 Eligible Participant 27
11.109 Excess Aggregate Contributions 27
11.110 Excess Contributions 27
11.111 Excess Elective Deferrals 27
11.112 Matching Contribution 27
11.113 Qualified Nonelective Contributions 27
11.114 Qualified Matching Contributions 27
11.115 Qualifying Contributing Participant 27
11.200 Contributing Participant 27
11.201 Requirements To Enroll As A Contributing Participant 27
11.202 Changing Elective Deferral Amounts 27
11.203 Ceasing Elective Deferrals 27
11.204 Return As A Contributing Participant After Ceasing
Elective Deferrals 27
11.205 Certain One-Time Irrevocable Elections 28
11.300 Contributions 28
11.301 Contributions By Employer 28
11.302 Matching Contributions 28
11.303 Qualified Nonelective Contributions 28
11.304 Qualified Matching Contributions 28
11.305 Nondeductible Employee Contributions 28
11.400 Nondiscrimination Testing 28
11.401 Actual Deferral Percentage Test (ADP) 29
11.402 Limits On Nondeductible Employee Contributions
And Matching Contributions 30
11.500 Distribution Provisions 30
11.501 General Rule 30
11.502 Distribution Requirements 30
11.503 Hardship Distribution 30
11.504 Distribution Of Excess Elective Deferrals 30
11.505 Distribution Of Excess Contributions 30
11.506 Distribution Of Excess Aggregate Contributions 31
11.507 Recharacterization 31
11.508 Distribution Of Elective Deferrals If Excess
Annual Additions 31
11.600 Vesting 31
11.601 100% Vesting On Certain Contributions 31
11.602 Forfeitures And Vesting Of Matching Contributions 31
TABLE OF CONTENTS iii
<PAGE>
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT
DEFINED CONTRIBUTION BASIC PLAN DOCUMENT 04
SECTION 1
DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth below
unless the context indicates that other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it adopts the Plan and
Trust and thereby agrees to be bound by all terms and conditions of the Plan and
Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BENEFICIARY
Means the individual or individuals designated pursuant to
Section 6.03(A) of the Plan.
1.04 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee fails to complete more than 500
Hours of Service (or such lesser number of Hours of Service specified in the
Adoption Agreement for this purpose).
1.05 BREAK IN VESTING SERVICE
Means a Plan Year (or other vesting computation period described in Section
1.50) during which an Employee fails to complete more than 500 Hours of Service
(or such lesser number of Hours of Service specified in the Adoption Agreement
for this purpose).
1.06 CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.07 COMPENSATION
A. Basic Definition
For Plan Years beginning on or after January 1, 1989, the following definition
of Compensation shall apply:
As elected by the Employer in the Adoption Agreement (and if no election is
made, W2 wages will be deemed to have been selected), Compensation shall mean
one of the following:
1. W2 wages. Compensation is defined as information required to be reported
under Sections 6041 and 6051, and 6052 of the Code (Wages, tips and other
compensation as reported on Form W2). Compensation is defined as wages within
the meaning of Section 3401(a) of the Code and all other payments of
compensation to an Employee by the Employer (in the course of the Employer's
trade or business) for which the Employer is required to furnish the Employee a
written statement under Sections 6041(d) and 6051(a)(3), and 6052 of the Code.
Compensation must be determined without regard to any rules under Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
2. Section 3401(a) wages. Compensation is defined as wages within the meaning of
Section 3401(a) of the Code, for the purposes of income tax withholding at the
source but determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor in Section
3401(a)(2)).
3. 415 safe-harbor compensation. Compensation is defined as wages, salaries, and
fees for professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer maintaining the Plan to
the extent that the amounts are includible in gross income (including, but not
limited to, commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, and reimbursements or other expense allowances under a
nonaccountable plan (as described in 1.622(c)), and excluding the following:
a. Employer contributions to a plan of deferred compensation which are not
includible in the Employee's gross income for the taxable year in which
contributed, or employer contributions under a simplified employee pension plan
to the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
b. Amounts realized from the exercise of a nonqualified stock option, or when
restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
c. Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
d. Other amounts which received special tax benefits, or contributions made by
the Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Section 403(b) of the Code (whether
or not the contributions are actually excludable from the gross income of the
Employee).
For any Self-Employed Individual covered under the Plan, Compensation will mean
Earned Income.
B. Determination Period And Other Rules
Compensation shall include only that Compensation which is actually paid to the
Participant during the determination period. Except as provided elsewhere in
this Plan, the determination period shall be the Plan Year unless the Employer
has selected another period in the Adoption Agreement. If the Employer makes no
election, the determination period shall be the Plan Year.
Unless otherwise indicated in the Adoption Agreement, Compensation shall include
any amount which is contributed by the Employer pursuant to a salary reduction
agreement and which is not includible in the gross income of the Employee under
Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
Where this Plan is being adopted as an amendment and restatement to bring a
Prior Plan into compliance with the Tax Reform Act of 1986, such Prior Plan's
definition of Compensation shall apply for Plan Years beginning before January
1, 1989.
C. Limits On Compensation
For years beginning after December 31, 1988 and before January 1, 1994, the
annual Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any determination period shall not exceed
$200,000. This limitation shall be adjusted by the Secretary at the same time
and in the same manner as under Section 415(d) of the Code, except that the
dollar increase in effect on January 1 of any calendar year is effective for
Plan Years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effective on January 1, 1990.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 1
<PAGE>
For Plan Years beginning on or after January 1, 1994, the annual Compensation
of each Participant taken into account for determining all benefits provided
under the Plan for any Plan Year shall not exceed $150,000, as adjusted for
increases in the cost-of-living in accordance with Section 401(a)(17)(B) of the
Internal Revenue Code. The cost-of-living adjustment in effect for a calendar
year applies to any determination period beginning in such calendar year.
If the period for determining Compensation used in calculating an Employee's
allocation for a determination period is a short Plan Year (i.e., shorter than
12 months), the annual Compensation limit is an amount equal to the otherwise
applicable annual Compensation limit multiplied by a fraction, the numerator of
which is the number of months in the short Plan Year, and the denominator of
which is 12.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the close of the year. If, as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level, if this
Plan provides for permitted disparity), the limitation shall be prorated among
the affected individuals in proportion to each such individual's Compensation
as determined under this Section prior to the application of this limitation.
If Compensation for any prior determination period is taken into account in
determining an Employee's allocations or benefits for the current determination
period, the Compensation for such prior determination period is subject to the
applicable annual Compensation limit in effect for that prior period. For this
purpose, in determining allocations in Plan Years beginning on or after January
1, 1989, the annual Compensation limit in effect for determination periods
beginning before that date is $200,000. In addition, in determining allocations
in Plan Years beginning on or after January 1, 1994, the annual Compensation
limit in effect for determination periods beginning before that date is
$150,000.
1.08 [INTENTIONALLY OMITTED]
1.09 DISABILITY
Unless the Employer has elected a different definition in the Adoption
Agreement, Disability means the inability to engage in any substantial, gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. The permanence and
degree of such impairment shall be supported by medical evidence.
1.10 EARLY RETIREMENT AGE
Means the age specified in the Adoption Agreement. The Plan will not have an
Early Retirement Age if none is specified in the Adoption Agreement.
1.11 EARNED INCOME
Means the net earnings from self-employment in the trade or business with
respect to which the Plan is established, for which personal services of the
individual are a material income-producing factor. Net earnings will be
determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan to the extent deductible under Section 404 of
the Code.
Net earnings shall be determined with regard to the deduction allowed to the
Employer by Section 164(f) of the Code for taxable years beginning after
December 31, 1989.
1.12 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, as indicated in the Adoption Agreement, certain provisions
may have specific effective dates. Further, where a separate date is stated in
the Plan as of which a particular Plan provision becomes effective, such date
will control with respect to that provision.
1.13 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the 12 consecutive
month period commencing on the Employee's Employment Commencement Date. The
Employee's subsequent Eligibility Computation Periods shall be the 12
consecutive month periods commencing on the anniversaries of his or her
Employment Commencement Date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of Eligibility
Service to become a Participant, then his or her subsequent Eligibility
Computation Periods shall be the Plan Years commencing with the Plan Year
beginning during his or her initial Eligibility Computation Period. An Employee
does not complete a Year of Eligibility Service before the end of the 12
consecutive month period regardless of when during such period the Employee
completes the required number of Hours of Service.
1.14 EMPLOYEE
Means any person employed by an Employer maintaining the Plan or of any other
employer required to be aggregated with such Employer under Sections 414(b),
(c), (m) or (o) of the Code.
The term Employee shall also include any Leased Employee deemed to be an
Employee of any Employer described in the previous paragraph as provided in
Section 414(n) or (o) of the Code.
1.15 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other entity named in
the Adoption Agreement and any successor who by merger, consolidation, purchase
or otherwise assumes the obligations of the Plan. A partnership is considered to
be the Employer of each of the partners and a sole-proprietorship is considered
to be the Employer of a sole proprietor. Where this Plan is being maintained by
a union or other entity that represents its member Employees in the negotiation
of collective bargaining agreements, the term Employer shall mean such union or
other entity.
1.16 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined under this
Plan.
1.17 EMPLOYMENT COMMENCEMENT DATE
An Employee's Employment Commencement date means the date the Employee first
performs an Hour of Service for the Employer.
1.18 EMPLOYER PROFIT SHARING CONTRIBUTION
Means an Employer Contribution made pursuant to the Section of the Adoption
Agreement titled "Employer Profit Sharing Contributions." The Employer may make
Employer Profit Sharing Contributions without regard to current or accumulated
earnings or profits.
1.19 ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh month of
the Plan Year, unless the Employer has specified different dates in the Adoption
Agreement.
1.20 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended from
time-to-time.
1.21 FORFEITURE Means that portion of a Participant's Individual Account derived
from Employer Contributions which he or she is not entitled to receive (i.e.,
the nonvested portion).
1.22 FUND Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 2
<PAGE>
1.23 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated active
employees and highly compensated former employees. A highly compensated active
employee includes any Employee who performs service for the Employer during the
determination year and who, during the look-back year: (a) received Compensation
from the Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received Compensation from the Employer in excess of $50,000
(as adjusted pursuant to Section 415(d) of the Code) and was a member of the
top-paid group for such year; or (c) was an officer of the Employer and received
Compensation during such year that is greater than 50% of the dollar limitation
in effect under Section 415(b)(1)(A) of the Code. The term Highly Compensated
Employee also includes: (a) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term "look-back
year" and the Employee is one of the 100 Employees who received the most
Compensation from the Employer during the determination year; and (b) Employees
who are 5% owners at any time during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above during
either a determination year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The look-back
year shall be the 12 month period immediately preceding the determination year.
A highly compensated former employee includes any Employee who separated from
service (or was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a family
member of either a 5% owner who is an active or former Employee or a Highly
Compensated Employee who is one of the 10 most Highly Compensated Employees
ranked on the basis of Compensation paid by the Employer during such year, then
the family member and the 5% owner or top 10 Highly Compensated Employee shall
be aggregated. In such case, the family member and 5% owner or top 10 Highly
Compensated Employee shall be treated as a single Employee receiving
Compensation and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member and 5% owner or
top 10 Highly Compensated Employee. For purposes of this Section, family member
includes the spouse, lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Section 414(q)
of the Code and the regulations thereunder.
1.24 HOURS OF SERVICE - Means
A. Each hour for which an Employee is paid, or entitled to payment, for the
performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to Section 2530.200b2 of the
Department of Labor Regulations which is incorporated herein by this reference;
and
C. Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (A) or paragraph (B), as the case may be, and
under this paragraph (C). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or payment is made.
D. Solely for purposes of determining whether a Break in Eligibility Service or
a Break in Vesting Service has occurred in a computation period (the computation
period for purposes of determining whether a Break in Vesting Service has
occurred is the Plan Year or other vesting computation period described in
Section 1.50), an individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which would otherwise have
been credited to such individual but for such absence, or in any case in which
such hours cannot be determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or paternity
reasons means an absence (1) by reason of the pregnancy of the individual, (2)
by reason of a birth of a child of the individual, (3) by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement. The Hours of
Service credited under this paragraph shall be credited (1) in the Eligibility
Computation Period or Plan Year or other vesting computation period described in
Section 1.50 in which the absence begins if the crediting is necessary to
prevent a Break in Eligibility Service or a Break in Vesting Service in the
applicable period, or (2) in all other cases, in the following Eligibility
Computation Period or Plan Year or other vesting computation period described in
Section 1.50.
E. Hours of Service will be credited for employment with other members of an
affiliated service group (under Section 414(m) of the Code), a controlled group
of corporations (under Section 414(b) of the Code), or a group of trades or
businesses under common control (under Section 414(c) of the Code) of which the
adopting Employer is a member, and any other entity required to be aggregated
with the Employer pursuant to Section 414(o) of the Code and the regulations
thereunder.
Hours of Service will also be credited for any individual considered an Employee
for purposes of this Plan under Code Sections 414(n) or 414(o) and the
regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer, service for
such predecessor employer shall be treated as service for the Employer.
G. The above method for determining Hours of Service may be altered as specified
in the Adoption Agreement.
1.25 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.26 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 5.05.
1.27 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under Section 10.08.
1.28 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who pursuant to an
agreement between the recipient and any other person ("leasing organization")
has performed services for the recipient (or for the recipient and related
persons determined in accordance with Section 414(n)(6) of the Code) on a
substantially full time basis for a period of at least one year, and such
services are of a type historically performed by Employees in the business field
of the recipient Employer. Contributions or benefits provided a Leased Employee
by the leasing organization which are attributable to services performed for the
recipient Employer shall be treated as provided by the recipient Employer.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 3
<PAGE>
A Leased Employee shall not be considered an Employee of the recipient if: (1)
such employee is covered by a money purchase pension plan providing: (a) a
nonintegrated employer contribution rate of at least 10% of compensation, as
defined in Section 415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Section 125, Section 402(e)(3), Section
402(h)(1)(B) or Section 403(b) of the Code, (b) immediate participation, and (c)
full and immediate vesting; and (2) Leased Employees do not constitute more than
20% of the recipient's non-highly compensated work force.
1.29 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Means any contribution made to the Plan by or on behalf of a Participant that is
included in the Participant's gross income in the year in which made and that is
maintained under a separate account to which earnings and losses are allocated.
1.30 NORMAL RETIREMENT AGE
Means the age specified in the Adoption Agreement. However, if the Employer
enforces a mandatory retirement age which is less than the Normal Retirement
Age, such mandatory age is deemed to be the Normal Retirement Age. If no age is
specified in the Adoption Agreement, the Normal Retirement Age shall be age 65.
1.31 OWNER-EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner owning more
than 10% of either the capital or profits interest of the partnership.
1.32 PARTICIPANT
Means any Employee or former Employee of the Employer who has met the Plan's
eligibility requirements, has entered the Plan and who is or may become eligible
to receive a benefit of any type from this Plan or whose Beneficiary may be
eligible to receive any such benefit.
1.33 PLAN
Means the prototype defined contribution plan adopted by the Employer. The Plan
consists of this Basic Plan Document plus the corresponding Adoption Agreement
as completed and signed by the Employer.
1.34 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.35 PLAN YEAR
Means the 12 consecutive month period which coincides with the Employer's fiscal
year or such other 12 consecutive month period as is designated in the Adoption
Agreement.
1.36 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this Plan document as
indicated in the Adoption Agreement.
1.37 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement that makes this prototype
plan available to employers for adoption.
1.38 QUALIFYING PARTICIPANT
Means a Participant who has satisfied the requirements described in Section
3.01(B)(2) to be entitled to share in any Employer Contribution (and
Forfeitures, if applicable) for a Plan Year.
1.39 RELATED EMPLOYER
Means an employer that may be required to be aggregated with the Employer
adopting this Plan for certain qualification requirements under Sections 414(b),
(c), (m) or (o) of the Code (or any other employer that has ownership in common
with the Employer). A Related Employer may participate in this Plan if so
indicated in the Section of the Adoption Agreement titled "Employer Information"
or if such Related Employer executes a Related Employer Participation Agreement.
1.40 RELATED EMPLOYER PARTICIPATION AGREEMENT
Means the agreement under this prototype Plan that a Related Employer may
execute to participate in this Plan.
1.41 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Earned Income for the taxable year from the trade or
business for which the Plan is established; also, an individual who would have
had Earned Income but for the fact that the trade or business had no net profits
for the taxable year.
1.42 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular Participant
representing certain assets held for that Participant. The assets which comprise
a Participant's Separate Fund are those assets earmarked for him or her and
those assets subject to the Participant's individual direction pursuant to
Section 5.14.
1.43 TAXABLE WAGE BASE
Means, with respect to any taxable year, the contribution and benefit base in
effect under Section 230 of the Social Security Act at the beginning of the Plan
Year.
1.44 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall occur whenever
his or her status as an Employee of such Employer ceases for any reason other
than death. An Employee who does not return to work for the Employer on or
before the expiration of an authorized leave of absence from such Employer shall
be deemed to have incurred a Termination of Employment when such leave ends.
1.45 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to be such
pursuant to Section 10.08.
1.46 TRUSTEE
Means an individual, individuals or corporation specified in the Adoption
Agreement as Trustee or any duly appointed successor as provided in Section
5.09.
1.47 VALUATION DATE
Means the date or dates as specified in the Adoption Agreement. If no date is
specified in the Adoption Agreement, the Valuation Date shall be the last day of
the Plan Year and each other date designated by the Plan Administrator which is
selected in a uniform and nondiscriminatory manner when the assets of the Fund
are valued at their then fair market value.
1.48 VESTED
Means nonforfeitable, that is, a claim which is unconditional and legally
enforceable against the Plan obtained by a Participant or the Participant's
Beneficiary to that part of an immediate or deferred benefit under the Plan
which arises from a Participant's Years of Vesting Service.
1.49 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee completes at least 1,000 Hours of
Service (or such lesser number of Hours of Service specified in the Adoption
Agreement for this purpose). An Employee does not complete a Year of Eligibility
Service before the end of the 12 consecutive month period regardless of when
during such period the Employee completes the required number of Hours of
Service.
1.50 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least 1,000 Hours of
Service (or such lesser number of Hours of Service specified in the Adoption
Agreement for this purpose). Notwithstanding the preceding sentence, where the
Employer so indicates in the Adoption Agreement, vesting shall be computed by
reference to the 12 consecutive month period beginning with the Employee's
Employment Commencement Date and each successive 12 month period commencing on
the anniversaries thereof.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 4
<PAGE>
In the case of a Participant who has 5 or more consecutive Breaks in Vesting
Service, all Years of Vesting Service after such Breaks in Vesting Service will
be disregarded for the purpose of determining the Vested portion of his or her
Individual Account derived from Employer Contributions that accrued before such
breaks. Such Participant's prebreak service will count in vesting the postbreak
Individual Account derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his or her
Individual Account derived from Employer Contributions at the time of his or her
Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in Vesting
Service is less than his or her number of Years of Vesting Service before such
breaks. Separate subaccounts will be maintained for the Participant's prebreak
and postbreak portions of his or her Individual Account derived from Employer
Contributions. Both subaccounts will share in the gains and losses of the Fund.
Years of Vesting Service shall not include any period of time excluded from
Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period, Employees shall
receive credit for Years of Vesting Service, in accordance with the preceding
provisions of this definition, for each of the Plan Years (the old and new Plan
Years) which overlap as a result of such change.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong to a class of
Employees which is excluded from participation as indicated in the Adoption
Agreement, shall be eligible to participate in this Plan upon the satisfaction
of the age and Years of Eligibility Service requirements specified in the
Adoption Agreement.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or restatement,
each Employee of the Employer who was a Participant in said Prior Plan before
the Effective Date shall continue to be a Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the Effective Date if
the Employee has met the eligibility requirements of Section 2.01 as of such
date. After the Effective Date, each Employee shall become a Participant on the
first Entry Date following the date the Employee satisfies the eligibility
requirements of Section 2.01 unless otherwise indicated in the Adoption
Agreement.
C. The Plan Administrator shall notify each Employee who becomes eligible to be
a Participant under this Plan and shall furnish the Employee with the
application form, enrollment forms or other documents which are required of
Participants. The eligible Employee shall execute such forms or documents and
make available such information as may be required in the administration of the
Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to participate
because he or she is no longer a member of an eligible class of Employees, but
has not incurred a Break in Eligibility Service, such Employee shall participate
immediately upon his or her return to an eligible class of Employees. If such
Employee incurs a Break in Eligibility Service, his or her eligibility to
participate shall be determined by Section 2.04.
An Employee who is not a member of the eligible class of Employees will become a
Participant immediately upon becoming a member of the eligible class provided
such Employee has satisfied the age and Years of Eligibility Service
requirements. If such Employee has not satisfied the age and Years of
Eligibility Service requirements as of the date he or she becomes a member of
the eligible class, such Employee shall become a Participant on the first Entry
Date following the date he or she satisfies those requirements unless otherwise
indicated in the Adoption Agreement.
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. Employee Not Participant Before Break -- If an Employee incurs a Break in
Eligibility Service before satisfying the Plan's eligibility requirements, such
Employee's Years of Eligibility Service before such Break in Eligibility Service
will not be taken into account.
B. Nonvested Participants -- In the case of a Participant who does not have a
Vested interest in his or her Individual Account derived from Employer
Contributions, Years of Eligibility Service before a period of consecutive
Breaks in Eligibility Service will not be taken into account for eligibility
purposes if the number of consecutive Breaks in Eligibility Service in such
period equals or exceeds the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate number of Years of
Eligibility Service will not include any Years of Eligibility Service
disregarded under the preceding sentence by reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded pursuant to the
preceding paragraph, such Participant will be treated as a new Employee for
eligibility purposes. If a Participant's Years of Eligibility Service may not be
disregarded pursuant to the preceding paragraph, such Participant shall continue
to participate in the Plan, or, if terminated, shall participate immediately
upon reemployment.
C. Vested Participants -- A Participant who has sustained a Break in Eligibility
Service and who had a Vested interest in all or a portion of his or her
Individual Account derived from Employer Contributions shall continue to
participate in the Plan, or, if terminated, shall participate immediately upon
reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each Employee to be a
Participant. This determination shall be conclusive and binding upon all persons
except as otherwise provided herein or by law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact that a common law
Employee has become a Participant shall give to that common law Employee any
right to continued employment; nor shall either fact limit the right of the
Employer to discharge or to deal otherwise with a common law Employee without
regard to the effect such treatment may have upon the Employee's rights under
the Plan.
2.07 SPECIAL RULES WHERE ELAPSED TIME METHOD IS BEING USED
This Section 2.07 shall apply where the Employer has indicated in the Adoption
Agreement that the elapsed time method will be used. When this Section applies,
the definitions of year of service, break in service and hour of service in this
Section will replace the definitions of Year of Eligibility Service, Year of
Vesting Service, Break in Eligibility Service, Break in Vesting Service and
Hours of Service found in the Definitions Section of the Plan (Section One).
For purposes of determining an Employee's initial or continued eligibility to
participate in the Plan or the Vested interest in the Participant's Individual
Account balance derived from Employer Contributions, (except for periods of
service which may be disregarded on account of the "rule of parity" described in
Sections 1.50 and 2.04) an Employee will receive credit for the aggregate of all
time period(s) commencing with the Employee's first day of employment or
reemployment and ending on the date a break in service begins. The first day of
employment or reemployment is the first day the Employee performs an hour of
service. An Employee will also receive
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 5
<PAGE>
credit for any period of severance of less than 12 consecutive months.
Fractional periods of a year will be expressed in terms of days.
For purposes of this Section, hour of service will mean each hour for which an
Employee is paid or entitled to payment for the performance of duties for the
Employer. Break in service is a period of severance of at least 12 consecutive
months. Period of severance is a continuous period of time during which the
Employee is not employed by the Employer. Such period begins on the date the
Employee retires, quits or is discharged, or if earlier, the 12 month
anniversary of the date on which the Employee was otherwise first absent from
service.
In the case of an individual who is absent from work for maternity or paternity
reasons, the 12 consecutive month period beginning on the first anniversary of
the first date of such absence shall not constitute a break in service. For
purposes of this paragraph, an absence from work for maternity or paternity
reasons means an absence (1) by reason of the pregnancy of the individual, (2)
by reason of the birth of a child of the individual, (3) by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
Each Employee will share in Employer Contributions for the period beginning on
the date the Employee commences participation under the Plan and ending on the
date on which such Employee severs employment with the Employer or is no longer
a member of an eligible class of Employees.
If the Employer is a member of an affiliated service group (under Section 414(m)
of the Code), a controlled group of corporations (under Section 414(b) of the
Code), a group of trades or businesses under common control (under Section
414(c) of the Code), or any other entity required to be aggregated with the
Employer pursuant to Section 414(o) of the Code, service will be credited for
any employment for any period of time for any other member of such group.
Service will also be credited for any individual required under Section 414(n)
or Section 414(o) to be considered an Employee of any Employer aggregated under
Section 414(b), (c), or (m) of the Code.
2.08 ELECTION NOT TO PARTICIPATE
This Section 2.08 will apply if this Plan is a nonstandardized plan and the
Adoption Agreement so provides. If this Section applies, then an Employee or a
Participant may elect not to participate in the Plan for one or more Plan Years.
The Employer may not contribute for an Employee or Participant for any Plan Year
during which such Employee's or Participant's election not to participate is in
effect. Any election not to participate must be in writing and filed with the
Plan Administrator.
The Plan Administrator shall establish such uniform and nondiscriminatory rules
as it deems necessary or advisable to carry out the terms of this Section,
including, but not limited to, rules prescribing the timing of the filing of
elections not to participate and the procedures for electing to reparticipate in
the Plan.
An Employee or Participant continues to earn credit for vesting and eligibility
purposes for each Year of Vesting Service or Year of Eligibility Service he or
she completes and his or her Individual Account (if any) will share in the gains
or losses of the Fund during the periods he or she elects not to participate.
SECTION 3
CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. Obligation to Contribute The Employer shall make contributions to the Plan in
accordance with the contribution formula specified in the Adoption Agreement. If
this Plan is a profit sharing plan, the Employer shall, in its sole discretion,
make contributions without regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer Contribution --
1. General -- The Employer Contribution for any Plan Year will be allocated or
contributed to the Individual Accounts of Qualifying Participants in accordance
with the allocation or contribution formula specified in the Adoption Agreement.
The Employer Contribution for any Plan Year will be allocated to each
Participant's Individual Account as of the last day of that Plan Year.
Any Employer Contribution for a Plan Year must satisfy Section 401(a)(4) and the
regulations thereunder for such Plan Year.
2. Qualifying Participants -- A Participant is a Qualifying Participant and is
entitled to share in the Employer Contribution for any Plan Year if the
Participant was a Participant on at least one day during the Plan Year and
satisfies any additional conditions specified in the Adoption Agreement. If this
Plan is a standardized plan, unless the Employer specifies more favorable
conditions in the Adoption Agreement, a Participant will not be a qualifying
Participant for a Plan Year if he or she incurs a Termination of Employment
during such Plan Year with not more than 500 Hours of Service if he or she is
not an Employee on the last day of the Plan Year. The determination of whether a
Participant is entitled to share in the Employer Contribution shall be made as
of the last day of each Plan Year.
3. Special Rules for Integrated Plans -- This Plan may not allocate
contributions based on an integrated formula if the Employer maintains any other
plan that provides for allocation of contributions based on an integrated
formula that benefits any of the same Participants. If the Employer has selected
the integrated contribution or allocation formula in the Adoption Agreement,
then the maximum disparity rate shall be determined in accordance with the
following table.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
MAXIMUM DISPARITY RATE
- ------------------------------------------------------------------------------------------------------------------------------------
Nonstandardized
Top-Heavy & Non-Top-Heavy
Integration Level Money Purchase Profit Sharing Profit Sharing
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than 20% of TWB 5.7% 2.7% 5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
More than 20% of TWB but
not more than 80% of TWB 4.3% 1.3% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
More than 80% of TWB but
not more than TWB 5.4% 2.4% 5.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C. Allocation of Forfeitures -- Forfeitures for a Plan Year which arise as a
result of the application of Section 6.01(D) shall be allocated as follows:
1. Profit Sharing Plan -- If this is a profit sharing plan, unless the Adoption
Agreement indicates otherwise, Forfeitures shall be allocated in the manner
provided in Section 3.01(B) (for Employer Contributions) to the Individual
Accounts of Qualifying Participants who are entitled to share in the Employer
Contribution for such Plan Year. Forfeitures shall be allocated as of the last
day of the Plan Year during which the Forfeiture arose (or any subsequent Plan
Year if indicated in the Adoption Agreement).
2. Money Purchase Pension and Target Benefit Plan -- If this Plan is a money
purchase plan or a target benefit plan, unless the Adoption Agreement indicates
otherwise, Forfeitures shall be applied towards the reduction of Employer
Contributions to the Plan. Forfeitures shall be allocated as of the last day of
the Plan Year during which the Forfeiture arose (or any subsequent Plan Year if
indicated in the Adoption Agreement).
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 6
<PAGE>
D. Timing of Employer Contribution The Employer Contribution for each Plan Year
shall be delivered to the Trustee not later than the due date for filing the
Employer's income tax return for its fiscal year in which the Plan Year ends,
including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans -- The contribution and allocation
provisions of this Section 3.01(E) shall apply for any Plan Year with respect to
which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, the Employer Contributions
and Forfeitures allocated on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of 3% of such Participant's Compensation or
(in the case where the Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code) the largest percentage of Employer
Contributions and Forfeitures, as a percentage of the first $200,000 ($150,000
for Plan Years beginning after December 31, 1993), (increased by any cost of
living adjustment made by the Secretary of Treasury or the Secretary's delegate)
of the Key Employee's Compensation, allocated on behalf of any Key Employee for
that year. The minimum allocation is determined without regard to any Social
Security contribution. The Employer may, in the Adoption Agreement, limit the
Participants who are entitled to receive the minimum allocation. This minimum
allocation shall be made even though under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of (a) the Participant's
failure to complete 1,000 Hours of Service (or any equivalent provided in the
Plan), or (b) the Participant's failure to make mandatory Nondeductible Employee
Contributions to the Plan, or (c) Compensation less than a stated amount.
2. For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in Section 1.07 of the Plan and shall exclude any
amounts contributed by the Employer pursuant to a salary reduction agreement and
which is not includible in the gross income of the Employee under Sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code even if the Employer has elected
to include such contributions in the definition of Compensation used for other
purposes under the Plan.
3. The provision in (1) above shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
4. The provision in (1) above shall not apply to any Participant to the extent
the Participant is covered under any other plan or plans of the Employer and the
Employer has provided in the adoption agreement that the minimum allocation or
benefit requirement applicable to Top-Heavy Plans will be met in the other plan
or plans.
5. The minimum allocation required under this Section 3.01(E) and Section
3.01(F)(1) (to the extent required to be nonforfeitable under Code Section
416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans -- The Employer maintains paired plans
if the Employer has adopted both a standardized profit sharing plan and a
standardized money purchase pension plan using this Basic Plan Document.
1. Minimum Allocation -- When the paired plans are top-heavy, the top-heavy
requirements set forth in Section 3.01(E)(1) of the Plan shall apply.
a. Same eligibility requirements. In satisfying the top-heavy minimum allocation
requirements set forth in Section 3.01(E) of the Plan, if the Employees
benefiting under each of the paired plans are identical, the top-heavy minimum
allocation shall be made to the money purchase pension plan.
b. Different eligibility requirements. In satisfying the top heavy minimum
allocation requirements set forth in Section 3.01(E) of the Plan, if the
Employees benefiting under each of the paired plans are not identical, the
top-heavy minimum allocation will be made to both of the paired plans.
A Participant is treated as benefiting under the Plan for any Plan Year during
which the Participant received or is deemed to receive an allocation in
accordance with Section 1.410(b)-3(a).
2. Only One Plan Can Be Integrated -- If the Employer maintains paired plans,
only one of the Plans may provide for the disparity in contributions which is
permitted under Section 401(l) of the Code. In the event that both Adoption
Agreements provide for such integration, only the money purchase pension plan
shall be deemed to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances -- Any contribution made by the Employer because of a mistake of
fact must be returned to the Employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines that the Plan
is not initially qualified under the Code, any contributions made incident to
that initial qualification by the Employer must be returned to the Employer
within one year after the date the initial qualification is denied, but only if
the application for qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan is adopted,
or such later date as the Secretary of the Treasury may prescribe.
In the event that a contribution made by the Employer under this Plan is
conditioned on deductibility and is not deductible under Code Section 404, the
contribution, to the extent of the amount disallowed, must be returned to the
Employer within one year after the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan and, if in any
Plan Year, any Employee who should be included as a Participant is erroneously
omitted and discovery of such omission is not made until after a contribution by
the Employer for the year has been made and allocated, the Employer shall make a
subsequent contribution to include earnings thereon, with respect to the omitted
Employee in the amount which the Employer would have contributed with respect to
that Employee had he or she not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year, any Employee
who should be included as a Participant is erroneously omitted and discovery of
such omission is not made until after the Employer Contribution has been made
and allocated, then the Plan Administrator must redo the allocation (if a
correction can be made) and inform the Employee. Alternatively, the Employer may
choose to contribute for the omitted Employee the amount to include earnings
thereon, which the Employer would have contributed for the Employee.
3.02 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
This Plan will not accept Nondeductible Employee Contributions and matching
contributions for Plan Years beginning after the Plan Year in which this Plan is
adopted by the Employer. Nondeductible Employee Contributions for Plan Years
beginning after December 31, 1986, together with any matching contributions as
defined in Section 401(m) of the Code, will be limited so as to meet the
nondiscrimination test of Section 401(m) of the Code.
A separate account will be maintained by the Plan Administrator for the
Nondeductible Employee Contributions of each Participant.
A Participant may, upon a written request submitted to the Plan Administrator
withdraw the lesser of the portion of his or her Individual Account attributable
to his or her Nondeductible Employee Contributions or the amount he or she
contributed as Nondeductible Employee Contributions.
Nondeductible Employee Contributions and earnings thereon will be nonforfeitable
at all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of Nondeductible Employee Contributions.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 7
<PAGE>
The Plan Administrator will not accept deductible employee contributions which
are made for a taxable year beginning after December 31, 1986. Contributions
made prior to that date will be maintained in a separate account which will be
nonforfeitable at all times. The account will share in the gains and losses of
the Fund in the same manner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase life
insurance. Subject to Section 6.05, joint and survivor annuity requirements (if
applicable), the Participant may withdraw any part of the deductible employee
contribution account by making a written application to the Plan Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If so indicated in the Adoption Agreement, an Employee may contribute a rollover
contribution to the Plan. The Plan Administrator may require the Employee to
submit a written certification that the contribution qualifies as a rollover
contribution under the applicable provisions of the Code. If it is later
determined that all or part of a rollover contribution was ineligible to be
rolled into the Plan, the Plan Administrator shall direct that any ineligible
amounts, plus earnings attributable thereto, be distributed from the Plan to the
Employee as soon as administratively feasible.
A separate account shall be maintained by the Plan Administrator for each
Employee's rollover contributions which will be nonforfeitable at all times.
Such account will share in the income and gains and losses of the Fund in the
manner described in Section 4.03 and shall be subject to the Plan's provisions
governing distributions.
The Employer may, in a uniform and nondiscriminatory manner, only allow
Employees who have become Participants in the Plan to make rollover
contributions.
3.04 TRANSFER CONTRIBUTIONS
If so indicated in the Adoption Agreement, the Trustee may receive any amounts
transferred to it from the trustee or custodian of another plan qualified under
Code Section 401(a). If it is later determined that all or part of a transfer
contribution was ineligible to be transferred into the Plan, the Plan
Administrator shall direct that any ineligible amounts, plus earnings
attributable thereto, be distributed from the Plan to the Employee as soon as
administratively feasible.
A separate account shall be maintained by the Plan Administrator for each
Employee's transfer contributions which will be nonforfeitable at all times.
Such account will share in the income and gains and losses of the Fund in the
manner described in Section 4.03 and shall be subject to the Plan's provisions
governing distributions. Notwithstanding any provision of this Plan to the
contrary, to the extent that any optional form of benefit under this Plan
permits a distribution prior to the Employee's retirement, death, Disability, or
severance from employment, and prior to Plan termination, the optional form of
benefit is not available with respect to benefits attributable to assets
(including the post-transfer earnings thereon) and liabilities that are
transferred, within the meaning of Section 414(1) of the Internal Revenue Code,
to this Plan from a money purchase pension plan qualified under Section 401(a)
of the Internal Revenue Code (other than any portion of those assets and
liabilities attributable to voluntary employee contributions).
The Employer may, in a uniform and nondiscriminatory manner, only allow
Employees who have become Participants in the Plan to make transfer
contributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never participated in
another qualified plan maintained by the Employer or a welfare benefit fund, as
defined in Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of the Code, or a
simplified employee pension plan, as defined in Section 408(k) of the Code,
maintained by the Employer, which provides an annual addition as defined in
Section 3.08(E)(1), the following rules shall apply:
1. The amount of annual additions which may be credited to the Participant's
Individual Account for any limitation year will not exceed the lesser of the
maximum permissible amount or any other limitation contained in this Plan. If
the Employer Contribution that would otherwise be contributed or allocated to
the Participant's Individual Account would cause the annual additions for the
limitation year to exceed the maximum permissible amount, the amount contributed
or allocated will be reduced so that the annual additions for the limitation
year will equal the maximum permissible amount.
2. Prior to determining the Participant's actual Compensation for the limitation
year, the Employer may determine the maximum permissible amount for a
Participant on the basis of a reasonable estimation of the Participant's
Compensation for the limitation year, uniformly determined for all Participants
similarly situated.
3. As soon as is administratively feasible after the end of the limitation year,
the maximum permissible amount for the limitation year will be determined on the
basis of the Participant's actual Compensation for the limitation year.
4. If pursuant to Section 3.05(A)(3) or as a result of the allocation of
Forfeitures there is an excess amount, the excess will be disposed of as
follows:
a. Any Nondeductible Employee Contributions, to the extent they would reduce the
excess amount, will be returned to the Participant;
b. If after the application of paragraph (a) an excess amount still exists, and
the Participant is covered by the Plan at the end of the limitation year, the
excess amount in the Participant's Individual Account will be used to reduce
Employer Contributions (including any allocation of Forfeitures) for such
Participant in the next limitation year, and each succeeding limitation year if
necessary;
c. If after the application of paragraph (b) an excess amount still exists, and
the Participant is not covered by the Plan at the end of a limitation year, the
excess amount will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer Contributions (including
allocation of any Forfeitures) for all remaining Participants in the next
limitation year, and each succeeding limitation year if necessary;
d. If a suspense account is in existence at any time during a limitation year
pursuant to this Section, it will not participate in the allocation of the
Fund's investment gains and losses. If a suspense account is in existence at any
time during a particular limitation year, all amounts in the suspense account
must be allocated and reallocated to Participants' Individual Accounts before
any Employer Contributions or any Nondeductible Employee Contributions may be
made to the Plan for that limitation year. Excess amounts may not be distributed
to Participants or former Participants.
B. If, in addition to this Plan, the Participant is covered under another
qualified master or prototype defined contribution plan maintained by the
Employer, a welfare benefit fund maintained by the Employer, an individual
medical account maintained by the Employer, or a simplified employee pension
maintained by the Employer that provides an annual addition as defined in
Section 3.05(E)(1), during any limitation year, the following rules apply:
1. The annual additions which may be credited to a Participant's Individual
Account under this Plan for any such limitation year will not exceed the maximum
permissible amount reduced by the annual additions credited to a Participant's
Individual Account under the other qualified master or prototype plans, welfare
benefit funds, individual medical accounts and simplified employee pensions for
the same limitation year. If the annual additions with respect to the
Participant under other qualified master or prototype defined contribution
plans, welfare benefit funds, individual medical accounts and simplified
employee pensions maintained by the Employer are less than the maximum
permissible amount and the Employer Contribution that would other wise be
contributed or allocated to the Participant's Individual Account under this Plan
would cause the annual additions for the limitation
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 8
<PAGE>
year to exceed this limitation, the amount contributed or allocated will be
reduced so that the annual additions under all such plans and funds for the
limitation year will equal the maximum permissible amount. If the annual
additions with respect to the Participant under such other qualified master or
prototype defined contribution plans, welfare benefit funds, individual medical
accounts and simplified employee pensions in the aggregate are equal to or
greater than the maximum permissible amount, no amount will be contributed or
allocated to the Participant's Individual Account under this Plan for the
limitation year.
2. Prior to determining the Participant's actual Compensation for the limitation
year, the Employer may determine the maximum permissible amount for a
Participant in the manner described in Section 3.05(A)(2).
3. As soon as is administratively feasible after the end of the limitation year,
the maximum permissible amount for the limitation year will be determined on the
basis of the Participant's actual Compensation for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of the allocation of
Forfeitures a Participant's annual additions under this Plan and such other
plans would result in an excess amount for a limitation year, the excess amount
will be deemed to consist of the annual additions last allocated, except that
annual additions attributable to a simplified employee pension will be deemed to
have been allocated first, followed by annual additions to a welfare benefit
fund or individual medical account, regardless of the actual allocation date.
5. If an excess amount was allocated to a Participant on an allocation date of
this Plan which coincides with an allocation date of another plan, the excess
amount attributed to this Plan will be the product of,
a. the total excess amount allocated as of such date, times
b. the ratio of (i) the annual additions allocated to the Participant for the
limitation year as of such date under this Plan to (ii) the total annual
additions allocated to the Participant for the limitation year as of such date
under this and all the other qualified prototype defined contribution plans.
6. Any excess amount attributed to this Plan will be disposed in the manner
described in Section 3.05(A)(4).
C. If the Participant is covered under another qualified defined contribution
plan maintained by the Employer which is not a master or prototype plan, annual
additions which may be credited to the Participant's Individual Account under
this Plan for any limitation year will be limited in accordance with Sections
3.05(B)(1) through 3.05(B)(6) as though the other plan were a master or
prototype plan unless the Employer provides other limitations in the Section of
the Adoption Agreement titled "Limitation on Allocation -- More Than One Plan."
D. If the Employer maintains, or at any time maintained, a qualified defined
benefit plan covering any Participant in this Plan, the sum of the Participant's
defined benefit plan fraction and defined contribution plan fraction will not
exceed 1.0 in any limitation year. The annual additions which may be credited to
the Participant's Individual Account under this Plan for any limitation year
will be limited in accordance with the Section of the Adoption Agreement titled
"Limitation on Allocation -- More Than One Plan."
E. The following terms shall have the following meanings when used in this
Section 3.05:
1. Annual additions: The sum of the following amounts credited to a
Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Nondeductible Employee Contributions,
c. Forfeitures,
d. amounts allocated, after March 31, 1984, to an individual medical account, as
defined in Section 415(l)(2) of the Code, which is part of a pension or annuity
plan maintained by the Employer are treated as annual additions to a defined
contribution plan. Also amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to postretirement medical benefits, allocated to the separate
account of a key employee, as defined in Section 419A(d)(3) of the Code, under a
welfare benefit fund, as defined in Section 419(e) of the Code, maintained by
the Employer are treated as annual additions to a defined contribution plan, and
e. allocations under a simplified employee pension.
For this purpose, any excess amount applied under Section 3.05(A)(4) or
3.05(B)(6) in the limitation year to reduce Employer Contributions will be
considered annual additions for such limitation year.
2. Compensation: Means Compensation as defined in Section 1.07 of the Plan
except that Compensation for purposes of this Section 3.05 shall not include any
amounts contributed by the Employer pursuant to a salary reduction agreement and
which is not includible in the gross income of the Employee under Sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code even if the Employer has elected
to include such contributions in the definition of Compensation used for other
purposes under the Plan. Further, any other exclusion the Employer has elected
(such as the exclusion of certain types of pay or pay earned before the Employee
enters the Plan) will not apply for purposes of this Section.
Notwithstanding the preceding sentence, Compensation for a Participant in a
defined contribution plan who is permanently and totally disabled (as defined in
Section 22(e)(3) of the Code) is the Compensation such Participant would have
received for the limitation year if the Participant had been paid at the rate of
Compensation paid immediately before becoming permanently and totally disabled;
such imputed Compensation for the disabled Participant may be taken into account
only if the Participant is not a Highly Compensated Employee (as defined in
Section 414(q) of the Code) and contributions made on behalf of such Participant
are nonforfeitable when made.
3. Defined benefit fraction: A fraction, the numerator of which is the sum of
the Participant's projected annual benefits under all the defined benefit plans
(whether or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125% of the dollar limitation determined for the
limitation year under Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under Section 415(b) of the
Code.
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first limitation year beginning after December 31, 1986, in one or
more defined benefit plans maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not be less than 125% of the
sum of the annual benefits under such plans which the Participant had accrued as
of the close of the last limitation year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the plan after May 5,
1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Section 415 of
the Code for all limitation years beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if greater, one-fourth of
the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code
as in effect for the limitation year.
5. Defined contribution fraction: A fraction, the numerator of which is the sum
of the annual additions to the Participant's account under all the defined
contribution plans (whether or not terminated) maintained by the Employer for
the current and all prior limitation
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 9
<PAGE>
years (including the annual additions attributable to the Participant's
nondeductible employee contributions to all defined benefit plans, whether or
not terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Section 419(e) of the
Code, individual medical accounts, and simplified employee pensions, maintained
by the Employer), and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior limitation years of service with
the Employer (regardless of whether a defined contribution plan was maintained
by the Employer). The maximum aggregate amount in any limitation year is the
lesser of 125% of the dollar limitation determined under Section 415(b) and (d)
of the Code in effect under Section 415(c)(1)(A) of the Code or 35% of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
limitation year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last limitation year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before January 1, 1987,
shall not be recomputed to treat all Nondeductible Employee Contributions as
annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall mean the Employer
that adopts this Plan, and all members of a controlled group of corporations (as
defined in Section 414(b) of the Code as modified by Section 415(h)), all
commonly controlled trades or businesses (as defined in Section 414(c) as
modified by Section 415(h)) or affiliated service groups (as defined in Section
414(m)) of which the adopting Employer is a part, and any other entity required
to be aggregated with the Employer pursuant to regulations under Section 414(o)
of the Code.
7. Excess amount: The excess of the Participant's annual additions for the
limitation year over the maximum permissible amount.
8. Highest average compensation: The average compensation for the three
consecutive years of service with the Employer that produces the highest
average.
9. Limitation year: A calendar year, or the 12consecutive month period elected
by the Employer in the Adoption Agreement. All qualified plans maintained by the
Employer must use the same limitation year. If the limitation year is amended to
a different 12consecutive month period, the new limitation year must begin on a
date within the limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
11. Maximum permissible amount: The maximum annual addition that may be
contributed or allocated to a Participant's Individual Account under the Plan
for any limitation year shall not exceed the lesser of:
a. the defined contribution dollar limitation, or
b. 25% of the Participant's Compensation for the limitation year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits (within the meaning of Section 401(h) or
Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition
under Section 415(l)(1) or 419A(d)(2) of the Code.
If a short limitation year is created because of an amendment changing the
limitation year to a different 12-consecutive month period, the maximum
permissible amount will not exceed the defined contribution dollar limitation
multiplied by the following fraction:
Number of months in the short limitation year
---------------------------------------------
12
12. Projected annual benefit: The annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed in a
form other than a straight life annuity or qualified joint and survivor annuity)
to which the Participant would be entitled under the terms of the Plan assuming:
a. the Participant will continue employment until Normal Retirement Age under
the Plan (or current age, if later), and
b. the Participant's Compensation for the current limitation year and all other
relevant factors used to determine benefits under the Plan will remain constant
for all future limitation years.
Straight life annuity means an annuity payable in equal installments for the
life of the Participant that terminates upon the Participants's death.
SECTION 4
INDIVIDUAL ACCOUNTS OF PARTICIPANTS
AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an Individual Account in
the name of each Participant to reflect the total value of his or her interest
in the Fund. Each Individual Account established hereunder shall consist of such
subaccounts as may be needed for each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures allocated on
behalf of a Participant;
2. a subaccount to reflect a Participant's rollover contributions;
3. a subaccount to reflect a Participant's transfer contributions;
4. a subaccount to reflect a Participant's Nondeductible Employee Contributions;
and
5. a subaccount to reflect a Participant's deductible employee contributions.
B. The Plan Administrator may establish additional accounts as it may deem
necessary for the proper administration of the Plan, including, but not limited
to, a suspense account for Forfeitures as required pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's Individual Account
are invested in a Separate Fund for the Participant, then the value of that
portion of such Participant's Individual Account at any relevant time
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 10
<PAGE>
equals the sum of the fair market values of the assets in such Separate Fund,
less any applicable charges or penalties.
B. The fair market value of the remainder of each Individual Account is
determined in the following manner:
1. First, the portion of the Individual Account invested in each Investment Fund
as of the previous Valuation Date is determined. Each such portion is reduced by
any withdrawal made from the applicable Investment Fund to or for the benefit of
a Participant or the Participant's Beneficiary, further reduced by any amounts
forfeited by the Participant pursuant to Section 6.01(D) and further reduced by
any transfer to another Investment Fund since the previous Valuation Date and is
increased by any amount transferred from another Investment Fund since the
previous Valuation Date. The resulting amounts are the net Individual Account
portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in each Investment
Fund are adjusted upwards or downwards, pro rata (i.e., ratio of each net
Individual Account portion to the sum of all net Individual Account portions) so
that the sum of all the net Individual Account portions invested in an
Investment Fund will equal the then fair market value of the Investment Fund.
Notwithstanding the previous sentence, for the first Plan Year only, the net
Individual Account portions shall be the sum of all contributions made to each
Participant's Individual Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are allocated in
accordance with the appropriate allocation provisions of Section 3. For purposes
of Section 4, contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the last day of that Plan
Year regardless of when paid to the Trustee (or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be credited with investment
gains or losses until the next following Valuation Date.
4. Finally, the portions of the Individual Account invested in each Investment
Fund (determined in accordance with (1), (2) and (3) above) are added together.
4.04 MODIFICATION OF METHOD FOR
VALUING INDIVIDUAL ACCOUNTS
If necessary or appropriate, the Plan Administrator may establish different or
additional procedures (which shall be uniform and nondiscriminatory) for
determining the fair market value of the Individual Accounts.
4.05 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump sum, the Plan
Administrator may place that Participant's account balance into a segregated
Investment Fund for the purpose of maintaining the necessary liquidity to
provide benefit installments on a periodic basis.
4.06 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the Plan Administrator
shall furnish a statement to each Participant indicating the Individual Account
balances of such Participant as of the last Valuation Date in such Plan Year.
SECTION 5
TRUSTEE
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which shall consist of
the assets of the Plan held by the Trustee pursuant to this Section 5. Assets
within the Fund may be pooled on behalf of all Participants, earmarked on behalf
of each Participant or be a combination of pooled and earmarked. To the extent
that assets are earmarked for a particular Participant, they will be held in a
Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or diverted to,
purposes other than for the exclusive benefit of Participants or their
Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual direction of
investments by Participants), the Employer, not the Trustee, shall have
exclusive management and control over the investment of the Fund into any
permitted investment. Notwithstanding the preceding sentence, a Trustee may make
an agreement with the Employer whereby the Trustee will manage the investment of
all or a portion of the Fund. Any such agreement shall be in writing and set
forth such matters as the Trustee deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION TRUSTEE WITHOUT
FULL TRUST POWERS
This Section 5.03 applies where a financial organization has indicated in the
Adoption Agreement that it will serve, with respect to this Plan, as Trustee
without full trust powers (under applicable law). Hereinafter, a financial
organization Trustee without full trust powers (under applicable law) shall be
referred to as a Custodian. The Custodian shall have no discretionary authority
with respect to the management of the Plan or the Fund but will act only as
directed by the entity who has such authority.
A. Permissible Investments -- The assets of the Plan shall be invested only in
those investments which are available through the Custodian in the ordinary
course of business which the Custodian may legally hold in a qualified plan and
which the Custodian chooses to make available to Employers for qualified plan
investments. Notwithstanding the preceding sentence, the Prototype Sponsor may,
as a condition of making the Plan available to the Employer, limit the types of
property in which the assets of the Plan may be invested.
B. Responsibilities of the Custodian -- The responsibilities of the Custodian
shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest the Fund
without distinction between principal and interest; provided, however, that
nothing in this Plan shall require the Custodian to maintain physical custody of
stock certificates (or other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, withdrawals and
other information the Custodian deems relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants or Beneficiaries upon the
proper authorization of the Plan Administrator; and
4. To furnish to the Plan Administrator a statement which reflects the value of
the investments in the hands of the Custodian as of the end of each Plan Year
and as of any other times as the Custodian and Plan Administrator may agree.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 11
<PAGE>
C. Powers of the Custodian -- Except as otherwise provided in this Plan, the
Custodian shall have the power to take any action with respect to the Fund which
it deems necessary or advisable to discharge its responsibilities under this
Plan including, but not limited to, the following powers:
1. To invest all or a portion of the Fund (including idle cash balances) in time
deposits, savings accounts, money market accounts or similar investments bearing
a reasonable rate of interest in the Custodian's own savings department or the
savings department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give general or
special proxies or powers of attorney with or without power of substitution; to
exercise any conversion privileges or subscription rights and to make any
payments incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes affecting corporate
securities, and to pay any assessment or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
3. To hold securities or other property of the Fund in its own name, in the name
of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents of transfer
and conveyance and any and all other instruments that may be necessary or
appropriate to carry out the powers herein granted.
5.04 [INTENTIONALLY OMITTED]
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee from time-to-time to divide and redivide the
Fund into one or more Investment Funds. Such Investment Funds may include, but
not be limited to, Investment Funds representing the assets under the control of
an investment manager pursuant to Section 5.12 and Investment Funds representing
investment options available for individual direction by Participants pursuant
to Section 5.14. Upon each division or redivision, the Employer may specify the
part of the Fund to be allocated to each such Investment Fund and the terms and
conditions, if any, under which the assets in such Investment Fund shall be
invested.
5.06 COMPENSATION AND EXPENSES
The Trustee shall receive such reasonable compensation as may be agreed upon by
the Trustee and the Employer. The Trustee shall be entitled to reimbursement by
the Employer for all proper expenses incurred in carrying out his or her duties
under this Plan, including reasonable legal, accounting and actuarial expenses.
If not paid by the Employer, such compensation and expenses may be charged
against the Fund.
All taxes of any kind that may be levied or assessed under existing or future
laws upon, or in respect of, the Fund or the income thereof shall be paid from
the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee and Plan Administrator the information
which each party deems necessary for the administration of the Plan including,
but not limited to, changes in a Participant's status, eligibility, mailing
addresses and other such data as may be required. The Trustee and Plan
Administrator shall be entitled to act on such information as is supplied them
and shall have no duty or responsibility to further verify or question such
information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding federal income taxes
from distributions from the Plan, unless the Participant (or Beneficiary, where
applicable) elects not to have such taxes withheld. The Trustee or other payor
may act as agent for the Plan Administrator to withhold such taxes and to make
the appropriate distribution reports, if the Plan Administrator furnishes all
the information to the Trustee or other payor it may need to do withholding and
reporting.
5.09 RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time by giving 30 days advance written notice to
the Employer. The resignation shall become effective 30 days after receipt of
such notice unless a shorter period is agreed upon.
The Employer may remove any Trustee at any time by giving written notice to such
Trustee and such removal shall be effective 30 days after receipt of such notice
unless a shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee.
Upon such resignation or removal, if the resigning or removed Trustee is the
sole Trustee, he or she shall transfer all of the assets of the Fund then held
by such Trustee as expeditiously as possible to the successor Trustee after
paying or reserving such reasonable amount as he or she shall deem necessary to
provide for the expense in the settlement of the accounts and the amount of any
compensation due him or her and any sums chargeable against the Fund for which
he or she may be liable. If the Funds as reserved are not sufficient for such
purpose, then he or she shall be entitled to reimbursement from the successor
Trustee out of the assets in the successor Trustee's hands under this Plan. If
the amount reserved shall be in excess of the amount actually needed, the former
Trustee shall return such excess to the successor Trustee.
Upon receipt of the transferred assets, the successor Trustee shall thereupon
succeed to all of the powers and responsibilities given to the Trustee by this
Plan.
The resigning or removed Trustee shall render an accounting to the Employer and
unless objected to by the Employer within 30 days of its receipt, the accounting
shall be deemed to have been approved and the resigning or removed Trustee shall
be released and discharged as to all matters set forth in the accounting. Where
a financial organization is serving as Trustee and it is merged with or bought
by another organization (or comes under the control of any federal or state
agency), that organization shall serve as the successor Trustee of this Plan,
but only if it is the type of organization that can so serve under applicable
law.
Where the Trustee is serving as a nonbank trustee or custodian pursuant to
Section 1.40112(n) of the Income Tax Regulations, the Employer will appoint a
successor Trustee upon notification by the Commissioner of Internal Revenue that
such substitution is required because the Trustee has failed to comply with the
requirements of Section 1.40112(n) or is not keeping such records or making such
returns or rendering such statements as are required by forms or regulations.
5.10 DEGREE OF CARE -- LIMITATIONS OF LIABILITY
The Trustee shall not be liable for any losses incurred by the Fund by any
direction to invest communicated by the Employer, Plan Administrator, investment
manager appointed pursuant to Section 5.12 or any Participant or Beneficiary.
The Trustee shall be under no liability for distributions made or other action
taken or not taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee shall have no duty or responsibility
with respect to the determination of matters pertaining to the eligibility of
any Employee to become a Participant or remain a Participant hereunder, the
amount of benefit to which a Participant or Beneficiary shall be entitled to
receive hereunder, whether a distribution to Participant or Beneficiary is
appropriate under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar matters; it
being understood that all such responsibilities under the Plan are vested in the
Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE
Notwithstanding any other provision herein, and except as may be otherwise
provided by ERISA, the Employer shall indemnify and hold harmless the Trustee
and the Prototype Sponsor, their officers, directors, employees, agents, their
heirs, executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges, or
expenses (including legal expenses) at any time arising out of or incurred in
connection with any action taken by such parties in the performance of
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 12
<PAGE>
their duties with respect to this Plan, unless there has been a final
adjudication of gross negligence or willful misconduct in the performance of
such duties.
Further, except as may be otherwise provided by ERISA, the Employer will
indemnify the Trustee and Prototype Sponsor from any liability, claim or expense
(including legal expense) which the Trustee and Prototype Sponsor shall incur by
reason of or which results, in whole or in part, from the Trustee's or Prototype
Sponsor's reliance on the facts and other directions and elections the Employer
communicates or fails to communicate.
5.12 INVESTMENT MANAGERS
A. Definition of Investment Manager -- The Employer may appoint one or more
investment managers to make investment decisions with respect to all or a
portion of the Fund. The investment manager shall be any firm or individual
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank as defined in said Act or an insurance company qualified under the laws of
more than one state to perform services consisting of the management,
acquisition or disposition of any assets of the Plan.
B. Investment Manager's Authority -- A separate Investment Fund shall be
established representing the assets of the Fund invested at the direction of the
investment manager. The investment manager so appointed shall direct the Trustee
with respect to the investment of such Investment Fund. The investments which
may be acquired at the direction of the investment manager are those described
in Section 5.03(A).
C. Written Agreement -- The appointment of any investment manager shall be by
written agreement between the Employer and the investment manager and a copy of
such agreement (and any modification or termination thereof) must be given to
the Trustee (or Custodian). The agreement shall set forth, among other matters,
the effective date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a fiduciary of the Plan
under ERISA.
D. Concerning the Trustee -- Written notice of each appointment of an investment
manager shall be given to the Trustee in advance of the effective date of such
appointment. Such notice shall specify which portion of the Fund will constitute
the Investment Fund subject to the investment manager's direction. The Trustee
shall comply with the investment direction given to it by the investment manager
and will not be liable for any loss which may result by reason of any action (or
inaction) it takes at the direction of the investment manager.
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a Participant, the
aggregate premium for certain life insurance for each Participant must be less
than a certain percentage of the aggregate Employer Contributions and
Forfeitures allocated to a Participant's Individual Account at any particular
time as follows:
1. Ordinary Life Insurance -- For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing premiums. If such contracts are
purchased, less than 50% of the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account will be used to pay the
premiums attributable to them.
2. Term and Universal Life Insurance -- No more than 25% of the aggregate
Employer Contributions and Forfeitures allocated to any Participant's Individual
Account will be used to pay the premiums on term life insurance contracts,
universal life insurance contracts, and all other life insurance contracts which
are not ordinary life.
3. Combination -- The sum of 50% of the ordinary life insurance premiums and all
other life insurance premiums will not exceed 25% of the aggregate Employer
Contributions and Forfeitures allocated to any Participant's Individual Account.
If this Plan is a profit sharing plan, the above incidental benefits limits do
not apply to life insurance contracts purchased with Employer Contributions and
Forfeitures that have been in the Participant's Individual Account for at least
2 full Plan Years, measured from the date such contributions were allocated.
B. Any dividends or credits earned on insurance contracts for a Participant
shall be allocated to such Participant's Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life will be
converted to cash or an annuity or distributed to the Participant upon
commencement of benefits.
D. The Trustee shall apply for and will be the owner of any insurance
contract(s) purchased under the terms of this Plan. The insurance contract(s)
must provide that proceeds will be payable to the Trustee, however, the Trustee
shall be required to pay over all proceeds of the contract(s) to the
Participant's designated Beneficiary in accordance with the distribution
provisions of this Plan. A Participant's spouse will be the designated
Beneficiary of the proceeds in all circumstances unless a qualified election has
been made in accordance with Section 6.05. Under no circumstances shall the Fund
retain any part of the proceeds. In the event of any conflict between the terms
of this Plan and the terms of any insurance contract purchased hereunder, the
Plan provisions shall control.
E. The Plan Administrator may direct the Trustee to sell and distribute
insurance or annuity contracts to a Participant (or other party as may be
permitted) in accordance with applicable law or regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may individually
direct the Trustee regarding the investment of part or all of his or her
Individual Account. To the extent so directed, the Employer, Plan Administrator,
Trustee and all other fiduciaries are relieved of their fiduciary responsibility
under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be established in the
name of each Participant who directs the investment of part or all of his or her
Individual Account. Each Separate Fund shall be charged or credited (as
appropriate) with the earnings, gains, losses or expenses attributable to such
Separate Fund. No fiduciary shall be liable for any loss which results from a
Participant's individual direction. The assets subject to individual direction
shall not be invested in collectibles as that term is defined in Section 408(m)
of the Code.
The Plan Administrator shall establish such uniform and nondiscriminatory rules
relating to individual direction as it deems necessary or advisable including,
but not limited to, rules describing (1) which portions of Participant's
Individual Account can be individually directed; (2) the frequency of investment
changes; (3) the forms and procedures for making investment changes; and (4) the
effect of a Participant's failure to make a valid direction.
The Plan Administrator may, in a uniform and nondiscriminatory manner, limit the
available investments for Participants' individual direction to certain
specified investment options (including, but not limited to, certain mutual
funds, investment contracts, deposit accounts and group trusts). The Plan
Administrator may permit, in a uniform and nondiscriminatory manner, a
Beneficiary of a deceased Participant or the alternate payee under a qualified
domestic relations order (as defined in Section 414(p) of the Code) to
individually direct in accordance with this Section.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 13
<PAGE>
SECTION 6
VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. Distributable Events
1. Entitlement to Distribution -- The Vested portion of a Participant's
Individual Account shall be distributable to the Participant upon (1) the
occurrence of any of the distributable events specified in the Adoption
Agreement; (2) the Participant's Termination of Employment after attaining
Normal Retirement Age; (3) the termination of the Plan; and (4) the
Participant's Termination of Employment after satisfying any Early Retirement
Age conditions.
If a Participant separates from service before satisfying the Early Retirement
Age requirement, but has satisfied the service requirement, the Participant will
be entitled to elect an early retirement benefit upon satisfaction of such age
requirement.
2. Written Request: When Distributed -- A Participant entitled to distribution
who wishes to receive a distribution must submit a written request to the Plan
Administrator. Such request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan Administrator shall direct the
Trustee to commence distribution no later than the time specified in the
Adoption Agreement for this purpose and, if not specified in the Adoption
Agreement, then no later than 90 days following the later of:
a. the close of the Plan Year within which the event occurs which entitles the
Participant to distribution; or
b. the close of the Plan Year in which the request is received.
3. Special Rules for Withdrawals During Service -- If this is a profit sharing
plan and the Adoption Agreement so provides, a Participant may elect to receive
a distribution of all or part of the Vested portion of his or her Individual
Account, subject to the requirements of Section 6.05 and further subject to the
following limits:
a. Participant for 5 or more years. An Employee who has been a Participant in
the Plan for 5 or more years may withdraw up to the entire Vested portion of his
or her Individual Account.
b. Participant for less than 5 years. An Employee who has been a Participant in
the Plan for less than 5 years may withdraw only the amount which has been in
his or her Individual Account attributable to Employer Contributions for at
least 2 full Plan Years, measured from the date such contributions were
allocated. However, if the distribution is on account of hardship, the
Participant may withdraw up to his or her entire Vested portion of the
Participant's Individual Account. For this purpose, hardship shall have the
meaning set forth in Section 6.01(A)(4) of the Code.
4. Special Rules for Hardship Withdrawals -- If this is a profit sharing plan
and the Adoption Agreement so provides, a Participant may elect to receive a
hardship distribution of all or part of the Vested portion of his or her
Individual Account, subject to the requirements of Section 6.05 and further
subject to the following limits:
a. Participant for 5 or more years. An Employee who has been a Participant in
the Plan for 5 or more years may withdraw up to the entire Vested portion of his
or her Individual Account.
b. Participant for less than 5 years. An Employee who has been a Participant in
the Plan for less than 5 years may withdraw only the amount which has been in
his or her Individual Account attributable to Employer Contributions for at
least 2 full Plan Years, measured from the date such contributions were
allocated.
For purposes of this Section 6.01(A)(4) and Section 6.01(A)(3) hardship is
defined as an immediate and heavy financial need of the Participant where such
Participant lacks other available resources.
The following are the only financial needs considered immediate and heavy:
expenses incurred or necessary for medical care, described in Section 213(d) of
the Code, of the Employee, the Employee's spouse or dependents; the purchase
(excluding mortgage payments) of a principal residence for the Employee; payment
of tuition and related educational fees for the next 12 months of post-secondary
education for the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an immediate and heavy
financial need of the Employee only if:
1) The employee has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer;
2) The distribution is not in excess of the amount of an immediate and heavy
financial need (including amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to result from the
distribution).
5. One-Time In-Service Withdrawal Option -- If this is a profit sharing plan and
the Employer has elected the one-time in-service withdrawal option in the
Adoption Agreement, then Participants will be permitted only one in-service
withdrawal during the course of such Participants employment with the Employer.
The amount which the Participant can withdraw will be limited to the lesser of
the amount determined under the limits set forth in Section 6.01(A)(3) or the
percentage of the Participant's Individual Account specified by the Employer in
the Adoption Agreement. Distributions under this Section will be subject to the
requirements of Section 6.05.
6. Commencement of Benefits -- Notwithstanding any other provision, unless the
Participant elects otherwise, distribution of benefits will begin no later than
the 60th day after the latest of the close of the Plan Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the Participant commenced
participation in the Plan; or
c. the Participant incurs a Termination of Employment.
Notwithstanding the foregoing, the failure of a Participant and spouse to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 6.02(B) of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to satisfy this Section.
B. Determining the Vested Portion -- In determining the Vested portion of a
Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures -- The Vested portion of a
Participant's Individual Account derived from Employer Contributions and
Forfeitures is determined by applying the vesting schedule selected in the
Adoption Agreement (or the vesting schedule described in Section 6.01(C) if the
Plan is a Top-Heavy Plan).
2. Rollover and Transfer Contributions -- A Participant is fully Vested in his
or her rollover contributions and transfer contributions.
3. Fully Vested Under Certain Circumstances -- A Participant is fully Vested in
his or her Individual Account if any of the following occurs:
a. the Participant reaches Normal Retirement Age;
b. the Plan is terminated or partially terminated; or
c. there exists a complete discontinuance of contributions under the Plan.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 14
<PAGE>
Further, unless otherwise indicated in the Adoption Agreement, a Participant is
fully Vested if the Participant dies, incurs a Disability, or satisfies the
conditions for Early Retirement Age (if applicable).
4. Participants in a Prior Plan If a Participant was a participant in a Prior
Plan on the Effective Date, his or her Vested percentage shall not be less than
it would have been under such Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans -- The following vesting
provisions apply for any Plan Year in which this Plan is a Top Heavy Plan.
Notwithstanding the other provisions of this Section 6.01 or the vesting
schedule selected in the Adoption Agreement (unless those provisions or that
schedule provide for more rapid vesting), a Participant's Vested portion of his
or her Individual Account attributable to Employer Contributions and Forfeitures
shall be determined in accordance with the vesting schedule elected by the
Employer in the Adoption Agreement (and if no election is made the 6 year graded
schedule will be deemed to have been elected) as described below:
- --------------------------------------------------------------------------------
6 YEAR GRADED 3 YEAR CLIFF
- --------------------------------------------------------------------------------
Years of Vested Years of Vested
Vesting Service Percentage Vesting Service Percentage
- --------------------------------------------------------------------------------
1 0% 1 0%
2 20% 2 0%
3 40% 3 100%
4 60%
5 80%
6 100%
- --------------------------------------------------------------------------------
This minimum vesting schedule applies to all benefits within the meaning of
Section 411(a)(7) of the Code, except those attributable to Nondeductible
Employee Contributions including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the Plan became a Top-Heavy
Plan. Further, no decrease in a Participant's Vested percentage may occur in the
event the Plan's status as a Top-Heavy Plan changes for any Plan Year. However,
this Section 6.01(C) does not apply to the Individual Account of any Employee
who does not have an Hour of Service after the Plan has initially become a
Top-Heavy Plan and such Employee's Individual Account attributable to Employer
Contributions and Forfeitures will be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance with the above
restrictions, the vesting schedule as selected in the Adoption Agreement will
govern. If the vesting schedule under the Plan shifts in or out of top-heavy
status, such shift is an amendment to the vesting schedule and the election in
Section 9.04 applies.
D. Break in Vesting Service and Forfeitures -- If a Participant incurs a
Termination of Employment, any portion of his or her Individual Account which is
not Vested shall be held in a suspense account. Such suspense account shall
share in any increase or decrease in the fair market value of the assets of the
Fund in accordance with Section 4 of the Plan. The disposition of such suspense
account shall be as follows:
1. Breaks in Vesting Service -- If a Participant neither receives nor is deemed
to receive a distribution pursuant to Section 6.01(D)(3) or (4) and the
Participant returns to the service of the Employer before incurring 5
consecutive Breaks in Vesting Service, there shall be no Forfeiture and the
amount in such suspense account shall be recredited to such Participant's
Individual Account.
2. Five Consecutive Breaks in Vesting Service -- If a Participant neither
receives nor is deemed to receive a distribution pursuant to Section 6.01(D)(3)
or (4) and the Participant does not return to the service of the Employer before
incurring 5 consecutive Breaks in Vesting Service, the portion of the
Participant's Individual Account which is not Vested shall be treated as a
Forfeiture and allocated in accordance with Section 3.01(C).
3. Cash-out of Certain Participants -- If the value of the Vested portion of
such Participant's Individual Account derived from Nondeductible Employee
Contributions and Employer Contributions does not exceed $3,500, the Participant
shall receive a distribution of the entire Vested portion of such Individual
Account and the portion which is not Vested shall be treated as a Forfeiture and
allocated in accordance with Section 3.01(C). For purposes of this Section, if
the value of the Vested portion of a Participant's Individual Account is zero,
the Participant shall be deemed to have received a distribution of such Vested
Individual Account. A Participant's Vested Individual Account balance shall not
include accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code for Plan Years beginning prior to January 1,
1989.
4. Participants Who Elect to Receive Distributions -- If such Participant elects
to receive a distribution, in accordance with Section 6.02(B), of the value of
the Vested portion of his or her Individual Account derived from Nondeductible
Employee Contributions and Employer Contributions, the portion which is not
Vested shall be treated as a Forfeiture and allocated in accordance with Section
3.01(C).
5. Reemployed Participants -- If a Participant receives or is deemed to receive
a distribution pursuant to Section 6.01(D)(3) or (4) above and the Participant
resumes employment covered under this Plan, the Participant's Employer-derived
Individual Account balance will be restored to the amount on the date of
distribution if the Participant repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the earlier of 5
years after the first date on which the Participant is subsequently reemployed
by the Employer, or the date the Participant incurs 5 consecutive Breaks in
Vesting Service following the date of the distribution.
Any restoration of a Participant's Individual Account pursuant to Section
6.01(D)(5) shall be made from other Forfeitures, income or gain to the Fund or
contributions made by the Employer.
E. Distribution Prior to Full Vesting -- If a distribution is made to a
Participant who was not then fully Vested in his or her Individual Account
derived from Employer Contributions and the Participant may increase his or her
Vested percentage in his or her Individual Account, then the following rules
shall apply:
1. a separate account will be established for the Participant's interest in the
Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the separate account
will be equal to an amount ("X") determined by the formula: X = P (AB + (R x D))
(R x D) where "P" is the Vested percentage at the relevant time, "AB" is the
separate account balance at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate account balance at the
relevant time to the separate account balance after distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $3,500 -- If the value of the
Vested portion of a Participant's Individual Account derived from Nondeductible
Employee Contributions and Employer Contributions does not exceed $3,500,
distribution from the Plan shall be made to the Participant in a single lump sum
in lieu of all other forms of distribution from the Plan as soon as
administratively feasible.
B. Value of Individual Account Exceeds $3,500
1. If the value of the Vested portion of a Participant's Individual Account
derived from Nondeductible Employee Contributions and Employer Contributions
exceeds (or at the time of any prior distribution exceeded) $3,500, and the
Individual Account is immediately distributable, the Participant and the
Participant's spouse (or where either the Participant or the spouse died, the
survivor) must consent to any
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 15
<PAGE>
distribution of such Individual Account. The consent of the Participant and the
Participant's spouse shall be obtained in writing within the 90day period ending
on the annuity starting date. The annuity starting date is the first day of the
first period for which an amount is paid as an annuity or any other form. The
Plan Administrator shall notify the Participant and the Participant's spouse of
the right to defer any distribution until the Participant's Individual Account
is no longer immediately distributable. Such notification shall include a
general description of the material features, and an explanation of the relative
values of, the optional forms of benefit available under the Plan in a manner
that would satisfy the notice requirements of Section 417(a)(3) of the Code, and
shall be provided no less than 30 days and no more than 90 days prior to the
annuity starting date.
If a distribution is one to which Sections 401(a)(11) and 417 of the Internal
Revenue Code do not apply, such distribution may commence less than 30 days
after the notice required under Section 1.411(a)11(c) of the Income Tax
Regulations is given, provided that:
a. the Plan Administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
b. the Participant, after receiving the notice, affirmatively elects a
distribution.
Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a qualified joint and survivor
annuity while the Individual Account is immediately distributable. Neither the
consent of the Participant nor the Participant's spouse shall be required to the
extent that a distribution is required to satisfy Section 401(a)(9) or Section
415 of the Code. In addition, upon termination of this Plan if the Plan does not
offer an annuity option (purchased from a commercial provider), the
Participant's Individual Account may, without the Participant's consent, be
distributed to the Participant or transferred to another defined contribution
plan (other than an employee stock ownership plan as defined in Section
4975(e)(7) of the Code) within the same controlled group.
An Individual Account is immediately distributable if any part of the Individual
Account could be distributed to the Participant (or surviving spouse) before the
Participant attains or would have attained (if not deceased) the later of Normal
Retirement Age or age 62.
2. For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first Plan Year
beginning after December 31, 1988, the Vested portion of a Participant's
Individual Account shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section 72(o)(5)(B) of
the Code.
C. Other Forms of Distribution to Participant -- If the value of the Vested
portion of a Participant's Individual Account exceeds $3,500 and the Participant
has properly waived the joint and survivor annuity, as described in Section
6.05, the Participant may request in writing that the Vested portion of his or
her Individual Account be paid to him or her in one or more of the following
forms of payment: (1) in a lump sum; (2) in installment payments over a period
not to exceed the life expectancy of the Participant or the joint and last
survivor life expectancy of the Participant and his or her designated
Beneficiary; or (3) applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a Participant
cannot elect payments in the form of an annuity if the Retirement Equity Act
safe harbor rules of Section 6.05(F) apply.
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. Designation of Beneficiary -- Spousal Consent -- Each Participant may
designate, upon a form provided by and delivered to the Plan Administrator, one
or more primary and contingent Beneficiaries to receive all or a specified
portion of the Participant's Individual Account in the event of his or her
death. A Participant may change or revoke such Beneficiary designation from time
to time by completing and delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary Beneficiary who is
not his or her spouse, his or her spouse must consent in writing to such
designation, and the spouse's consent must acknowledge the effect of such
designation and be witnessed by a notary public or plan representative.
Notwithstanding this consent requirement, if the Participant establishes to the
satisfaction of the Plan Administrator that such written consent may not be
obtained because there is no spouse or the spouse cannot be located, no consent
shall be required. Any change of Beneficiary will require a new spousal consent.
B. Payment to Beneficiary -- If a Participant dies before the Participant's
entire Individual Account has been paid to him or her, such deceased
Participant's Individual Account shall be payable to any surviving Beneficiary
designated by the Participant, or, if no Beneficiary survives the Participant,
to the Participant's estate.
C. Written Request: When Distributed -- A Beneficiary of a deceased Participant
entitled to a distribution who wishes to receive a distribution must submit a
written request to the Plan Administrator. Such request shall be made upon a
form provided by the Plan Administrator. Upon a valid request, the Plan
Administrator shall direct the Trustee to commence distribution no later than
the time specified in the Adoption Agreement for this purpose and if not
specified in the Adoption Agreement, then no later than 90 days following the
later of:
1. the close of the Plan Year within which the Participant dies; or
2. the close of the Plan Year in which the request is received.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. Value of Individual Account Does Not Exceed $3,500 -- If the value of the
Participant's Individual Account derived from Nondeductible Employee
Contributions and Employer Contributions does not exceed $3,500, the Plan
Administrator shall direct the Trustee to make a distribution to the Beneficiary
in a single lump sum in lieu of all other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 -- If the value of a Participant's
Individual Account derived from Nondeductible Employee Contributions and
Employer Contributions exceeds $3,500 the preretirement survivor annuity
requirements of Section 6.05 shall apply unless waived in accordance with that
Section or unless the Retirement Equity Act safe harbor rules of Section 6.05(F)
apply. However, a surviving spouse Beneficiary may elect any form of payment
allowable under the Plan in lieu of the preretirement survivor annuity. Any such
payment to the surviving spouse must meet the requirements of Section 6.06.
C. Other Forms of Distribution to Beneficiary -- If the value of a Participant's
Individual Account exceeds $3,500 and the Participant has properly waived the
preretirement survivor annuity, as described in Section 6.05 (if applicable) or
if the Beneficiary is the Participant's surviving spouse, the Beneficiary may,
subject to the requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid as follows: (1) in a lump sum; or (2)
in installment payments over a period not to exceed the life expectancy of such
Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant who is credited
with at least one Hour of Eligibility Service with the Employer on or after
August 23, 1984, and such other Participants as provided in Section 6.05(G).
B. Qualified Joint and Survivor Annuity -- Unless an optional form of benefit is
selected pursuant to a qualified election within the 90day period ending on the
annuity starting date, a married Participant's Vested account balance will be
paid in the form of a qualified joint and survivor annuity
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 16
<PAGE>
and an unmarried Participant's Vested account balance will be paid in the form
of a life annuity. The Participant may elect to have such annuity distributed
upon attainment of the earliest retirement age under the Plan.
C. Qualified Preretirement Survivor Annuity -- Unless an optional form of
benefit has been selected within the election period pursuant to a qualified
election, if a Participant dies before the annuity starting date then the
Participant's Vested account balance shall be applied toward the purchase of an
annuity for the life of the surviving spouse. The surviving spouse may elect to
have such annuity distributed within a reasonable period after the Participant's
death.
D. Definitions
1. Election Period -- The period which begins on the first day of the Plan Year
in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service prior to the first
day of the Plan Year in which age 35 is attained, with respect to the account
balance as of the date of separation, the election period shall begin on the
date of separation.
Pre-age 35 waiver -- A Participant who will not yet attain age 35 as of the end
of any current Plan Year may make special qualified election to waive the
qualified preretirement survivor annuity for the period beginning on the date of
such election and ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall not be valid unless the
Participant receives a written explanation of the qualified preretirement
survivor annuity in such terms as are comparable to the explanation required
under Section 6.05(E)(1). Qualified preretirement survivor annuity coverage will
be automatically reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date shall be
subject to the full requirements of this Section 6.05.
2. Earliest Retirement Age -- The earliest date on which, under the Plan, the
Participant could elect to receive retirement benefits.
3. Qualified Election -- A waiver of a qualified joint and survivor annuity or a
qualified preretirement survivor annuity. Any waiver of a qualified joint and
survivor annuity or a qualified preretirement survivor annuity shall not be
effective unless: (a) the Participant's spouse consents in writing to the
election, (b) the election designates a specific Beneficiary, including any
class of beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations by the
Participant without any further spousal consent); (c) the spouse's consent
acknowledges the effect of the election; and (d) the spouse's consent is
witnessed by a plan representative or notary public. Additionally, a
Participant's waiver of the qualified joint and survivor annuity shall not be
effective unless the election designates a form of benefit payment which may not
be changed without spousal consent (or the spouse expressly permits designations
by the Participant without any further spousal consent). If it is established to
the satisfaction of a plan representative that there is no spouse or that the
spouse cannot be located, a waiver will be deemed a qualified election.
Any consent by a spouse obtained under this provision (or establishment that the
consent of a spouse may not be obtained) shall be effective only with respect to
such spouse. A consent that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge that the spouse
has the right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the spouse voluntarily elects to relinquish
either or both of such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the Participant has
received notice as provided in Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity -- An immediate annuity for the life of
the Participant with a survivor annuity for the life of the spouse which is not
less than 50% and not more than 100% of the amount of the annuity which is
payable during the joint lives of the Participant and the spouse and which is
the amount of benefit which can be purchased with the Participant's vested
account balance. The percentage of the survivor annuity under the Plan shall be
50% (unless a different percentage is elected by the Employer in the Adoption
Agreement).
5. Spouse (surviving spouse) -- The spouse or surviving spouse of the
Participant, provided that a former spouse will be treated as the spouse or
surviving spouse and a current spouse will not be treated as the spouse or
surviving spouse to the extent provided under a qualified domestic relations
order as described in Section 414(p) of the Code.
6. Annuity Starting Date -- The first day of the first period for which an
amount is paid as an annuity or any other form.
7. Vested Account Balance -- The aggregate value of the Participant's Vested
account balances derived from Employer and Nondeductible Employee Contributions
(including rollovers), whether Vested before or upon death, including the
proceeds of insurance contracts, if any, on the Participant's life. The
provisions of this Section 6.05 shall apply to a Participant who is Vested in
amounts attributable to Employer Contributions, Nondeductible Employee
Contributions (or both) at the time of death or distribution.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the Plan Administrator
shall no less than 30 days and not more than 90 days prior to the annuity
starting date provide each Participant a written explanation of: (a) the terms
and conditions of a qualified joint and survivor annuity; (b) the Participant's
right to make and the effect of an election to waive the qualified joint and
survivor annuity form of benefit; (c) the rights of a Participant's spouse; and
(d) the right to make, and the effect of, a revocation of a previous election to
waive the qualified joint and survivor annuity.
2. In the case of a qualified preretirement annuity as described in Section
6.05(C), the Plan Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of the qualified
preretirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of Section
6.05(E)(1) applicable to a qualified joint and survivor annuity.
The applicable period for a Participant is whichever of the following periods
ends last: (a) the period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35; (b) a
reasonable period ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases to apply to the
Participant; and (d) a reasonable period ending after this Section 6.05 first
applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the enumerated events described in (b), (c) and (d) is the end of the
two-year period beginning one year prior to the date the applicable event
occurs, and ending one year after that date. In the case of a Participant who
separates from service before the Plan Year in which age 35 is attained, notice
shall be provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a Participant
thereafter returns to employment with the Employer, the applicable period for
such Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section 6.05(E), the
respective notices prescribed by this Section 6.05(E), need not be
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 17
<PAGE>
given to a Participant if (a) the Plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified preretirement survivor
annuity, and (b) the Plan does not allow the Participant to waive the qualified
joint and survivor annuity or qualified preretirement survivor annuity and does
not allow a married Participant to designate a nonspouse beneficiary. For
purposes of this Section 6.05(E)(3), a plan fully subsidizes the costs of a
benefit if no increase in cost, or decrease in benefits to the Participant may
result from the Participant's failure to elect another benefit.
F. Retirement Equity Act Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this Section 6.05(F)
shall apply to a Participant in a profit sharing plan, and shall always apply to
any distribution, made on or after the first day of the first Plan Year
beginning after December 31, 1988, from or under a separate account attributable
solely to accumulated deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a Participant in a money
purchase pension plan, (including a target benefit plan) if the following
conditions are satisfied:
a. the Participant does not or cannot elect payments in the form of a life
annuity; and
b. on the death of a Participant, the Participant's Vested account balance will
be paid to the Participant's surviving spouse, but if there is no surviving
spouse, or if the surviving spouse has consented in a manner conforming to a
qualified election, then to the Participant's designated Beneficiary. The
surviving spouse may elect to have distribution of the Vested account balance
commence within the 90day period following the date of the Participant's death.
The account balance shall be adjusted for gains or losses occurring after the
Participant's death in accordance with the provisions of the Plan governing the
adjustment of account balances for other types of distributions. This Section
6.05(F) shall not be operative with respect to a Participant in a profit sharing
plan if the plan is a direct or indirect transferee of a defined benefit plan,
money purchase plan, a target benefit plan, stock bonus, or profit sharing plan
which is subject to the survivor annuity requirements of Section 401(a)(11) and
Section 417 of the code. If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than Section 6.05(G) shall be inoperative.
2. The Participant may waive the spousal death benefit described in this Section
6.05(F) at any time provided that no such waiver shall be effective unless it
satisfies the conditions of Section 6.05(D)(3) (other than the notification
requirement referred to therein) that would apply to the Participant's waiver of
the qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), Vested account balance shall mean, in
the case of a money purchase pension plan or a target benefit plan, the
Participant's separate account balance attributable solely to accumulated
deductible employee contributions within the meaning of Section 72(o)(5)(B) of
the Code. In the case of a profit sharing plan, Vested account balance shall
have the same meaning as provided in Section 6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23, 1984, who would
otherwise not receive the benefits prescribed by the previous subsections of
this Section 6.05 must be given the opportunity to elect to have the prior
subsections of this Section apply if such Participant is credited with at least
one Hour of Service under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such Participant had at least 10
Years of Vesting Service when he or she separated from service.
2. Any living Participant not receiving benefits on August 23, 1984, who was
credited with at least one Hour of Service under this Plan or a predecessor plan
on or after September 2, 1974, and who is not otherwise credited with any
service in a Plan Year beginning on or after January 1, 1976, must be given the
opportunity to have his or her benefits paid in accordance with Section
6.05(G)(4).
3. The respective opportunities to elect (as described in Section 6.05(G)(1) and
(2) above) must be afforded to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date benefits would otherwise
commence to said Participants.
4. Any Participant who has elected pursuant to Section 6.05(G)(2) and any
Participant who does not elect under Section 6.05(G)(1) or who meets the
requirements of Section 6.05(G)(1) except that such Participant does not have at
least 10 Years of Vesting Service when he or she separates from service, shall
have his or her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a life annuity:
a. Automatic Joint and Survivor Annuity -- If benefits in the form of a life
annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal Retirement Age;
or
(2) dies on or after Normal Retirement Age while still working for the Employer;
or
(3) begins to receive payments on or after the qualified early retirement age;
or
(4) separates from service on or after attaining Normal Retirement Age (or the
qualified early retirement age) and after satisfying the eligibility
requirements for the payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits will be received under this Plan in the form of a qualified
joint and survivor annuity, unless the Participant has elected otherwise during
the election period. The election period must begin at least 6 months before the
Participant attains qualified early retirement age and ends not more than 90
days before the commencement of benefits. Any election hereunder will be in
writing and may be changed by the Participant at any time.
b. Election of Early Survivor Annuity -- A Participant who is employed after
attaining the qualified early retirement age will be given the opportunity to
elect, during the election period, to have a survivor annuity payable on death.
If the Participant elects the survivor annuity, payments under such annuity must
not be less than the payments which would have been made to the spouse under the
qualified joint and survivor annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in writing
and may be changed by the Participant at any time. The election period begins on
the later of (1) the 90th day before the Participant attains the qualified early
retirement age, or (2) the date on which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the Participant may elect to
receive retirement benefits,
b. the first day of the 120th month beginning before the Participant reaches
Normal Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity for the life of the
Participant with a survivor annuity for the life of the spouse as described in
Section 6.05(D)(4) of this Plan.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 18
<PAGE>
6.06 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 6.05 Joint and Survivor Annuity Requirements, the
requirements of this Section shall apply to any distribution of a Participant's
interest and will take precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this Section 6.06 apply to
calendar years beginning after December 31, 1984.
2. All distributions required under this Section 6.06 shall be determined and
made in accordance with the Income Tax Regulations under Section 401(a)(9),
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)2 of the proposed regulations.
B. Required Beginning Date -- The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
C. Limits on Distribution Periods -- As of the first distribution calendar year,
distributions, if not made in a single sum, may only be made over one of the
following periods (or a combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of the Participant,
or
4. a period certain not extending beyond the joint and last survivor expectancy
of the Participant and a designated Beneficiary.
D. Determination of Amount to be Distributed Each Year -- If the Participant's
interest is to be distributed in other than a single sum, the following minimum
distribution rules shall apply on or after the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be distributed over (1) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
Beneficiary or (2) a period not extending beyond the life expectancy of the
designated Beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
b. For calendar years beginning before January 1, 1989, if the Participant's
spouse is not the designated Beneficiary, the method of distribution selected
must assure that at least 50% of the present value of the amount available for
distribution is paid within the life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated Beneficiary, the applicable
divisor determined from the table set forth in Q&A4 of Section 1.401(a)(9)2 of
the Proposed Income Tax Regulations. Distributions after the death of the
Participant shall be distributed using the applicable life expectancy in Section
6.05(D)(1)(a) above as the relevant divisor without regard to proposed
regulations 1.401(a)(9)2.
d. The minimum distribution required for the Participant's first distribution
calendar year must be made on or before the Participant's required beginning
date. The minimum distribution for other calendar years, including the minimum
distribution for the distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of that
distribution calendar year.
2. Other Forms -- If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of Section 401(a)(9) of the Code and
the regulations thereunder.
E. Death Distribution Provisions
1. Distribution Beginning Before Death -- If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
2. Distribution Beginning After Death -- If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (a) or (b)
below:
a. if any portion of the Participant's interest is payable to a designated
Beneficiary, distributions may be made over the life or over a period certain
not greater than the life expectancy of the designated Beneficiary commencing on
or before December 31 of the calendar year immediately following the calendar
year in which the Participant died;
b. if the designated Beneficiary is the Participant's surviving spouse, the date
distributions are required to begin in accordance with (a) above shall not be
earlier than the later of (1) December 31 of the calendar year immediately
following the calendar year in which the Participant dies or (2) December 31 of
the calendar year in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this Section 6.05(E)(2)
by the time of his or her death, the Participant's designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 6.05(E)(2), or (2) December 31 of the calendar year which contains the
fifth anniversary of the date of death of the Participant. If the Participant
has no designated Beneficiary, or if the designated Beneficiary does not elect a
method of distribution, distribution of the Participant's entire interest must
be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving spouse dies after
the Participant, but before payments to such spouse begin, the provisions of
Section 6.06(E)(2), with the exception of paragraph (b) therein, shall be
applied as if the surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving spouse if
the amount becomes payable to the surviving spouse when the child reaches the
age of majority.
5. For purposes of this Section 6.06(E), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 6.06(E)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 6.06(E)(2) above).
If distribution in the form of an annuity irrevocably commences to the
Participant before the required beginning date, the date distribution is
considered to begin is the date distribution actually commences.
F. Definitions
1. Applicable Life Expectancy -- The life expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated Beneficiary's) birthday in
the applicable calendar year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated. If life expectancy
is being recalculated, the applicable life expectancy shall be the life
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 19
<PAGE>
expectancy as so recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being recalculated such
succeeding calendar year.
2. Designated Beneficiary -- The individual who is designated as the Beneficiary
under the Plan in accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
3. Distribution Calendar Year -- A calendar year for which a mini mum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 6.05(E) above.
4. Life Expectancy -- Life expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of Section
1.729 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or spouse, in the case of
distributions described in Section 6.05(E)(2)(b) above) by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the Participant (or spouse)
and shall apply to all subsequent years. The life expectancy of a nonspouse
Beneficiary may not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date in the valuation calendar
year (the calendar year immediately preceding the distribution calendar year)
increased by the amount of any Contributions or Forfeitures allocated to the
account balance as of dates in the valuation calendar year after the valuation
date and decreased by distributions made in the valuation calendar year after
the valuation date.
b. Exception for second distribution calendar year. For purposes of paragraph
(a) above, if any portion of the minimum distribution for the first distribution
calendar year is made in the second distribution calendar year on or before the
required beginning date, the amount of the minimum distribution made in the
second distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
6. Required Beginning Date
a. General Rule -- The required beginning date of a Participant is the first day
of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
b. Transitional Rules -- The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (1) or (2) below:
(1) Non 5% Owners -- The required beginning date of a Participant who is not a
5% owner is the first day of April of the calendar year following the calendar
year in which the later of retirement or attainment of age 70 1/2 occurs.
(2) 5% Owners -- The required beginning date of a Participant who is a 5% owner
during any year beginning after December 31, 1979, is the first day of April
following the later of:
(a) the calendar year in which the Participant attains age 70 1/2, or
(b) the earlier of the calendar year with or within which ends the Plan Year in
which the Participant becomes a 5% owner, or the calendar year in which the
Participant retires.
The required beginning date of a Participant who is not a 5% owner who attains
age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April
1, 1990.
c. 5% Owner -- A Participant is treated as a 5% owner for purposes of this
Section 6.06(F)(6) if such Participant is a 5% owner as defined in Section
416(i) of the Code (determined in accordance with Section 416 but without regard
to whether the Plan is top-heavy) at any time during the Plan Year ending with
or within the calendar year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
d. Once distributions have begun to a 5% owner under this Section 6.06(F)(6)
they must continue to be distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06 and subject to
the requirements of Section 6.05, Joint and Survivor Annuity Requirements,
distribution on behalf of any Employee, including a 5% owner, may be made in
accordance with all of the following requirements (regardless of when such
distribution commences):
a. The distribution by the Fund is one which would not have qualified such Fund
under Section 401(a)(9) of the Code as in effect prior to amendment by the
Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method of distribution designated by
the Employee whose interest in the Fund is being distributed or, if the Employee
is deceased, by a Beneficiary of such Employee.
c. Such designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of December 31, 1983.
e. The method of distribution designated by the Employee or the Beneficiary
specifies the time at which distribution will commence, the period over which
distributions will be made, and in the case of any distribution upon the
Employee's death, the Beneficiaries of the Employee listed in order of priority.
2. A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required information
described above with respect to the distributions to be made upon the death of
the Employee.
3. For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Employee, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in Sections 6.06(G)(1)(a) and (e).
4. If a designation is revoked, any subsequent distribution must satisfy the
requirements of Section 401(a)(9) of the Code and the regulations thereunder. If
a designation is revoked subsequent to the date distributions are required to
begin, the Plan must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to satisfy
Section 401(a)(9) of the Code and the regulations thereunder, but for the
Section 242(b)(2) election. For calendar years beginning after December 31,
1988, such distributions must meet the minimum distribution incidental benefit
requirements in Section 1.401(a)(9)2 of the Proposed Income Tax Regulations. Any
changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another Beneficiary
(one not named in the designation) under the designation will not be considered
to be a revocation of the designation, so long as such substitution or addition
does not alter the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the relevant
measuring
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 20
<PAGE>
life). In the case in which an amount is transferred or rolled over from one
plan to another plan, the rules in Q&A J2 and Q&A J3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or required by
this Section 6) must be nontransferable. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or spouse shall comply
with the requirements of the Plan.
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive a loan from
the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a reasonably equivalent
basis.
B. Loans shall not be made available to Highly Compensated Employees (as defined
in Section 414(q) of the Code) in an amount greater than the amount made
available to other Employees.
C. Loans must be adequately secured and bear a reasonable interest rate.
D. No Participant loan shall exceed the present value of the Vested portion of a
Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if any, to the
use of the Individual Account as security for the loan. Spousal consent shall be
obtained no earlier than the beginning of the 90 day period that ends on the
date on which the loan is to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a plan
representative or notary public. Such consent shall thereafter be binding with
respect to the consenting spouse or any subsequent spouse with respect to that
loan. A new consent shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
Notwithstanding the foregoing, no spousal consent is necessary if, at the time
the loan is secured, no consent would be required for a distribution under
Section 417(a)(2)(B). In addition, spousal consent is not required if the Plan
or the Participant is not subject to Section 401(a)(11) at the time the
Individual Account is used as security, or if the total Individual Account
subject to the security is less than or equal to $3,500.
F. In the event of default, foreclosure on the note and attachment of security
will not occur until a distributable event occurs in the Plan. Notwithstanding
the preceding sentence, a Participant's default on a loan will be treated as a
distributable event and as soon as administratively feasible after the default,
the Participant's Vested Individual Account will be reduced by the lesser of the
amount in default (plus accrued interest) or the amount secured. If this Plan is
a 401(k) plan, then to the extent the loan is attributable to a Participant's
Elective Deferrals, Qualified Nonelective Contributions or Qualified Matching
Contributions, the Participant's Individual Account will not be reduced unless
the Participant has attained age 59 1/2 or has another distributable event. A
Participant will be deemed to have consented to the provision at the time the
loan is made to the Participant.
G. No loans will be made to any shareholder-employee or Owner-Employee. For
purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1) of the Code), on
any day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
If a valid spousal consent has been obtained in accordance with 6.08(E), then,
notwithstanding any other provisions of this Plan, the portion of the
Participant's Vested Individual Account used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's Vested Individual
Account (determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first reducing
the Vested Individual Account by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving spouse.
To avoid taxation to the Participant, no loan to any Participant can be made to
the extent that such loan when added to the outstanding balance of all other
loans to the Participant would exceed the lesser of (a) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the one year
period ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made, or (b) 50% of the present
value of the nonforfeitable Individual Account of the Participant or, if
greater, the total Individual Account up to $10,000. For the purpose of the
above limitation, all loans from all plans of the Employer and other members of
a group of employers described in Sections 414(b), 414(c), and 414(m) of the
Code are aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond 5 years from the
date of the loan, unless such loan is used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan, pledge, or
assignment with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
The Plan Administrator shall administer the loan program in accordance with a
written document. Such written document shall include, at a minimum, the
following: (i) the identity of the person or positions authorized to administer
the Participant loan program; (ii) the procedure for applying for loans; (iii)
the basis on which loans will be approved or denied; (iv) limitations (if any)
on the types and amounts of loans offered; (v) the procedure under the program
for determining a reasonable rate of interest; (vi) the types of collateral
which may secure a Participant loan; and (vii) the events constituting default
and the steps that will be taken to preserve Plan assets in the event of such
default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan to be made
either in a form actually held in the Fund, or in cash by converting assets
other than cash into cash, or in any combination of the two foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE
ROLLOVER DISTRIBUTIONS
A. Direct Rollover Option
This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution that is equal to at least $500 paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
B. Definitions
1. Eligible rollover distribution -- An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include:
a. any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated Beneficiary, or for a
specified period of ten years or more;
b. any distribution to the extent such distribution is required under Section
401(a)(9) of the Code;
c. the portion of any other distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation with
respect to employer securities); and
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 21
<PAGE>
d. any other distribution(s) that is reasonably expected to total less than $200
during a year.
2. Eligible retirement plan -- An eligible retirement plan is an individual
retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
3. Distributee -- A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
4. Direct rollover -- A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
6.11 PROCEDURE FOR MISSING
PARTICIPANTS OR BENEFICIARIES
The Plan Administrator must use all reasonable measures to locate Participants
or Beneficiaries who are entitled to distributions from the Plan. In the event
that the Plan Administrator cannot locate a Participant or Beneficiary who is
entitled to a distribution from the Plan after using all reasonable measures to
locate him or her, the Plan Administrator may, consistent with applicable laws,
regulations and other pronouncements under ERISA, use any reasonable procedure
to dispose of distributable plan assets, including any of the following: (1)
establish a bank account for and in the name of the Participant or Beneficiary
and transfer the assets to such bank account, (2) purchase an annuity contract
with the assets in the name of the Participant or Beneficiary, or (3) after the
expiration of 5 years after the benefit becomes payable, treat the amount
distributable as a Forfeiture and allocate it in accordance with the terms of
the Plan and if the Participant or Beneficiary is later located, restore such
benefit to the Plan.
SECTION 7
CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
A Participant or Beneficiary who desires to make a claim for the Vested portion
of the Participant's Individual Account shall file a written request with the
Plan Administrator on a form to be furnished to him or her by the Plan
Administrator for such purpose. The request shall set forth the basis of the
claim. The Plan Administrator is authorized to conduct such examinations as may
be necessary to facilitate the payment of any benefits to which the Participant
or Beneficiary may be entitled under the terms of the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or Beneficiary has
been wholly or partially denied, the Plan Administrator must furnish such
Participant or Beneficiary written notice of the denial within 60 days of the
date the original claim was filed. This notice shall set forth the specific
reasons for the denial, specific reference to pertinent Plan provisions on which
the denial is based, a description of any additional information or material
needed to perfect the claim, an explanation of why such additional information
or material is necessary and an explanation of the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of the denial
notice in which to make written application for review by the Plan
Administrator. The Participant or Beneficiary may request that the review be in
the nature of a hearing. The Participant or Beneficiary shall have the right to
representation, to review pertinent documents and to submit comments in writing.
The Plan Administrator shall issue a decision on such review within 60 days
after receipt of an application for review as provided for in Section 7.02. Upon
a decision unfavorable to the Participant or Beneficiary, such Participant or
Beneficiary shall be entitled to bring such actions in law or equity as may be
necessary or appropriate to protect or clarify his or her right to benefits
under this Plan.
SECTION 8
PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the managing body of the
Employer designates a person or persons other than the Employer as the Plan
Administrator and so notifies the Trustee. The Employer shall also be the Plan
Administrator if the person or persons so designated cease to be the Plan
Administrator. The Employer may establish an administrative committee that will
carry out the Plan Administrator's duties. Members of the administrative
committee may allocate the Plan Administrator's duties among themselves.
B. If the managing body of the Employer designates a person or persons other
than the Employer as Plan Administrator, such person or persons shall serve at
the pleasure of the Employer and shall serve pursuant to such procedures as such
managing body may provide. Each such person shall be bonded as may be required
by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the duties of the Plan
Administrator among several individuals or entities. Such appointments shall not
be effective until the party designated accepts such appointment in writing.
B. The Plan Administrator shall have the authority to control and manage the
operation and administration of the Plan. The Plan Administrator shall
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the specific terms of the Plan.
C. The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to the following:
1. To determine all questions of interpretation or policy in a manner consistent
with the Plan's documents and the Plan Administrator's construction or
determination in good faith shall be conclusive and binding on all persons
except as otherwise provided herein or by law. Any interpretation or
construction shall be done in a nondiscriminatory manner and shall be consistent
with the intent that the Plan shall continue to be deemed a qualified plan under
the terms of Section 401(a) of the Code, as amended from time-to-time, and shall
comply with the terms of ERISA, as amended from time-to-time;
2. To determine all questions relating to the eligibility of Employees to become
or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be contributed to the Plan;
4. To compute the amount and kind of benefits to which a Participant or
Beneficiary shall be entitled under the Plan and to direct the Trustee with
respect to all disbursements under the Plan, and, when requested by the Trustee,
to furnish the Trustee with instructions, in writing, on matters pertaining to
the Plan and the Trustee may rely and act thereon;
5. To maintain all records necessary for the administration of the Plan;
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 22
<PAGE>
6. To be responsible for preparing and filing such disclosure and tax forms as
may be required from time-to-time by the Secretary of Labor or the Secretary of
the Treasury; and
7. To furnish each Employee, Participant or Beneficiary such notices,
information and reports under such circumstances as may be required by law.
D. The Plan Administrator shall have all of the powers necessary or appropriate
to accomplish his or her duties under the Plan, including, but not limited to,
the following:
1. To appoint and retain such persons as may be necessary to carry out the
functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons as the Plan
Administrator deems necessary or advisable in the administration of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it deems
necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory manner which it
deems necessary to correct any arithmetical or accounting errors which may have
been made for any Plan Year; and
6. To correct any defect, supply any omission or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not limited to, those
involved in retaining necessary professional assistance may be paid from the
assets of the Fund. Alternatively, the Employer may, in its discretion, pay any
or all such expenses. Pursuant to uniform and nondiscriminatory rules that the
Plan Administrator may establish from time-to-time, administrative expenses and
expenses unique to a particular Participant may be charged to a Participant's
Individual Account or the Plan Administrator may allow Participants to pay such
fees outside of the Plan. The Employer shall furnish the Plan Administrator with
such clerical and other assistance as the Plan Administrator may need in the
performance of his or her duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his or her duties, the Employer
shall supply full and timely information to the Plan Administrator (or his or
her designated agents) on all matters relating to the Compensation of all
Participants, their regular employment, retirement, death, Disability or
Termination of Employment, and such other pertinent facts as the Plan
Administrator (or his or her agents) may require. The Plan Administrator shall
advise the Trustee of such of the foregoing facts as may be pertinent to the
Trustee's duties under the Plan. The Plan Administrator (or his or her agents)
is entitled to rely on such information as is supplied by the Employer and shall
have no duty or responsibility to verify such information.
SECTION 9
AMENDMENT AN TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the Prototype
Sponsor the power, but not the duty, to amend the Plan without any further
action or consent of the Employer as the Prototype Sponsor deems necessary for
the purpose of adjusting the Plan to comply with all laws and regulations
governing pension or profit sharing plans. Specifically, it is understood that
the amendments may be made unilaterally by the Prototype Sponsor. However, it
shall be understood that the Prototype Sponsor shall be under no obligation to
amend the Plan documents and the Employer expressly waives any rights or claims
against the Prototype Sponsor for not exercising this power to amend. For
purposes of Prototype Sponsor amendments, the mass submitter shall be recognized
as the agent of the Prototype Sponsor. If the Prototype Sponsor does not adopt
the amendments made by the mass submitter, it will no longer be identical to or
a minor modifier of the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by giving written
notice to the Employer of the amendment to be made. The notice shall set forth
the text of such amendment and the date such amendment is to be effective. Such
amendment shall take effect unless within the 30 day period after such notice is
provided, or within such shorter period as the notice may specify, the Employer
gives the Prototype Sponsor written notice of refusal to consent to the
amendment. Such written notice of refusal shall have the effect of withdrawing
the Plan as a prototype plan and shall cause the Plan to be considered an
individually designed plan. The right of the Prototype Sponsor to cause the Plan
to be amended shall terminate should the Plan cease to conform as a prototype
plan as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
The Employer may (1) change the choice of options in the Adoption Agreement; (2)
add overriding language in the Adoption Agreement when such language is
necessary to satisfy Section 415 or Section 416 of the Code because of the
required aggregation of multiple plans; and (3) add certain model amendments
published by the Internal Revenue Service which specifically provide that their
adoption will not cause the Plan to be treated as individually designed. An
Employer that amends the Plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d) of the Code, will no longer
participate in this prototype plan and will be considered to have an
individually designed plan.
An Employer who wishes to amend the Plan to change the options it has chosen in
the Adoption Agreement must complete and deliver a new Adoption Agreement to the
Prototype Sponsor and Trustee. Such amendment shall become effective upon
execution by the Employer and Trustee.
The Employer further reserves the right to replace the Plan in its entirety by
adopting another retirement plan which the Employer designates as a replacement
plan.
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent that it has the effect
of decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's Individual Account may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes of this paragraph, a
plan amendment which has the effect of decreasing a Participant's Individual
Account or eliminating an optional form of benefit with respect to benefits
attributable to service before the amendment shall be treated as reducing an
accrued benefit. Furthermore, if the vesting schedule of a Plan is amended, in
the case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the Vested percentage
(determined as of such date) of such Employee's Individual Account derived from
Employer Contributions will not be less than the percentage computed under the
Plan without regard to such amendment.
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended in any way
that directly or indirectly affects the computation of the Participant's Vested
percentage, or if the Plan is deemed amended by an automatic change to or from a
top-heavy vesting schedule, each Participant with at least 3 Years of Vesting
Service with the Employer may elect, within the time set forth below, to have
the Vested percentage computed under the Plan without regard to such amendment.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 23
<PAGE>
For Participants who do not have at least 1 Hour of Service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be applied by
substituting "5 Years of Vesting Service" for "3 Years of Vesting Service" where
such language appears.
The Period during which the election may be made shall commence with the date
the amendment is adopted or deemed to be made and shall end the later of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the amendment by
the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary contributions
thereto indefinitely, but such continuance and payment is not assumed as a
contractual obligation. Neither the Adoption Agreement nor the Plan nor any
amendment or modification thereof nor the making of contributions hereunder
shall be construed as giving any Participant or any person whomsoever any legal
or equitable right against the Employer, the Trustee the Plan Administrator or
the Prototype Sponsor except as specifically provided herein, or as provided by
law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by appropriate action of
its managing body. Such termination shall be effective on the date specified by
the Employer. The Plan shall terminate if the Employer shall be dissolved,
terminated, or declared bankrupt. Written notice of the termination and
effective date thereof shall be given to the Trustee, Plan Administrator,
Prototype Sponsor, Participants and Beneficiaries of deceased Participants, and
the required filings (such as the Form 5500 series and others) must be made with
the Internal Revenue Service and any other regulatory body as required by
current laws and regulations. Until all of the assets have been distributed from
the Fund, the Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and (b) taking such
other measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the Employer may
continue the Plan and be substituted in the place of the present Employer. The
successor and the present Employer (or, if deceased, the executor of the estate
of a deceased Self-Employed Individual who was the Employer) must execute a
written instrument authorizing such substitution and the successor must complete
and sign a new plan document.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan will no longer be
considered to be part of a prototype plan, and such Employer can no longer
participate under this prototype. In such event, the Plan will be considered an
individually designed plan.
SECTION 10
MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without regard to the
community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of reference only
and are to be ignored in any construction of the provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply, and whenever any words are used herein in the
singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or transfer of
assets or liabilities of such Plan to, any other plan, each Participant shall be
entitled to receive benefits immediately after the merger, consolidation, or
transfer (if the Plan had then terminated) which are equal to or greater than
the benefits he or she would have been entitled to receive immediately before
the merger, consolidation, or transfer (if the Plan had then terminated). The
Trustee has the authority to enter into merger agreements or agreements to
directly transfer the assets of this Plan but only if such agreements are made
with trustees or custodians of other retirement plans described in Section
401(a) of the Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary under this
Plan shall discharge their duties with respect to this Plan solely in the
interests of Participants and their Beneficiaries and with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
man acting in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims. No fiduciary
shall cause the Plan to engage in any transaction known as a "prohibited
transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest whatsoever here
under agree to perform any and all acts and execute any and all documents and
papers which may be necessary or desirable for the carrying out of this Plan and
any of its provisions.
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors, administrators, successors
and assigns, as those terms shall apply to any and all parties hereto, present
and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this Plan is a Top-Heavy
Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan is not part of
any required aggregation group or permissive aggregation group of plans.
2. If this Plan is part of a required aggregation group of plans but not part of
a permissive aggregation group and the top-heavy ratio for the group of plans
exceeds 60%.
3. If this Plan is a part of a required aggregation group and part of a
permissive aggregation group of plans and the top-heavy ratio for the permissive
aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms shall have the meanings
indicated below:
B. Key Employee -- Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the determination period was an officer of
the Employer if such individual's annual compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner (or considered an
owner under Section 318 of the Code) of one of the 10 largest interests in the
Employer if such individual's compensation exceeds 100% of the dollar limitation
under Section 415(c)(1)(A) of the Code, a 5% owner of the Employer, or a 1%
owner of the Employer who has an annual compensation of more than $150,000.
Annual compensation means compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a salary
reduction agreement which are
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 24
<PAGE>
excludable from the Employee's gross income under Section 125, Section
402(e)(3), Section 402(h)(1)(B) or Section 403(b) of the Code. The determination
period is the Plan Year containing the determination date and the 4 preceding
Plan Years.
The determination of who is a Key Employee will be made in accordance with
Section 416(i)(1) of the Code and the regulations thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution plans (including
any simplified employee pension plan) and the Employer has not maintained any
defined benefit plan which during the 5 year period ending on the determination
date(s) has or has had accrued benefits, the top-heavy ratio for this Plan alone
or for the required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of the account balances of all Key
Employees as of the determination date(s) (including any part of any account
balance distributed in the 5 year period ending on the determination date(s)),
and the denominator of which is the sum of all account balances (including any
part of any account balance distributed in the 5 year period ending on the
determination date(s)), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and the denominator of the
top-heavy ratio are increased to reflect any contribution not actually made as
of the determination date, but which is required to be taken into account on
that date under Section 416 of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution plans (including
any simplified employee pension plan) and the Employer maintains or has
maintained one or more defined benefit plans which during the 5 year period
ending on the determination date(s) has or has had any accrued benefits, the
top-heavy ratio for any required or permissive aggregation group as appropriate
is a fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key Employees, determined
in accordance with (1) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all Key Employees as of the
determination date(s), and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for all Participants as
of the determination date(s), all determined in accordance with Section 416 of
the Code and the regulations thereunder. The accrued benefits under a defined
benefit plan in both the numerator and denominator of the top heavy ratio are
increased for any distribution of an accrued benefit made in the 5 year period
ending on the determination date.
3. For purposes of (1) and (2) above, the value of account balances and the
present value of accrued benefits will be determined as of the most recent
valuation date that falls within or ends with the 12month period ending on the
determination date, except as provided in Section 416 of the Code and the
regulations thereunder for the first and second plan years of a defined benefit
plan. The account balances and accrued benefits of a Participant (a) who is not
a Key Employee but who was a Key Employee in a Prior Year, or (b) who has not
been credited with at least one Hour of Service with any employer maintaining
the plan at any time during the 5 year period ending on the determination date
will be disregarded. The calculation of the top-heavy ratio, and the extent to
which distributions, rollovers, and transfers are taken into account will be
made in accordance with Section 416 of the Code and the regulations thereunder.
Deductible employee contributions will not be taken into account for purposes of
computing the top-heavy ratio. When aggregating plans the value of account
balances and accrued benefits will be calculated with reference to the
determination dates that fall within the same calendar year. The accrued benefit
of a Participant other than a Key Employee shall be determined under (a) the
method, if any, that uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (b) if there is no such method, as
if such benefit accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group of plans plus
any other plan or plans of the Employer which, when considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
5. Required aggregation group: (a) Each qualified plan of the Employer in which
at least one Key Employee participates or participated at any time during the
determination period (regardless of whether the Plan has terminated), and (b)
any other qualified plan of the Employer which enables a plan described in (a)
to meet the requirements of Sections 401(a)(4) or 410 of the Code.
6. Determination date: For any Plan Year subsequent to the first Plan Year, the
last day of the preceding Plan Year. For the first Plan Year of the Plan, the
last day of that year.
7. Valuation date: For purposes of calculating the top-heavy ratio, the
valuation date shall be the last day of each Plan Year.
8. Present value: For purposes of establishing the "present value" of benefits
under a defined benefit plan to compute the top-heavy ratio, any benefit shall
be discounted only for mortality and interest based on the interest rate and
mortality table specified for this purpose in the defined benefit plan, unless
otherwise indicated in the Adoption Agreement.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more Owner-Employees
who control both the business for which this Plan is established and one or more
other trades or businesses, this Plan and the plan established for other trades
or businesses must, when looked at as a single plan, satisfy Sections 401(a) and
(d) of the Code for the employees of those trades or businesses.
If the Plan provides contributions or benefits for one or more Owner Employees
who control one or more other trades or businesses, the employees of the other
trades or businesses must be included in a plan which satisfies Sections 401(a)
and (d) of the Code and which provides contributions and benefits not less
favorable than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under the
plan of the trade or business which is controlled must be as favor able as those
provided for him or her under the most favorable plan of the trade or business
which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees, together:
(1) own the entire interest in a unincorporated trade or business, or
(2) in the case of a partnership, own more than 50% of either the capital
interest or the profit interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 25
<PAGE>
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to assignment or
alienation, either voluntarily or involuntarily. The preceding sentence shall
also apply to the creation, assignment, or recognition of a right to any benefit
payable with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations order, as
defined in Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified domestic relations
order until January 1, 1985. However, in the case of a domestic relations order
entered before such date, the Plan Administrator:
(1) shall treat such order as a qualified domestic relations order if such Plan
Administrator is paying benefits pursuant to such order on such date, and
(2) may treat any other such order entered before such date as a qualified
domestic relations order even if such order does not meet the requirements of
Section 414(p) of the Code.
Notwithstanding any provision of the Plan to the contrary, a distribution to an
alternate payee under a qualified domestic relations order shall be permitted
even if the Participant affected by such order is not otherwise entitled to a
distribution and even if such Participant has not attained earliest retirement
age as defined in Section 414(p) of the Code.
10.11 CANNOT ELIMINATE PROTECTED BENEFITS
Pursuant to Section 411(d)(6) of the Code, and the regulations thereunder, the
Employer cannot reduce, eliminate or make subject to Employer discretion any
Section 411(d)(6) protected benefit. Where this Plan document is being adopted
to amend another plan that contains a protected benefit not provided for in this
document, the Employer may attach a supplement to the Adoption Agreement that
describes such protected benefit which shall become part of the Plan.
SECTION 11
401(K) PROVISIONS
In addition to Sections 1 through 10, the provisions of this Section 11 shall
apply if the Employer has established a 401(k) cash or deferred arrangement
(CODA) by completing and signing the appropriate Adoption Agreement.
11.100 DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purposes of this Plan, have the meanings set forth below
unless the context indicates that other meanings are intended.
11.101 ACTUAL DEFERRAL PERCENTAGE (ADP)
Means, for a specified group of Participants for a Plan Year, the average of the
ratios (calculated separately for each Participant in such group) of (1) the
amount of Employer Contributions actually paid over to the Fund on behalf of
such Participant for the Plan Year to (2) the Participant's Compensation for
such Plan Year (taking into account only that Compensation paid to the Employee
during the portion of the Plan Year he or she was an eligible Participant,
unless otherwise indicated in the Adoption Agreement). For purposes of
calculating the ADP, Employer Contributions on behalf of any Participant shall
include: (1) any Elective Deferrals made pursuant to the Participant's deferral
election, (including Excess Elective Deferrals of Highly Compensated Employees),
but excluding (a) Excess Elective Deferrals of Non-highly Compensated Employees
that arise solely from Elective Deferrals made under the Plan or plans of this
Employer and (b) Elective Deferrals that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals); and (2) at the election of the
Employer, Qualified Nonelective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for the failure to make Elective
Deferrals shall be treated as a Participant on whose behalf no Elective
Deferrals are made.
11.102 AGGREGATE LIMIT
Means the sum of (1) 125% of the greater of the ADP of the Participants who are
not Highly Compensated Employees for the Plan Year or the ACP of the
Participants who are not Highly Compensated Employees under the Plan subject to
Code Section 401(m) for the Plan Year beginning with or within the Plan Year of
the CODA; and (2) the lesser of 200% or two plus the lesser of such ADP or ACP.
"Lesser" is substituted for "greater" in "(1)" above, and "greater" is
substituted for "lesser" after "two plus the" in "(2)" if it would result in a
larger Aggregate Limit.
11.103 AVERAGE CONTRIBUTION PERCENTAGE (ACP)
Means the average of the Contribution Percentages of the Eligible Participants
in a group.
11.104 CONTRIBUTING PARTICIPANT
Means a Participant who has enrolled as a Contributing Participant pursuant to
Section 11.201 and on whose behalf the Employer is contributing Elective
Deferrals to the Plan (or is making Nondeductible Employee Contributions).
11.105 CONTRIBUTION PERCENTAGE
Means the ratio (expressed as a percentage) of the Participant's Contribution
Percentage Amounts to the Participant's Compensation for the Plan Year (taking
into account only the Compensation paid to the Employee during the portion of
the Plan Year he or she was an eligible Participant, unless otherwise indicated
in the Adoption Agreement).
11.106 CONTRIBUTION PERCENTAGE AMOUNTS
Means the sum of the Nondeductible Employee Contributions, Matching
Contributions, and Qualified Matching Contributions made under the Plan on
behalf of the Participant for the Plan Year. Such Contribution Percentage
Amounts shall not include Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the contributions to which
they relate are Excess Deferrals, Excess Contributions, Excess Aggregate
Contributions or excess annual additions which are distributed pursuant to
Section 11.508. If so elected in the Adoption Agreement, the Employer may
include Qualified Nonelective Contributions in the Contribution Percentage
Amount. The Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before the
Elective Deferrals are used in the ACP test and continues to be met following
the exclusion of those Elective Deferrals that are used to meet the ACP test.
11.107 ELECTIVE DEFERRALS
Means any Employer Contributions made to the Plan at the election of the
Participant, in lieu of cash compensation, and shall include contributions made
pursuant to a salary reduction agreement or other deferral mechanism. With
respect to any taxable year, a Participant's Elective Deferral is the sum of all
Employer contributions made on behalf of such Participant pursuant to an
election to defer under any qualified CODA as described in Section 401(k) of the
Code, any simplified employee pension cash or deferred arrangement as described
in Section 402(h)(1)(B), any eligible deferred compensation plan under Section
457, any plan as described under Section 501(c)(18), and any Employer
contributions made on the behalf of a Participant for the purchase of an annuity
contract under Section 403(b) pursuant to a salary reduction agreement. Elective
Deferrals shall not include any deferrals properly distributed as excess annual
additions.
No Participant shall be permitted to have Elective Deferrals made under this
Plan, or any other qualified plan maintained by the Employer, during any taxable
year, in excess of the dollar limitation contained in Section 402(g) of the Code
in effect at the beginning of such taxable year.
Elective Deferrals may not be taken into account for purposes of satisfying the
minimum allocation requirement applicable to Top-Heavy Plans described in
Section 3.01(E).
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 26
<PAGE>
11.108 ELIGIBLE PARTICIPANT
Means any Employee who is eligible to make a Nondeductible Employee Contribution
or an Elective Deferral (if the Employer takes such contributions into account
in the calculation of the Contribution Percentage), or to receive a Matching
Contribution (including Forfeitures thereof) or a Qualified Matching
Contribution.
If a Nondeductible Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a Participant in the Plan
if such Employee made such a contribution shall be treated as an Eligible
Participant on behalf of whom no Nondeductible Employee Contributions are made.
11.109 EXCESS AGGREGATE CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. The aggregate Contribution Percentage Amounts taken into account in computing
the numerator of the Contribution Percentage actually made on behalf of Highly
Compensated Employees for such Plan Year, over
B. The maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages beginning with the highest
of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 11.111 and then determining Excess Contributions
pursuant to Section 11.110.
11.110 EXCESS CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. The aggregate amount of Employer Contributions actually taken into account in
computing the ADP of Highly Compensated Employees for such Plan Year, over
B. The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPs, beginning with the highest of such percentages).
11.111 EXCESS ELECTIVE DEFERRALS
Means those Elective Deferrals that are includible in a Participant's gross
income under Section 402(g) of the Code to the extent such Participant's
Elective Deferrals for a taxable year exceed the dollar limitation under such
Code section. Excess Elective Deferrals shall be treated as annual additions
under the Plan, unless such amounts are distributed no later than the first
April 15 following the close of the Participant's taxable year.
11.112 MATCHING CONTRIBUTION
Means an Employer Contribution made to this or any other defined contribution
plan on behalf of a Participant on account of an Elective Deferral or a
Nondeductible Employee Contribution made by such Participant under a plan
maintained by the Employer.
Matching Contributions may not be taken into account for purposes of satisfying
the minimum allocation requirement applicable to Top-Heavy Plans described in
Section 3.01(E).
11.113 QUALIFIED NONELECTIVE CONTRIBUTIONS
Means contributions (other than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to Participants' Individual
Accounts that the Participants may not elect to receive in cash until
distributed from the Plan; that are nonforfeitable when made; and that are
distributable only in accordance with the distribution provisions that are
applicable to Elective Deferrals and Qualified Matching Contributions.
Qualified Nonelective Contribution may be taken into account for purposes of
satisfying the minimum allocation requirement applicable to Top-Heavy Plans
described in Section 3.01(E).
11.114 QUALIFIED MATCHING CONTRIBUTIONS
Means Matching Contributions which are subject to the distribution and
nonforfeitability requirements under Section 401(k) of the Code when made.
11.115 QUALIFYING CONTRIBUTING PARTICIPANT
Means a Contributing Participant who satisfies the requirements described in
Section 11.302 to be entitled to receive a Matching Contribution (and
Forfeitures, if applicable) for a Plan Year.
11.200 CONTRIBUTING PARTICIPANT
11.201 REQUIREMENTS TO ENROLL AS
A CONTRIBUTING PARTICIPANT
A. Each Employee who satisfies the eligibility requirements specified in the
Adoption Agreement may enroll as a Contributing Participant as of any subsequent
Entry Date (or earlier if required by Section 2.03) specified in the Adoption
Agreement for this purpose. A Participant who wishes to enroll as a Contributing
Participant must complete, sign and file a salary reduction agreement (or
agreement to make Nondeductible Employee Contributions) with the Plan
Administrator.
B. Notwithstanding the times set forth in Section 11.201(A) as of which a
Participant may enroll as a Contributing Participant, the Plan Administrator
shall have the authority to designate, in a nondiscriminatory manner, additional
enrollment times during the 12 month period beginning on the Effective Date (or
the date that Elective Deferrals may commence, if later) in order that an
orderly first enrollment might be completed. In addition, if the Employer has
indicated in the Adoption Agreement that Elective Deferrals may be based on
bonuses, then Participants shall be afforded a reasonable period of time prior
to the issuance of such bonuses to elect to defer them into the Plan.
11.202 CHANGING ELECTIVE DEFERRAL AMOUNTS
A Contributing Participant may modify his or her salary reduction agreement (or
agreement to make Nondeductible Employee Contributions) to increase or decrease
(within the limits placed on Elective Deferrals (or Nondeductible Employee
Contributions) in the Adoption Agreement) the amount of his or her Compensation
deferred into the Plan. Such modification may only be made as of the dates
specified in the Adoption Agreement for this purpose, or as of any other more
frequent date(s) if the Plan Administrator permits in a uniform and
nondiscriminatory manner. A Contributing Participant who desires to make such a
modification shall complete, sign and file a new salary reduction agreement (or
agreement to make Nondeductible Employee Contribution) with the Plan
Administrator. The Plan Administrator may prescribe such uniform and
nondiscriminatory rules it deems appropriate to carry out the terms of this
Section.
11.203 CEASING ELECTIVE DEFERRALS
A Participant may cease Elective Deferrals (or Nondeductible Employee
Contributions) and thus withdraw as a Contributing Participant as of the dates
specified in the Adoption Agreement for this purpose (or as of any other date if
the Plan Administrator so permits in a uniform and nondiscriminatory manner) by
revoking the authorization to the Employer to make Elective Deferrals (or
Nondeductible Employee Contributions) on his or her behalf. A Participant who
desires to withdraw as a Contributing Participant shall give written notice of
withdrawal to the Plan Administrator at least thirty days (or such lesser period
of days as the Plan Administrator shall permit in a uniform and
nondiscriminatory manner) before the effective date of withdrawal. A Participant
shall cease to be a Contributing Participant upon his or her Termination of
Employment, or an account of termination of the Plan.
11.204 RETURN AS A CONTRIBUTING PARTICIPANT
AFTER CEASING ELECTIVE DEFERRALS
A Participant who has withdrawn as a Contributing Participant under Section
11.203 (or because the Participant has taken a hardship withdrawal pursuant to
Section 11.503) may not again become a Contributing Participant until the dates
set forth in the Adoption Agreement for this purpose,
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 27
<PAGE>
unless the Plan Administrator, in a uniform and nondiscriminatory manner,
permits withdrawing Participants to resume their status as Contributing
Participants sooner.
11.205 CERTAIN ONE-TIME IRREVOCABLE ELECTIONS
This Section 11.205 applies where the Employer has indicated in the Adoption
Agreement that an Employee may make a one-time irrevocable election to have the
Employer make contributions to the Plan on such Employee's behalf. In such
event, an Employee may elect, upon the Employee's first becoming eligible to
participate in the Plan, to have contributions equal to a specified amount or
percentage of the Employee's Compensation (including no amount of Compensation)
made by the Employer on the Employee's behalf to the Plan (and to any other plan
of the Employer) for the duration of the Employee's employment with the
Employer. Any contributions made pursuant to a one-time irrevocable election
described in this Section are not treated as made pursuant to a cash or deferred
election, are not Elective Deferrals and are not includible in an Employee's
gross income.
The Plan Administrator shall establish such uniform and nondiscriminatory
procedures as it deems necessary or advisable to administer this provision.
11.300 CONTRIBUTIONS
11.301 CONTRIBUTIONS BY EMPLOYER
The Employer shall make contributions to the Plan in accordance with the
contribution formulas specified in the Adoption Agreement.
11.302 MATCHING CONTRIBUTIONS
The Employer may elect to make Matching Contributions under the Plan on behalf
of Qualifying Contributing Participants as provided in the Adoption Agreement.
To be a Qualifying Contributing Participant for a Plan Year, the Participant
must make Elective Deferrals (or Nondeductible Employee Contributions, if the
Employer has agreed to match such contributions) for the Plan Year, satisfy any
age and Years of Eligibility Service requirements that are specified for
Matching Contributions in the Adoption Agreement and also satisfy any additional
conditions set forth in the Adoption Agreement for this purpose. In a uniform
and nondiscriminatory manner, the Employer may make Matching Contributions at
the same time as it contributes Elective Deferrals or at any other time as
permitted by laws and regulations.
11.303 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer may elect to make Qualified Nonelective Contributions under the
Plan on behalf of Participants as provided in the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as provided in Section
11.505 of the Plan, or Excess Aggregate Contributions as provided in Section
11.506 of the Plan, and to the extent elected by the Employer in the Adoption
Agreement, the Employer may make Qualified Nonelective Contributions on behalf
of Participants who are not Highly Compensated Employees that are sufficient to
satisfy either the Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
11.304 QUALIFIED MATCHING CONTRIBUTIONS
The Employer may elect to make Qualified Matching Contributions under the Plan
on behalf of Participants as provided in the Adoption Agreement.
11.305 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Notwithstanding Section 3.02, if the Employer so allows in the Adoption
Agreement, a Participant may contribute Nondeductible Employee Contributions to
the Plan.
If the Employer has indicated in the Adoption Agreement that Nondeductible
Employee Contributions will be mandatory, then the Employer shall establish
uniform and nondiscriminatory rules and procedures for Nondeductible Employee
Contributions as it deems necessary and advisable including, but not limited to,
rules describing in amounts or percentages of Compensation Participants may or
must contribute to the Plan.
A separate account will be maintained by the Plan Administrator for the
Nondeductible Employee Contributions for each Participant.
A Participant may, upon a written request submitted to the Plan Administrator,
withdraw the lesser of the portion of his or her Individual Account attributable
to his or her Nondeductible Employee Contributions or the amount he or she
contributed as Nondeductible Employee Contributions.
Nondeductible Employee Contributions and earnings thereon will be nonforfeitable
at all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of Nondeductible Employee Contributions.
11.400 NONDISCRIMINATION TESTING
11.401 ACTUAL DEFERRAL PERCENTAGE TEST (ADP)
A. Limits on Highly Compensated Employees -- The Actual Deferral Percentage
(hereinafter "ADP") for Participants who are Highly Compensated Employees for
each Plan Year and the ADP for Participants who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
1. The ADP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ADP for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
2. The ADP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ADP for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 2.0 provided that the ADP for
Participants who are Highly Compensated Employees does not exceed the ADP for
Participants who are not Highly Compensated Employees by more than 2 percentage
points.
B. Special Rules
1. The ADP for any Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to have Elective Deferrals (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to his or her
Individual Accounts under two or more arrangements described in Section 401(k)
of the Code, that are maintained by the Employer, shall be determined as if such
Elective Deferrals (and, if applicable, such Qualified Nonelective Contributions
or Qualified Matching Contributions, or both) were made under a single
arrangement. If a Highly Compensated Employee participates in two or more cash
or deferred arrangements that have different Plan Years, all cash or deferred
arrangements ending with or within the same calendar year shall be treated as a
single arrangement. Notwithstanding the foregoing, certain plans shall be
treated as separate if mandatorily disaggregated under regulations under Section
401(k) of the Code.
2. In the event that this Plan satisfies the requirements of Sections 401(k),
401(a)(4), or 410(b) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such sections
of the Code only if aggregated with this Plan, then this Section 11.401 shall be
applied by determining the ADP of Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code only if they have the same Plan
Year.
3. For purposes of determining the ADP of a Participant who is a 5% owner or one
of the 10 most highly paid Highly Compensated Employees, the Elective Deferrals
(and Qualified Nonelective Contributions or Qualified Matching Contributions, or
both, if treated as Elective Deferrals for purposes of the ADP test) and
Compensation of such Participant shall include the Elective Deferrals (and, if
applicable, Qualified Nonelective Contributions and Qualified Matching
Contributions, or both) and Compensation for the Plan Year of family members (as
defined in Section 414(q)(6) of the Code). Family members, with respect to such
Highly Compensated Employees,
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 28
<PAGE>
shall be disregarded as separate Employees in determining the ADP both for
Participants who are not Highly Compensated Employees and for Participants who
are Highly Compensated Employees.
4. For purposes of determining the ADP test, Elective Deferrals, Qualified
Nonelective Contributions and Qualified Matching Contributions must be made
before the last day of the 12 month period immediately following the Plan Year
to which contributions relate.
5. The Employer shall maintain records sufficient to demonstrate satisfaction of
the ADP test and the amount of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
6. The determination and treatment of the ADP amounts of any Participant shall
satisfy such other requirements as may be prescribed by the Secretary of the
Treasury.
7. If the Employer elects to take Qualified Matching Contributions into account
as Elective Deferrals for purposes of the ADP test, then (subject to such other
requirements as may be prescribed by the Secretary of the Treasury) unless
otherwise indicated in the Adoption Agreement, only the amount of such Qualified
Matching Contributions that are needed to meet the ADP test shall be taken into
account.
8. In the event that the Plan Administrator determines that it is not likely
that the ADP test will be satisfied for a particular Plan Year unless certain
steps are taken prior to the end of such Plan Year, the Plan Administrator may
require Contributing Participants who are Highly Compensated Employees to reduce
their Elective Deferrals for such Plan Year in order to satisfy that
requirement. Said reduction shall also be required by the Plan Administrator in
the event that the Plan Administrator anticipates that the Employer will not be
able to deduct all Employer Contributions from its income for Federal income tax
purposes.
11.402 LIMITS ON NONDEDUCTIBLE EMPLOYEE
CONTRIBUTIONS AND MATCHING CONTRIBUTIONS
A. Limits on Highly Compensated Employees -- The Average Contribution Percentage
(hereinafter "ACP") for Participants who are Highly Compensated Employees for
each Plan Year and the ACP for Participants who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the following tests:
1. The ACP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ACP for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
2. The ACP for Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the ACP for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 2, provided that the ACP for the
Participants who are Highly Compensated Employees does not exceed the ACP for
Participants who are not Highly Compensated Employees by more than 2 percentage
points.
B. Special Rules
1. Multiple Use -- If one or more Highly Compensated Employees participate in
both a CODA and a plan subject to the ACP test maintained by the Employer and
the sum of the ADP and ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit, then, as elected in the
Adoption Agreement, the ACP or the ADP of those Highly Compensated Employees who
also participate in a CODA will be reduced (beginning with such Highly
Compensated Employee whose ACP (or ADP, if elected) is the highest) so that the
limit is not exceeded. The amount by which each Highly Compensated Employee's
Contribution Percentage Amounts (or ADP, if elected) is reduced shall be treated
as an Excess Aggregate Contribution (or Excess Contribution, if elected). The
ADP and ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does not occur
if the ADP and ACP of the Highly Compensated Employees does not exceed 1.25
multiplied by the ADP and ACP of the Participants who are not Highly Compensated
Employees.
2. For purposes of this Section 11.402, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or her Individual Account under
two or more plans described in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are maintained by the Employer,
shall be determined as if the total of such Contribution Percentage Amounts was
made under each plan. If a Highly Compensated Employee participates in two or
more cash or deferred arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar year shall be
treated as a single arrangement. Notwithstanding the foregoing, certain plans
shall be treated as separate if mandatorily disaggregated under regulations
under Section 401(m) of the Code.
3. In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections of the
Code only if aggregated with this Plan, then this Section shall be applied by
determining the Contribution Percentage of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same Plan Year.
4. For purposes of determining the Contribution Percentage of a Participant who
is a 5% owner or one of the 10 most highly paid Highly Compensated Employees,
the Contribution Percentage Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts and Compensation for the Plan Year
of family members, (as defined in Section 414(q)(6) of the Code). Family
members, with respect to Highly Compensated Employees, shall be disregarded as
separate Employees in determining the Contribution Percentage both for
Participants who are not Highly Compensated Employees and for Participants who
are Highly Compensated Employees.
5. For purposes of determining the Contribution Percentage test, Non deductible
Employee Contributions are considered to have been made in the Plan Year in
which contributed to the Fund. Matching Contributions and Qualified Nonelective
Contributions will be considered made for a Plan Year if made no later than the
end of the 12 month period beginning on the day after the close of the Plan
Year.
6. The Employer shall maintain records sufficient to demonstrate satisfaction of
the ACP test and the amount of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
7. The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
8. If the Employer elects to take Qualified Nonelective Contributions into
account as Contribution Percentage Amounts for purposes of the ACP test, then
(subject to such other requirements as may be prescribed by the Secretary of the
Treasury) unless otherwise indicated in the Adoption Agreement, only the amount
of such Qualified Nonelective Contributions that are needed to meet the ACP test
shall be taken into account.
9. If the Employer elects to take Elective Deferrals into account as
Contribution Percentage Amounts for purposes of the ACP test, then (subject to
such other requirements as may be prescribed by the Secretary of the Treasury)
unless otherwise indicated in the Adoption Agreement, only the amount of such
Elective Deferrals that are needed to meet the ACP test shall be taken into
account.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 29
<PAGE>
11.500 DISTRIBUTION PROVISIONS
11.501 GENERAL RULE
Distributions from the Plan are subject to the provisions of Section 6 and the
provisions of this Section 11. In the event of a conflict between the provisions
of Section 6 and Section 11, the provisions of Section 11 shall control.
11.502 DISTRIBUTION REQUIREMENTS
Elective Deferrals, Qualified Nonelective Contributions, and Qualified Matching
Contributions, and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary or Beneficiaries' election, earlier than upon
separation from service, death or disability.
Such amounts may also be distributed upon:
A. Termination of the Plan without the establishment of another defined
contribution plan, other than an employee stock ownership plan (as defined in
Section 4975(e) or Section 409 of the Code) or a simplified employee pension
plan as defined in Section 408(k).
B. The disposition by a corporation to an unrelated corporation of substantially
all of the assets (within the meaning of Section 409(d)(2) of the Code used in a
trade or business of such corporation if such corporation continues to maintain
this Plan after the disposition, but only with respect to Employees who continue
employment with the corporation acquiring such assets.
C. The disposition by a corporation to an unrelated entity of such corporation's
interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code)
if such corporation continues to maintain this Plan, but only with respect to
Employees who continue employment with such subsidiary.
D. The attainment of age 59 1/2 in the case of a profit sharing plan.
E. If the Employer has so elected in the Adoption Agreement, the hardship of the
Participant as described in Section 11.503.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the spousal and Participant consent
requirements (if applicable) contained in Section 401(a)(11) and 417 of the
Code. In addition, distributions after March 31, 1988, that are triggered by any
of the first three events enumerated above must be made in a lump sum.
11.503 HARDSHIP DISTRIBUTION
A. General -- If the Employer has so elected in the Adoption Agreement,
distribution of Elective Deferrals (and any earnings credited to a Participant's
account as of the end of the last Plan Year, ending before July 1, 1989) may be
made to a Participant in the event of hardship. For the purposes of this
Section, hardship is defined as an immediate and heavy financial need of the
Employee where such Employee lacks other available resources. Hardship
distributions are subject to the spousal consent requirements contained in
Sections 401(a)(11) and 417 of the Code.
B. Special Rules
1. The following are the only financial needs considered immediate and heavy:
expenses incurred or necessary for medical care, described in Section 213(d) of
the Code, of the Employee, the Employee's spouse or dependents; the purchase
(excluding mortgage payments) of a principal residence for the Employee; payment
of tuition and related educational fees for the next 12 months of post-secondary
education for the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
2. A distribution will be considered as necessary to satisfy an immediate and
heavy financial need of the Employee only if:
a. The Employee has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by the
Employer;
b. All plans maintained by the Employer provide that the Employee's Elective
Deferrals (and Nondeductible Employee Contributions) will be suspended for 12
months after the receipt of the hard ship distribution;
c. The distribution is not in excess of the amount of an immediate and heavy
financial need (including amounts necessary to pay any Federal, state or local
income taxes or penalties reasonably anticipated to result from the
distribution); and
d. All plans maintained by the Employer provide that the Employee may not make
Elective Deferrals for the Employee's taxable year immediately following the
taxable year of the hardship distribution in excess of the applicable limit
under Section 402(g) of the Code for such taxable year less the amount of such
Employee's Elective Deferrals for the taxable year of the hardship distribution.
11.504 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
A. General Rule -- A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant by notifying the Plan
Administrator on or before the date specified in the Adoption Agreement of the
amount of the Excess Elective Deferrals to be assigned to the Plan. A
Participant is deemed to notify the Plan Administrator of any Excess Elective
Deferrals that arise by taking into account only those Elective Deferrals made
to this Plan and any other plans of the Employer.
Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus
any income and minus any loss allocable thereto, shall be distributed no later
than April 15 to any Participant to whose Individual Account Excess Elective
Deferrals were assigned for the preceding year and who claims Excess Elective
Deferrals for such taxable year.
B. Determination of Income or Loss -- Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The income of
loss allocable to Excess Elective Deferrals is the sum of: (1) income or loss
allocable to the Participant's Elective Deferral account for the taxable year
multiplied by a fraction, the numerator of which is such Participant's Elective
Deferrals for the year and the denominator is the Participant's Individual
Account balance attributable to Elective Deferrals without regard to any income
or loss occurring during such taxable year; and (2) 10% of the amount determined
under (1) multiplied by the number of whole calendar months between the end of
the Participant's taxable year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th of such month.
Notwithstanding the preceding sentence, the Plan Administrator may compute the
income or loss allocable to Excess Elective Deferrals in the manner described in
Section 4 (i.e., the usual manner used by the Plan for allocating income or loss
to Participants' Individual Accounts), provided such method is used consistently
for all Participants and for all corrective distributions under the Plan for the
Plan Year.
11.505 DISTRIBUTION OF EXCESS CONTRIBUTIONS
A. General Rule -- Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to Participants to
whose Individual Accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2 1/2
months after the last day of the Plan Year in which such excess amounts arose, a
10% excise tax will be imposed on the Employer maintaining the Plan with respect
to such amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess Contributions
attributable to each of such Employees. Excess Contributions of Participants who
are subject to the family member aggregation rules shall be allocated among the
family members in proportion to the Elective Deferrals (and amounts treated as
Elective Deferrals) of each family member that is combined to determine the
combined ADP.
Excess Contributions (including the amounts recharacterized) shall be treated as
annual additions under the Plan.
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 30
<PAGE>
B. Determination of Income or Loss -- Excess Contributions shall be adjusted for
any income or loss up to the date of distribution. The income or loss allocable
to Excess Contributions is the sum of: (1) income or loss allocable to
Participant's Elective Deferral account (and, if applicable, the Qualified
Nonelective Contribution account or the Qualified Matching Contributions account
or both) for the Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Contributions for the year and the denominator is the
Participant's Individual Account balance attributable to Elective Deferrals (and
Qualified Nonelective Contributions or Qualified Matching Contributions, or
both, if any of such contributions are included in the ADP test) without regard
to any income or loss occurring during such Plan Year; and (2) 10% of the amount
determined under (1) multiplied by the number of whole calendar months between
the end of the Plan Year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
Notwithstanding the preceding sentence, the Plan Administrator may compute the
income or loss allocable to Excess Contributions in the manner described in
Section 4 (i.e., the usual manner used by the Plan for allocating income or loss
to Participants' Individual Accounts), provided such method is used consistently
for all Participants and for all corrective distributions under the Plan for the
Plan Year.
C. Accounting for Excess Contributions -- Excess Contributions shall be
distributed from the Participant's Elective Deferral account and Qualified
Matching Contribution account (if applicable) in proportion to the Participant's
Elective Deferrals and Qualified Matching Contributions (to the extent used in
the ADP test) for the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified Nonelective Contribution account only to the extent
that such Excess Contributions exceed the balance in the Participant's Elective
Deferral account and Qualified Matching Contribution account.
11.506 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
A. General Rule -- Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to whose accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions of Participants who are subject to the family
member aggregation rules shall be allocated among the family members in
proportion to the Employee and Matching Contributions (or amounts treated as
Matching Contributions) of each family member that is combined to determine the
combined ACP. If such Excess Aggregate Contributions are distributed more than
2 1/2 months after the last day of the Plan Year in which such excess amounts
arose, a 10% excise tax will be imposed on the Employer maintaining the Plan
with respect to those amounts.
Excess Aggregate Contributions shall be treated as annual additions under the
Plan.
B. Determination of Income or Loss -- Excess Aggregate Contributions shall be
adjusted for any income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum of: (1) income or
loss allocable to the Participant's Nondeductible Employee Contribution account,
Matching Contribution account (if any, and if all amounts therein are not used
in the ADP test) and, if applicable, Qualified Nonelective Contribution account
and Elective Deferral account for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's Excess Aggregate Contributions for the
year and the denominator is the Participant's Individual Account balance(s)
attributable to Contribution Percentage Amounts without regard to any income or
loss occurring during such Plan Year; and (2) 10% of the amount deter mined
under (1) multiplied by the number of whole calendar months between the end of
the Plan Year and the date of distribution, counting the month of distribution
if distribution occurs after the 15th of such month. Notwithstanding the
preceding sentence, the Plan Administrator may compute the income or loss
allocable to Excess Aggregate Contributions in the manner described in Section 4
(i.e., the usual manner used by the Plan for allocating income or loss to
Participants' Individual Accounts), provided such method is used consistently
for all Participants and for all corrective distributions under the Plan for the
Plan Year.
C. Forfeitures of Excess Aggregate Contributions -- Forfeitures of Excess
Aggregate Contributions may either be reallocated to the accounts of
Contributing Participants who are not Highly Compensated Employees or applied to
reduce Employer Contributions, as elected by the Employer in the Adoption
Agreement.
D. Accounting for Excess Aggregate Contributions -- Excess Aggregate
Contributions shall be forfeited, if forfeitable or distributed on a pro rata
basis from the Participant's Nondeductible Employee Contribution account,
Matching Contribution account, and Qualified Matching Contribution account (and,
if applicable, the Participant's Qualified Nonelective Contribution account or
Elective Deferral account, or both).
11.507 RECHARACTERIZATION
A Participant may treat his or her Excess Contributions as an amount distributed
to the Participant and then contributed by the Participant to the Plan.
Recharacterized amounts will remain nonforfeitable and subject to the same
distribution requirements as Elective Deferrals. Amounts may not be
recharacterized by a Highly Compensated Employee to the extent that such amount
in combination with other Nondeductible Employee Contributions made by that
Employee would exceed any stated limit under the Plan on Nondeductible Employee
Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
11.508 DISTRIBUTION OF ELECTIVE DEFERRALS
IF EXCESS ANNUAL ADDITIONS
Notwithstanding any other provision of the Plan, a Participant's Elective
Deferrals shall be distributed to him or her to the extent that the distribution
will reduce an excess annual addition (as that term is described in Section 3.05
of the Plan).
11.600 VESTING
11.601 100% VESTING ON CERTAIN CONTRIBUTIONS
The Participant's accrued benefit derived from Elective Deferrals, Qualified
Nonelective Contributions, Nondeductible Employee Contributions, and Qualified
Matching Contributions is nonforfeitable. Separate accounts for Elective
Deferrals, Qualified Nonelective Contributions, Nondeductible Employee
Contributions, Matching Contributions, and Qualified Matching Contributions will
be maintained for each Participant. Each account will be credited with the
applicable contributions and earnings thereon.
11.602 FORFEITURES AND VESTING
OF MATCHING CONTRIBUTIONS
Matching Contributions shall be Vested in accordance with the vesting schedule
for Matching Contributions in the Adoption Agreement. In any event, Matching
Contributions shall be fully Vested at Normal Retirement Age, upon the complete
or partial termination of the profit sharing plan, or upon the complete
discontinuance of Employer Contributions. Notwithstanding any other provisions
of the Plan, Matching Contributions or Qualified Matching Contributions must be
forfeited if the contributions to which they relate are Excess Elective
Deferrals, Excess Contributions, Excess Aggregate Contributions or excess annual
additions which are distributed pursuant to Section 11.508. Such Forfeitures
shall be allocated in accordance with Section 3.01(C).
When a Participant incurs a Termination of Employment, whether a Forfeiture
arises with respect to Matching Contributions shall be determined in accordance
with Section 6.01(D).
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 31
<PAGE>
NOTES
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 32
<PAGE>
NOTES
QUALIFIED RETIREMENT PLAN & TRUST AGREEMENT 33
<PAGE>
(Blank Page)
<PAGE>
[LOGO] J A N U S
P.O. Box 173375 Denver, CO 80217-3375 1-800-525-1093
Visit our Web site at http://www.Janus.com
Funds distributed by Janus Distributors, Inc. Member NASD. (12/97)
DOC 04 KE-BPD 12/97
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31,1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> JANUS BALANCED FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 314,443
<INVESTMENTS-AT-VALUE> 347,244
<RECEIVABLES> 18,836
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 366,081
<PAYABLE-FOR-SECURITIES> 3,866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,056
<TOTAL-LIABILITIES> 5,922
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 291,100
<SHARES-COMMON-STOCK> 21,530
<SHARES-COMMON-PRIOR> 13,618
<ACCUMULATED-NII-CURRENT> 2,406
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34,553
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,100
<NET-ASSETS> 360,159
<DIVIDEND-INCOME> 3,183
<INTEREST-INCOME> 7,377
<OTHER-INCOME> 0
<EXPENSES-NET> 3,105
<NET-INVESTMENT-INCOME> 7,455
<REALIZED-GAINS-CURRENT> 34,483
<APPREC-INCREASE-CURRENT> 17,621
<NET-CHANGE-FROM-OPS> 59,559
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,418)
<DISTRIBUTIONS-OF-GAINS> (19,020)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,343
<NUMBER-OF-SHARES-REDEEMED> (8,152)
<SHARES-REINVESTED> 1,721
<NET-CHANGE-IN-ASSETS> 153,115
<ACCUMULATED-NII-PRIOR> 1,570
<ACCUMULATED-GAINS-PRIOR> 18,889
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,168
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,177
<AVERAGE-NET-ASSETS> 283,220
<PER-SHARE-NAV-BEGIN> 15.200
<PER-SHARE-NII> 0.360
<PER-SHARE-GAIN-APPREC> 2.880
<PER-SHARE-DIVIDEND> (0.360)
<PER-SHARE-DISTRIBUTIONS> (1.350)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.730
<EXPENSE-RATIO> 1.120
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> JANUS ENTERPRISE FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 413,685
<INVESTMENTS-AT-VALUE> 548,660
<RECEIVABLES> 14,717
<ASSETS-OTHER> 583
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 563,960
<PAYABLE-FOR-SECURITIES> 9,561
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,571
<TOTAL-LIABILITIES> 12,132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 382,952
<SHARES-COMMON-STOCK> 17,881
<SHARES-COMMON-PRIOR> 23,466
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 35,367
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 133,509
<NET-ASSETS> 551,828
<DIVIDEND-INCOME> 1,532
<INTEREST-INCOME> 1,116
<OTHER-INCOME> 0
<EXPENSES-NET> 6,414
<NET-INVESTMENT-INCOME> (3,766)
<REALIZED-GAINS-CURRENT> 33,040
<APPREC-INCREASE-CURRENT> (21,277)
<NET-CHANGE-FROM-OPS> 7,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (30,151)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,843
<NUMBER-OF-SHARES-REDEEMED> (20,455)
<SHARES-REINVESTED> 1,027
<NET-CHANGE-IN-ASSETS> (180,175)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 31,206
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,598
<AVERAGE-NET-ASSETS> 613,784
<PER-SHARE-NAV-BEGIN> 31.190
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.950
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (1.280)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 30.860
<EXPENSE-RATIO> 1.070
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 019
<NAME> JANUS EQUITY INCOME FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 64,283
<INVESTMENTS-AT-VALUE> 71,785
<RECEIVABLES> 4,334
<ASSETS-OTHER> 577
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 76,696
<PAYABLE-FOR-SECURITIES> 1,945
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 426
<TOTAL-LIABILITIES> 2,371
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,722
<SHARES-COMMON-STOCK> 5,317
<SHARES-COMMON-PRIOR> 2,695
<ACCUMULATED-NII-CURRENT> 87
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,163
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,353
<NET-ASSETS> 74,325
<DIVIDEND-INCOME> 581
<INTEREST-INCOME> 373
<OTHER-INCOME> 0
<EXPENSES-NET> 667
<NET-INVESTMENT-INCOME> 287
<REALIZED-GAINS-CURRENT> 5,252
<APPREC-INCREASE-CURRENT> 6,343
<NET-CHANGE-FROM-OPS> 11,882
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (393)
<DISTRIBUTIONS-OF-GAINS> (992)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,443
<NUMBER-OF-SHARES-REDEEMED> (3,936)
<SHARES-REINVESTED> 115
<NET-CHANGE-IN-ASSETS> 43,896
<ACCUMULATED-NII-PRIOR> 119
<ACCUMULATED-GAINS-PRIOR> 978
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 395
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 683
<AVERAGE-NET-ASSETS> 46,054
<PER-SHARE-NAV-BEGIN> 11.290
<PER-SHARE-NII> 0.090
<PER-SHARE-GAIN-APPREC> 3.110
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.39)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.980
<EXPENSE-RATIO> 1.480
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> JANUS FEDERAL TAX - EXEMPT FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 60,499
<INVESTMENTS-AT-VALUE> 61,965
<RECEIVABLES> 9,172
<ASSETS-OTHER> 113
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 71,250
<PAYABLE-FOR-SECURITIES> 9,053
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142
<TOTAL-LIABILITIES> 9,195
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,041
<SHARES-COMMON-STOCK> 8,755
<SHARES-COMMON-PRIOR> 6,481
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,451)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1465
<NET-ASSETS> 62,055
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,028
<OTHER-INCOME> 0
<EXPENSES-NET> 348
<NET-INVESTMENT-INCOME> 2,680
<REALIZED-GAINS-CURRENT> 198
<APPREC-INCREASE-CURRENT> 1,009
<NET-CHANGE-FROM-OPS> 1,207
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,680)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,489
<NUMBER-OF-SHARES-REDEEMED> (4,535)
<SHARES-REINVESTED> 320
<NET-CHANGE-IN-ASSETS> 17,197
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,648)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 321
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 592
<AVERAGE-NET-ASSETS> 53,574
<PER-SHARE-NAV-BEGIN> 6.920
<PER-SHARE-NII> 0.350
<PER-SHARE-GAIN-APPREC> 0.170
<PER-SHARE-DIVIDEND> (0.350)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.090
<EXPENSE-RATIO> 0.660
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> JANUS FLEXIBLE INCOME FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 670,618
<INVESTMENTS-AT-VALUE> 694,281
<RECEIVABLES> 45,400
<ASSETS-OTHER> 4,194
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 743,875
<PAYABLE-FOR-SECURITIES> 14,075
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,699
<TOTAL-LIABILITIES> 16,774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 687,691
<SHARES-COMMON-STOCK> 72,706
<SHARES-COMMON-PRIOR> 62,580
<ACCUMULATED-NII-CURRENT> 610
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,135
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,665
<NET-ASSETS> 727,101
<DIVIDEND-INCOME> 1,671
<INTEREST-INCOME> 50,554
<OTHER-INCOME> 0
<EXPENSES-NET> 5,648
<NET-INVESTMENT-INCOME> 46,577
<REALIZED-GAINS-CURRENT> 14,875
<APPREC-INCREASE-CURRENT> 11,115
<NET-CHANGE-FROM-OPS> 72,567
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,546)
<DISTRIBUTIONS-OF-GAINS> (1,192)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,058
<NUMBER-OF-SHARES-REDEEMED> (30,105)
<SHARES-REINVESTED> 4,173
<NET-CHANGE-IN-ASSETS> 123,446
<ACCUMULATED-NII-PRIOR> 394
<ACCUMULATED-GAINS-PRIOR> 1,635
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,910
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,742
<AVERAGE-NET-ASSETS> 656,422
<PER-SHARE-NAV-BEGIN> 9.650
<PER-SHARE-NII> 0.690
<PER-SHARE-GAIN-APPREC> 0.370
<PER-SHARE-DIVIDEND> (0.690)
<PER-SHARE-DISTRIBUTIONS> (0.020)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.000
<EXPENSE-RATIO> 0.870
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 152
<NAME> JANUS GOVT. MMKT FUND - INST. SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 172,798
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,374
<ASSETS-OTHER> 137
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,309
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,772
<TOTAL-LIABILITIES> 5,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 168,537
<SHARES-COMMON-STOCK> 35,775
<SHARES-COMMON-PRIOR> 59,490
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 35,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,073
<OTHER-INCOME> 0
<EXPENSES-NET> 839
<NET-INVESTMENT-INCOME> 9,234
<REALIZED-GAINS-CURRENT> 8
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,063)
<DISTRIBUTIONS-OF-GAINS> (2)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 671,494
<NUMBER-OF-SHARES-REDEEMED> (697,778)
<SHARES-REINVESTED> 2,569
<NET-CHANGE-IN-ASSETS> (23,715)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 57
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 95
<AVERAGE-NET-ASSETS> 56,801
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.150
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 151
<NAME> JANUS GOVT. MMKT FUND - INVESTOR SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 172,798
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,374
<ASSETS-OTHER> 137
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,309
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,772
<TOTAL-LIABILITIES> 5,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 168,537
<SHARES-COMMON-STOCK> 132,134
<SHARES-COMMON-PRIOR> 117,408
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 132,133
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,073
<OTHER-INCOME> 0
<EXPENSES-NET> 839
<NET-INVESTMENT-INCOME> 9,234
<REALIZED-GAINS-CURRENT> 8
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,112)
<DISTRIBUTIONS-OF-GAINS> (5)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 250,916
<NUMBER-OF-SHARES-REDEEMED> (242,091)
<SHARES-REINVESTED> 5,901
<NET-CHANGE-IN-ASSETS> 14,726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 749
<AVERAGE-NET-ASSETS> 123,193
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.600
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 153
<NAME> JANUS GOVT. MMKT FUND - SERVICE SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-22-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 172,798
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,374
<ASSETS-OTHER> 137
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,309
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,772
<TOTAL-LIABILITIES> 5,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 168,537
<SHARES-COMMON-STOCK> 628
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 628
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,073
<OTHER-INCOME> 0
<EXPENSES-NET> 839
<NET-INVESTMENT-INCOME> 9,234
<REALIZED-GAINS-CURRENT> 8
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (60)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,557
<NUMBER-OF-SHARES-REDEEMED> (1,961)
<SHARES-REINVESTED> 32
<NET-CHANGE-IN-ASSETS> 628
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15
<AVERAGE-NET-ASSETS> 1,141
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.400
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated Octoberl 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> JANUS GROWTH AND INCOME FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 1,510,170
<INVESTMENTS-AT-VALUE> 1,898,573
<RECEIVABLES> 53,519
<ASSETS-OTHER> 616
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,952,708
<PAYABLE-FOR-SECURITIES> 59,354
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,355
<TOTAL-LIABILITIES> 63,709
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,317,911
<SHARES-COMMON-STOCK> 75,342
<SHARES-COMMON-PRIOR> 51,529
<ACCUMULATED-NII-CURRENT> 823
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 183,694
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 386,571
<NET-ASSETS> 1,888,999
<DIVIDEND-INCOME> 13,550
<INTEREST-INCOME> 4,227
<OTHER-INCOME> 0
<EXPENSES-NET> 13,548
<NET-INVESTMENT-INCOME> 4,229
<REALIZED-GAINS-CURRENT> 185,980
<APPREC-INCREASE-CURRENT> 241,318
<NET-CHANGE-FROM-OPS> 431,527
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,298)
<DISTRIBUTIONS-OF-GAINS> (97,951)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,425
<NUMBER-OF-SHARES-REDEEMED> (21,857)
<SHARES-REINVESTED> 5,245
<NET-CHANGE-IN-ASSETS> 855,816
<ACCUMULATED-NII-PRIOR> 5,340
<ACCUMULATED-GAINS-PRIOR> 93,217
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,828
<AVERAGE-NET-ASSETS> 1,415,563
<PER-SHARE-NAV-BEGIN> 20.050
<PER-SHARE-NII> 0.010
<PER-SHARE-GAIN-APPREC> 6.980
<PER-SHARE-DIVIDEND> (0.110)
<PER-SHARE-DISTRIBUTIONS> (1.860)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 25.070
<EXPENSE-RATIO> 0.980
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 017
<NAME> JANUS HIGH-YIELD FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 272,410
<INVESTMENTS-AT-VALUE> 278,615
<RECEIVABLES> 43,334
<ASSETS-OTHER> 1,512
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 323,461
<PAYABLE-FOR-SECURITIES> 15,974
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,065
<TOTAL-LIABILITIES> 22,039
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 278,679
<SHARES-COMMON-STOCK> 25,471
<SHARES-COMMON-PRIOR> 18,965
<ACCUMULATED-NII-CURRENT> 142
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,395
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,206
<NET-ASSETS> 301,422
<DIVIDEND-INCOME> 352
<INTEREST-INCOME> 24,815
<OTHER-INCOME> 0
<EXPENSES-NET> 2,662
<NET-INVESTMENT-INCOME> 22,505
<REALIZED-GAINS-CURRENT> 16,424
<APPREC-INCREASE-CURRENT> 2,641
<NET-CHANGE-FROM-OPS> 41,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,392)
<DISTRIBUTIONS-OF-GAINS> (2,396)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39,057
<NUMBER-OF-SHARES-REDEEMED> (34,479)
<SHARES-REINVESTED> 1,928
<NET-CHANGE-IN-ASSETS> 90,489
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,395
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,994
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,761
<AVERAGE-NET-ASSETS> 266,213
<PER-SHARE-NAV-BEGIN> 11.120
<PER-SHARE-NII> 0.970
<PER-SHARE-GAIN-APPREC> 0.820
<PER-SHARE-DIVIDEND> (0.970)
<PER-SHARE-DISTRIBUTIONS> (0.110)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.830
<EXPENSE-RATIO> 1.030
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> JANUS FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 15,676,629
<INVESTMENTS-AT-VALUE> 19,146,227
<RECEIVABLES> 546,441
<ASSETS-OTHER> 5,462
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,698,130
<PAYABLE-FOR-SECURITIES> 559,059
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109,737
<TOTAL-LIABILITIES> 668,796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,379,736
<SHARES-COMMON-STOCK> 648,151
<SHARES-COMMON-PRIOR> 574,704
<ACCUMULATED-NII-CURRENT> 160,515
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,104,409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,384,674
<NET-ASSETS> 19,029,334
<DIVIDEND-INCOME> 184,855
<INTEREST-INCOME> 114,720
<OTHER-INCOME> 0
<EXPENSES-NET> 150,001
<NET-INVESTMENT-INCOME> 149,574
<REALIZED-GAINS-CURRENT> 3,110,339
<APPREC-INCREASE-CURRENT> 495,474
<NET-CHANGE-FROM-OPS> 3,755,387
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (120,830)
<DISTRIBUTIONS-OF-GAINS> (1,689,077)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,499
<NUMBER-OF-SHARES-REDEEMED> (112,847)
<SHARES-REINVESTED> 71,795
<NET-CHANGE-IN-ASSETS> 3,716,154
<ACCUMULATED-NII-PRIOR> 173,997
<ACCUMULATED-GAINS-PRIOR> 1,640,921
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 114,245
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 152,285
<AVERAGE-NET-ASSETS> 17,515,216
<PER-SHARE-NAV-BEGIN> 26.650
<PER-SHARE-NII> 0.150
<PER-SHARE-GAIN-APPREC> 5.690
<PER-SHARE-DIVIDEND> (0.210)
<PER-SHARE-DISTRIBUTIONS> (2.920)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 29.360
<EXPENSE-RATIO> 0.870
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> JANUS MERCURY FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 1,679,802
<INVESTMENTS-AT-VALUE> 1,970,245
<RECEIVABLES> 50,502
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,020,804
<PAYABLE-FOR-SECURITIES> 40,280
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,475
<TOTAL-LIABILITIES> 49,755
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,488,013
<SHARES-COMMON-STOCK> 105,674
<SHARES-COMMON-PRIOR> 110,006
<ACCUMULATED-NII-CURRENT> 5,512
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 192,788
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 284,736
<NET-ASSETS> 1,971,049
<DIVIDEND-INCOME> 12,163
<INTEREST-INCOME> 11,744
<OTHER-INCOME> 0
<EXPENSES-NET> 19,608
<NET-INVESTMENT-INCOME> 4,299
<REALIZED-GAINS-CURRENT> 198,605
<APPREC-INCREASE-CURRENT> 116,617
<NET-CHANGE-FROM-OPS> 319,521
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,225)
<DISTRIBUTIONS-OF-GAINS> (250,204)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,228
<NUMBER-OF-SHARES-REDEEMED> (84,844)
<SHARES-REINVESTED> 15,284
<NET-CHANGE-IN-ASSETS> (31,301)
<ACCUMULATED-NII-PRIOR> 15,395
<ACCUMULATED-GAINS-PRIOR> 238,429
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,722
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,081
<AVERAGE-NET-ASSETS> 2,045,901
<PER-SHARE-NAV-BEGIN> 18.200
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> 2.820
<PER-SHARE-DIVIDEND> (0.080)
<PER-SHARE-DISTRIBUTIONS> (2.280)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.650
<EXPENSE-RATIO> 0.980
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 142
<NAME> JANUS MONEY MARKET FUND - INST. SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 3,992,906
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 30,961
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,023,883
<PAYABLE-FOR-SECURITIES> 104,346
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,588
<TOTAL-LIABILITIES> 209,934
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,813,949
<SHARES-COMMON-STOCK> 2,770,961
<SHARES-COMMON-PRIOR> 1,705,610
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,770,961
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 195,066
<OTHER-INCOME> 0
<EXPENSES-NET> 9,167
<NET-INVESTMENT-INCOME> 185,899
<REALIZED-GAINS-CURRENT> 98
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 185,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (140,928)
<DISTRIBUTIONS-OF-GAINS> (76)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,798,535
<NUMBER-OF-SHARES-REDEEMED> (56,765,454)
<SHARES-REINVESTED> 32,270
<NET-CHANGE-IN-ASSETS> 1,065,351
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,866
<AVERAGE-NET-ASSETS> 2,545,294
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.060
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.060)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.150
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 141
<NAME> JANUS MONEY MARKET FUND - INVESTOR SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 3,992,906
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 30,961
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,023,883
<PAYABLE-FOR-SECURITIES> 104,346
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,588
<TOTAL-LIABILITIES> 209,934
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,813,949
<SHARES-COMMON-STOCK> 1,032,647
<SHARES-COMMON-PRIOR> 773,887
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,032,647
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 195,066
<OTHER-INCOME> 0
<EXPENSES-NET> 9,167
<NET-INVESTMENT-INCOME> 185,899
<REALIZED-GAINS-CURRENT> 98
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 185,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (44,924)
<DISTRIBUTIONS-OF-GAINS> (22)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,205,232
<NUMBER-OF-SHARES-REDEEMED> (3,989,256)
<SHARES-REINVESTED> 42,784
<NET-CHANGE-IN-ASSETS> 258,760
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 883
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,345
<AVERAGE-NET-ASSETS> 883,052
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.600
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 143
<NAME> JANUS MONEY MARKET FUND - SERVICE SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-22-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 3,992,906
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 30,961
<ASSETS-OTHER> 16
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,023,883
<PAYABLE-FOR-SECURITIES> 104,346
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,588
<TOTAL-LIABILITIES> 209,934
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,813,949
<SHARES-COMMON-STOCK> 10,341
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,341
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 195,066
<OTHER-INCOME> 0
<EXPENSES-NET> 9,167
<NET-INVESTMENT-INCOME> 185,899
<REALIZED-GAINS-CURRENT> 98
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 185,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,775
<NUMBER-OF-SHARES-REDEEMED> (7,481)
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 10,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50
<AVERAGE-NET-ASSETS> 913
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.400
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirely by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 018
<NAME> JANUS OLYMPUS FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 499,991
<INVESTMENTS-AT-VALUE> 618,244
<RECEIVABLES> 28,009
<ASSETS-OTHER> 3,505
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 649,758
<PAYABLE-FOR-SECURITIES> 32,157
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,950
<TOTAL-LIABILITIES> 34,107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 473,702
<SHARES-COMMON-STOCK> 33,441
<SHARES-COMMON-PRIOR> 29,101
<ACCUMULATED-NII-CURRENT> 1,267
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,497
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 117,185
<NET-ASSETS> 615,651
<DIVIDEND-INCOME> 3,759
<INTEREST-INCOME> 2,917
<OTHER-INCOME> 0
<EXPENSES-NET> 5,319
<NET-INVESTMENT-INCOME> 1,357
<REALIZED-GAINS-CURRENT> 32,619
<APPREC-INCREASE-CURRENT> 82,685
<NET-CHANGE-FROM-OPS> 115,304
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,648)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,016
<NUMBER-OF-SHARES-REDEEMED> (28,918)
<SHARES-REINVESTED> 242
<NET-CHANGE-IN-ASSETS> 183,276
<ACCUMULATED-NII-PRIOR> 3,647
<ACCUMULATED-GAINS-PRIOR> (9,212)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,801
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,484
<AVERAGE-NET-ASSETS> 517,424
<PER-SHARE-NAV-BEGIN> 14.860
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 3.640
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.410
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31,1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> JANUS OVERSEAS FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 2,782,523
<INVESTMENTS-AT-VALUE> 3,083,330
<RECEIVABLES> 217,647
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,300,980
<PAYABLE-FOR-SECURITIES> 77,703
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,080
<TOTAL-LIABILITIES> 95,783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,807,706
<SHARES-COMMON-STOCK> 178,699
<SHARES-COMMON-PRIOR> 52,184
<ACCUMULATED-NII-CURRENT> 19,546
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 82,566
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 295,379
<NET-ASSETS> 3,205,197
<DIVIDEND-INCOME> 26,011
<INTEREST-INCOME> 18,080
<OTHER-INCOME> 0
<EXPENSES-NET> 21,198
<NET-INVESTMENT-INCOME> 16,993
<REALIZED-GAINS-CURRENT> 86,037
<APPREC-INCREASE-CURRENT> 231,923
<NET-CHANGE-FROM-OPS> 334,953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,552)
<DISTRIBUTIONS-OF-GAINS> (15,609)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 262,026
<NUMBER-OF-SHARES-REDEEMED> (136,692)
<SHARES-REINVESTED> 1,181
<NET-CHANGE-IN-ASSETS> 2,432,567
<ACCUMULATED-NII-PRIOR> 5,739
<ACCUMULATED-GAINS-PRIOR> 11,504
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,050
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,557
<AVERAGE-NET-ASSETS> 2,093,370
<PER-SHARE-NAV-BEGIN> 14.810
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 3.390
<PER-SHARE-DIVIDEND> (0.040)
<PER-SHARE-DISTRIBUTIONS> (0.260)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.940
<EXPENSE-RATIO> 1.030
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 010
<NAME> JANUS SHORT-TERM BOND FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 56,269
<INVESTMENTS-AT-VALUE> 56,677
<RECEIVABLES> 1,580
<ASSETS-OTHER> 88
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58,345
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 437
<TOTAL-LIABILITIES> 437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,328
<SHARES-COMMON-STOCK> 19,980
<SHARES-COMMON-PRIOR> 14,239
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,829)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 408
<NET-ASSETS> 57,908
<DIVIDEND-INCOME> 11
<INTEREST-INCOME> 3,224
<OTHER-INCOME> 0
<EXPENSES-NET> 315
<NET-INVESTMENT-INCOME> 2,920
<REALIZED-GAINS-CURRENT> 407
<APPREC-INCREASE-CURRENT> 128
<NET-CHANGE-FROM-OPS> 3,455
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,920)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,891
<NUMBER-OF-SHARES-REDEEMED> (16,092)
<SHARES-REINVESTED> 942
<NET-CHANGE-IN-ASSETS> 17,124
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (3,236)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 315
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 581
<AVERAGE-NET-ASSETS> 48,421
<PER-SHARE-NAV-BEGIN> 2.860
<PER-SHARE-NII> 0.170
<PER-SHARE-GAIN-APPREC> 0.040
<PER-SHARE-DIVIDEND> (0.170)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.900
<EXPENSE-RATIO> 0.670
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 020
<NAME> JANUS SPECIAL SITUATIONS FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 303,473
<INVESTMENTS-AT-VALUE> 338,270
<RECEIVABLES> 5,999
<ASSETS-OTHER> 527
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 344,796
<PAYABLE-FOR-SECURITIES> 8,478
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,541
<TOTAL-LIABILITIES> 11,019
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 282,480
<SHARES-COMMON-STOCK> 23,704
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,997
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,300
<NET-ASSETS> 333,777
<DIVIDEND-INCOME> 1,280
<INTEREST-INCOME> 266
<OTHER-INCOME> 0
<EXPENSES-NET> 1,655
<NET-INVESTMENT-INCOME> (109)
<REALIZED-GAINS-CURRENT> 18,106
<APPREC-INCREASE-CURRENT> 33,300
<NET-CHANGE-FROM-OPS> 51,297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,037
<NUMBER-OF-SHARES-REDEEMED> (8,333)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 333,777
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,090
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,692
<AVERAGE-NET-ASSETS> 168,215
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 4.080
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.080
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 162
<NAME> JANUS TAX-EXEMPT MMKT FUND-INST.SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 77,064
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 592
<ASSETS-OTHER> 98
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77,754
<PAYABLE-FOR-SECURITIES> 1,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169
<TOTAL-LIABILITIES> 1,169
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,947
<SHARES-COMMON-STOCK> 1,947
<SHARES-COMMON-PRIOR> 11,192
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,947
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,694
<OTHER-INCOME> 0
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 2,279
<REALIZED-GAINS-CURRENT> (1)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,832
<NUMBER-OF-SHARES-REDEEMED> (48,120)
<SHARES-REINVESTED> 43
<NET-CHANGE-IN-ASSETS> (9,245)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3
<AVERAGE-NET-ASSETS> 1,754
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.040)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.150
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 161
<NAME> JANUS TAX-EXEMPT MMKT FUND-INVESTOR SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 76,955
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 867
<ASSETS-OTHER> 82
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77,904
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 559
<TOTAL-LIABILITIES> 559
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,594
<SHARES-COMMON-STOCK> 75,594
<SHARES-COMMON-PRIOR> 74,638
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 74,638
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,455
<OTHER-INCOME> 0
<EXPENSES-NET> 236
<NET-INVESTMENT-INCOME> 1,219
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,217
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,166
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,856
<NUMBER-OF-SHARES-REDEEMED> (103,012)
<SHARES-REINVESTED> 1,112
<NET-CHANGE-IN-ASSETS> 956
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236
<AVERAGE-NET-ASSETS> 77,315
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.610
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 163
<NAME> JANUS TAX-EXEMPT MMKT FUND-SERVICE SHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-22-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,838
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10
<AVERAGE-NET-ASSETS> 10
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.030)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.400
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated Octoberl 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> JANUS TWENTY FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 4,790,615
<INVESTMENTS-AT-VALUE> 5,945,356
<RECEIVABLES> 41,965
<ASSETS-OTHER> 61
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,987,382
<PAYABLE-FOR-SECURITIES> 101,861
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,451
<TOTAL-LIABILITIES> 116,312
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,950,593
<SHARES-COMMON-STOCK> 167,001
<SHARES-COMMON-PRIOR> 123,438
<ACCUMULATED-NII-CURRENT> 16,568
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 754,451
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,149,458
<NET-ASSETS> 5,871,070
<DIVIDEND-INCOME> 49,911
<INTEREST-INCOME> 12,043
<OTHER-INCOME> 0
<EXPENSES-NET> 45,367
<NET-INVESTMENT-INCOME> 16,587
<REALIZED-GAINS-CURRENT> 754,451
<APPREC-INCREASE-CURRENT> 546,527
<NET-CHANGE-FROM-OPS> 1,317,565
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,661)
<DISTRIBUTIONS-OF-GAINS> (663,308)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62,858
<NUMBER-OF-SHARES-REDEEMED> (42,422)
<SHARES-REINVESTED> 23,127
<NET-CHANGE-IN-ASSETS> 1,933,626
<ACCUMULATED-NII-PRIOR> 46,083
<ACCUMULATED-GAINS-PRIOR> 638,364
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32,876
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,436
<AVERAGE-NET-ASSETS> 4,989,616
<PER-SHARE-NAV-BEGIN> 31.900
<PER-SHARE-NII> (0.090)
<PER-SHARE-GAIN-APPREC> 8.850
<PER-SHARE-DIVIDEND> (0.180)
<PER-SHARE-DISTRIBUTIONS> (5.320)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 35.160
<EXPENSE-RATIO> 0.930
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated Octoberl 31, 1997 included in the Fund's Annual Report and is
qualified in its entirely by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 003
<NAME> JANUS VENTURE FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 959,038
<INVESTMENTS-AT-VALUE> 1,250,123
<RECEIVABLES> 5,832
<ASSETS-OTHER> 1,570
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,257,525
<PAYABLE-FOR-SECURITIES> 2,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,561
<TOTAL-LIABILITIES> 5,184
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 766,715
<SHARES-COMMON-STOCK> 21,284
<SHARES-COMMON-PRIOR> 30,463
<ACCUMULATED-NII-CURRENT> 3,432
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 191,545
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 290,649
<NET-ASSETS> 1,252,341
<DIVIDEND-INCOME> 4,510
<INTEREST-INCOME> 9,649
<OTHER-INCOME> 0
<EXPENSES-NET> 12,649
<NET-INVESTMENT-INCOME> 1,510
<REALIZED-GAINS-CURRENT> 195,359
<APPREC-INCREASE-CURRENT> (52,099)
<NET-CHANGE-FROM-OPS> 144,770
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (155,029)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,277
<NUMBER-OF-SHARES-REDEEMED> (15,340)
<SHARES-REINVESTED> 2,884
<NET-CHANGE-IN-ASSETS> (488,975)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 153,138
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,406
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,941
<AVERAGE-NET-ASSETS> 1,379,145
<PER-SHARE-NAV-BEGIN> 57.160
<PER-SHARE-NII> 0.160
<PER-SHARE-GAIN-APPREC> 6.800
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (5.280)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 58.840
<EXPENSE-RATIO> 0.940
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated October 31, 1997 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 005
<NAME> JANUS WORLDWIDE FUND
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 8,781,970
<INVESTMENTS-AT-VALUE> 10,057,949
<RECEIVABLES> 565,022
<ASSETS-OTHER> 1,066
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,624,037
<PAYABLE-FOR-SECURITIES> 228,285
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,527
<TOTAL-LIABILITIES> 265,812
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,391,943
<SHARES-COMMON-STOCK> 258,645
<SHARES-COMMON-PRIOR> 129,112
<ACCUMULATED-NII-CURRENT> 69,045
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 630,141
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,267,096
<NET-ASSETS> 10,358,225
<DIVIDEND-INCOME> 95,827
<INTEREST-INCOME> 28,799
<OTHER-INCOME> 0
<EXPENSES-NET> 73,831
<NET-INVESTMENT-INCOME> 50,795
<REALIZED-GAINS-CURRENT> 655,178
<APPREC-INCREASE-CURRENT> 690,790
<NET-CHANGE-FROM-OPS> 1,396,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,409)
<DISTRIBUTIONS-OF-GAINS> (285,338)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 190,176
<NUMBER-OF-SHARES-REDEEMED> (69,584)
<SHARES-REINVESTED> 8,941
<NET-CHANGE-IN-ASSETS> 5,891,040
<ACCUMULATED-NII-PRIOR> 64,560
<ACCUMULATED-GAINS-PRIOR> 235,401
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51,016
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,284
<AVERAGE-NET-ASSETS> 7,783,669
<PER-SHARE-NAV-BEGIN> 34.600
<PER-SHARE-NII> (0.080)
<PER-SHARE-GAIN-APPREC> 7.730
<PER-SHARE-DIVIDEND> (0.150)
<PER-SHARE-DISTRIBUTIONS> (2.050)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 40.050
<EXPENSE-RATIO> 0.970
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
