JANUS INVESTMENT FUND, 485APOS, 1998-12-16

JANUS INVESTMENT FUND
485APOS, 1998-12-16

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre- Effective Amendment No. [ ]

Post-Effective Amendment No. 86 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [X]

Amendment No. 69 [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: December 31, 1998

It is proposed that this filing will become effective (check appropriate box):
[ ] 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
[X] on February 17, 1999 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 box:
[ ] 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 PROSPECTUSES

PART A

1. Front and Back Cover Pages Cover Pages

2. Risk/Return Summary: Risk/Return Summary
Investments, Risks, and
Performance

3. Risk/Return Summary: Fee Risk/Return Summary
Table

4. Investment Objectives, Investment Objectives, Principal
Principal Investment Investment Strategies, and Risks;
Strategies, and Related Risks Ratings Categories (Combined Income
Prospectus only)

5. Management's Discussion of Not Applicable
Fund Performance

6. Management, Organization, and Management of the Funds
Capital Structure

7. Shareholder Information Shareholder's Manual; Other Information;
Distributions and Taxes

8. Distribution Arrangements Not Applicable

9. Financial Highlights Financial Highlights
Information

<PAGE>

FORM N-1A ITEM CAPTION IN STATEMENTS OF ADDITIONAL
INFORMATION

PART B

10. Cover Page and Table of Cover Page; Table of Contents
Contents

11. Fund History Miscellaneous Information

12. Description of the Fund and Classification, Portfolio Turnover,
Its Investments and Risks Investment Policies and Restrictions,
Investment Strategies and Risks;
Appendix A; Appendix B (Money Market
Fund Statements of Additional
Information only)

13. Management of the Fund Investment Adviser (Combined Growth and
Income Funds, Venture and Overseas
Statements of Additional Information
only); Investment Adviser and
Administrator (Money Market Fund
Statements of Additional Information
only); Trustees and Officers

14. Control Persons and Principal Principal Shareholders
Holders of Securities

15. Investment Advisory and Other Investment Adviser (Combined Growth and
Services Income Funds, Venture and Overseas
Statements of Additional Information
only); Investment Adviser and
Administrator (Money Market Fund
Statements of Additional Information
only); Custodian, Transfer Agent, and
Certain Affiliations; Portfolio
Transactions and Brokerage; Trustees
and Officers; Miscellaneous Information

<PAGE>

16. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices

17. Capital Stock and Other Purchase of Shares; Redemption of
Securities Shares; Miscellaneous Information

18. Purchase, Redemption, and Purchase of Shares; Redemption of
Pricing of Shares Shares; Miscellaneous Information

19. Taxation of the Fund Tax-Deferred Accounts; Income Dividends,
Capital Gains, Distributions, and Tax
Status (Combined Growth and Income
Funds, Venture and Overseas Statements
of Additional Information only);
Dividends and Tax Status (Money Market
Fund Statements of Additional
Information only)

20. Underwriters Custodian, Transfer Agent, and Certain
Affiliations

21. Calculation of Performance Performance Information (Combined
Data Growth and Income Funds, Venture and
Overseas Statements of Additional
Information); Performance Data (Money
Market Fund Statements of Additional
Information only)

22. Financial Statements Financial Statements

<PAGE>

[JANUS LOGO]

Janus Equity Funds
PROSPECTUS
FEBRUARY 17, 1999
Janus Fund
Janus Enterprise Fund
Janus Mercury Fund
Janus Olympus Fund
Janus Special Situations Fund
Janus Twenty Fund
Janus Global Life Sciences Fund
Janus Global Technology Fund
Janus Worldwide Fund
Janus Balanced Fund
Janus Equity Income Fund
Janus Growth and Income Fund

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Growth Funds ........................................................ page 2
Combination Funds ................................................... page 13
Fees and Expenses ................................................... page 18

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
Growth Funds ........................................................ page 20
Combination Funds ................................................... page 26
General Portfolio Policies .......................................... page 28
Risks ............................................................... page 30

SHAREHOLDER'S MANUAL
Minimum Investments ................................................. page 36
Types of Account Ownership .......................................... page 37
How to Open Your Janus Account ...................................... page 38
How to Purchase Shares .............................................. page 39
How to Exchange Shares .............................................. page 41
How to Redeem Shares ................................................ page 42
Shareholder Services and Account Policies ........................... page 46

MANAGEMENT OF THE FUNDS
Investment Adviser .................................................. page 50
Investment Personnel ................................................ page 51

OTHER INFORMATION ................................................... page 54

DISTRIBUTIONS AND TAXES
Distributions ....................................................... page 55
Taxes ............................................................... page 56

FINANCIAL HIGHLIGHTS ................................................ page 58
GLOSSARY
Glossary of Investment Terms ........................................ page 68
</TABLE>
<PAGE>

1
<PAGE>
2

RISK/RETURN SUMMARY

GROWTH FUNDS
The 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.

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE GROWTH FUNDS?

DOMESTIC GROWTH FUNDS
- - JANUS FUND seeks long-term growth of capital in a manner consistent with the
preservation of capital.

- - JANUS ENTERPRISE FUND, JANUS MERCURY FUND, JANUS OLYMPUS FUND AND JANUS TWENTY
FUND seek long-term growth of capital.

- - JANUS SPECIAL SITUATIONS FUND seeks capital appreciation.

GLOBAL GROWTH FUNDS
- - JANUS GLOBAL LIFE SCIENCES FUND AND JANUS GLOBAL TECHNOLOGY FUND seek
long-term growth of capital.

- - JANUS WORLDWIDE FUND seeks long-term growth of capital in a manner consistent
with the preservation of capital.

The Funds' Trustees may change these objectives without a shareholder vote and
the Funds will notify you of any changes that are material. If there is a
material change to a Fund's objective or policies, you should consider whether
that Fund remains an appropriate investment for you. There is no guarantee that
a fund will meet its objective.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE GROWTH FUNDS? The portfolio
managers apply a "bottom up" approach in choosing investments. In other words,
they look for companies with earnings growth potential one at a time. If a
portfolio manager is unable to find investments with earnings growth potential,
a significant portion of a Fund's assets may be in cash or similar investments.

JANUS FUND invests primarily in common stocks selected for their growth
potential. Although the Fund can invest in companies of any size, it generally
invests in larger, more established companies.

JANUS ENTERPRISE FUND invests primarily in common stocks selected for their
growth potential, and normally invests at least 50% of its equity assets in
medium-sized companies.

<PAGE>
3

JANUS MERCURY FUND invests primarily in common stocks selected for their growth
potential. The Fund may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.

JANUS OLYMPUS FUND invests primarily in common stocks selected for their growth
potential. The Fund may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.

JANUS SPECIAL SITUATIONS FUND invests primarily in common stocks selected for
their capital appreciation potential. The Fund emphasizes stocks of "special
situation" companies that the portfolio manager believes have been overlooked or
undervalued by other investors. A "special situation" arises when, in the
portfolio manager's opinion, securities of a particular company will appreciate
in value due to a specific development. The portfolio manager pays particular
attention to companies that he thinks have high free cash flows.

JANUS TWENTY FUND invests primarily in common stocks selected for their growth
potential. The Fund normally concentrates its investments in a core group of
20-30 common stocks.

JANUS GLOBAL LIFE SCIENCES FUND invests primarily in equity securities of U.S.
and foreign companies selected for their growth potential. Normally, it invests
at least 65% of its total assets in securities of companies that the portfolio
manager believes have a life science orientation. As a fundamental policy, the
Fund normally invests at least 25% of its total assets, in the aggregate, in the
following industry groups: health care; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.

JANUS GLOBAL TECHNOLOGY FUND invests primarily in equity securities of U.S. and
foreign companies selected for their growth potential. Normally, it invests at
least 65% of its total assets in securities of companies that the portfolio
manager believes will benefit significantly from advances or improvements in
technology.

JANUS WORLDWIDE FUND invests primarily in common stocks of companies of any size
throughout the world. The Fund normally invests in issuers from at least five
different countries, including the United States.

<PAGE>
4

The Fund may at times invest in fewer than five countries or even a single
country.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE GROWTH FUNDS? The biggest risk is
that the Funds' returns may vary, and you could lose money. If you are
considering investing in any of the Growth Funds, remember that they are each
designed for long-term investors who can accept the risks of investing in a
portfolio with significant common stock holdings. Common stocks tend to be more
volatile than other investment choices.

The value of a Fund's portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of a Fund's portfolio could also
decrease if the stock market goes down. If the value of a Fund's portfolio
decreases, a Fund's net asset value (NAV) will also decrease, which means if you
sell your shares in a Fund you would get back less money.

JANUS SPECIAL SITUATIONS FUND emphasizes investments in special situation
companies which may not appreciate if an anticipated development does not occur
or attract the anticipated attention. See "What is a special situation" on page
23 for an explanation of what the portfolio manager may consider a special
situation.

JANUS GLOBAL LIFE SCIENCES FUND concentrates its investments in related industry
groups. Because of this, companies in its portfolio may share common
characteristics and react similarly to market developments. For example, many
companies with a life science orientation are highly regulated and may be
dependent upon certain types of technology. As a result, changes in government
funding or subsidies, new or anticipated legislative changes, or technological
advances could affect the value of such companies and, therefore, the Fund's
NAV. The Fund's returns may be more volatile than those of a less concentrated
portfolio. The Fund may have significant exposure to foreign markets. As a
result, its returns and NAV may be affected to a large degree by fluctuations in
currency exchange rates or political or economic conditions in a particular
country.

Although JANUS GLOBAL TECHNOLOGY FUND does not concentrate its investments in
specific industries, it may invest in companies related in such a way that they
react similarly to certain market pressures. For example, competition among
technology companies may result in

<PAGE>

increasingly aggressive pricing of their products and services, which may affect
the profitability of companies in the Fund's portfolio. In addition, because of
the rapid pace of technological development, products or services developed by
companies in the Fund's portfolio may become rapidly obsolete or have relatively
short product cycles. As a result, the Fund's returns may be considerably more
volatile than the returns of a fund that does not invest in similarly related
companies. The Fund may have significant exposure to foreign markets. As a
result, its returns and NAV may be affected to a large degree by fluctuations in
currency exchange rates or political or economic conditions in a particular
country.

JANUS GLOBAL LIFE SCIENCES FUND, JANUS GLOBAL TECHNOLOGY FUND AND JANUS
WORLDWIDE FUND may have significant exposure to foreign markets. As a result,
their returns and NAV may be affected to a large degree by fluctuations in
currency exchange rates or political or economic conditions in a particular
country.

JANUS ENTERPRISE FUND, JANUS OLYMPUS FUND, JANUS SPECIAL SITUATIONS FUND, JANUS
TWENTY FUND, JANUS GLOBAL LIFE SCIENCES FUND AND JANUS GLOBAL TECHNOLOGY FUND
are nondiversified. In other words, they may hold larger positions in a smaller
number of securities than a diversified fund. As a result, a single security's
increase or decrease in value may have a greater impact on a Fund's NAV and
total return. Since JANUS TWENTY FUND normally concentrates in a core portfolio
of 20-30 stocks, this risk may be increased.

An investment in these Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

<PAGE>
6

The following information illustrates how each of the Growth Fund's performance
has varied over time. The bar charts depict the change in performance from
year-to-year during the period indicated. The tables compare each Fund's average
annual returns for the periods indicated to a broad-based securities market
index.

[TO BE FILED BY AMENDMENT]

JANUS FUND

A BAR CHART showing Annual Total Returns for Janus Fund from 1989 through 1998:

[To be
Filed
by
46.32% -0.74% 42.80% 6.87% 10.92% -1.10% 29.43% 19.61% 22.72% Amendment]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
-------------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (2/5/70)
<S> <C> <C> <C> <C>
Janus Fund % % % %
S&P 500 Index* % % % %
- ------------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.
<PAGE>
7

JANUS ENTERPRISE FUND

A BAR CHART showing Annual Total Returns for Janus Enterprise Fund from 1993
through 1998:

[To be
Filed
by
15.64% 8.92% 27.25% 11.65% 10.82% Amendment]
1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
---------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (9/1/92)
<S> <C> <C> <C>
Janus Enterprise Fund % % %
S&P 400 Mid Cap
Index* % % %
- --------------------------------------------------------------
</TABLE>

* The S&P 400 Mid Cap Index is an unmanaged group of 400 domestic stocks
chosen for their market size, liquidity and industry group representation.

<PAGE>
8

JANUS MERCURY FUND

A BAR CHART showing Annual Total Returns for Janus Mercury Fund from 1994
through 1998:

[To be
Filed
by
15.86% 33.01% 17.67% 11.88% Amendment]
1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
--------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (5/3/93)
<S> <C> <C> <C>
Janus Mercury Fund % % %
S&P 500 Index* % % %
- -------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.
<PAGE>

JANUS OLYMPUS FUND

A BAR CHART showing Annual Total Returns for Janus Olympus Fund from 1996
through 1998:

[To be
Filed
by
21.73% 26.73% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
------------------------------------
1 YEAR SINCE INCEPTION (12/29/95)
<S> <C> <C>
Janus Olympus Fund % %
S&P 500 Index* % %
- ------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.
<PAGE>

JANUS SPECIAL SITUATIONS FUND

A BAR CHART showing Annual Total Returns for Janus Special Situations Fund for
1998:

[To be
Filed
by
46.04% Amendment]
1997 1998

The percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
------------------------------------
1 YEAR SINCE INCEPTION (12/31/96)
<S> <C> <C>
Janus Special
Situations Fund % %
S&P 500 Index* % %
- ------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.

<PAGE>

JANUS TWENTY FUND

A BAR CHART showing Annual Total Returns for Janus Twenty Fund from 1989 through
1998:

[To be
Filed
by
50.85% 0.59% 69.21% 1.97% 3.43% -6.73% 36.22% 27.85% 29.70% Amendment]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
---------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (4/30/85)
<S> <C> <C> <C> <C>
Janus Twenty Fund % % % %
S&P 500 Index* % % % %
- --------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.

<PAGE>

JANUS WORLDWIDE FUND

A BAR CHART showing Annual Total Returns for Janus Worldwide Fund from 1992
through 1998:

[To be
Filed
by
9.01% 28.41% 3.61% 21.90% 26.40% 20.48% Amendment]
1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
-----------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS (5/15/91)
<S> <C> <C> <C>
Janus Worldwide Fund % % %
Morgan Stanley
International Worldwide
Index* % % %
- --------------------------
</TABLE>

* The Morgan Stanley International Worldwide Index is a market capitalization
weighted index composed of countries representative of the market structure
of 47 Developed and Emerging Markets.

Since Janus Global Life Sciences Fund and Janus Global Technology Fund did not
commence operations until December 31, 1998, there is no performance shown.

The Growth Funds' past performance does not necessarily indicate how they will
perform in the future.

<PAGE>

COMBINATION FUNDS

The Combination Funds are designed for investors who primarily seek growth of
capital with varying degrees of emphasis on income. These Funds are not designed
for investors who desire a consistent level of income.

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE COMBINATION FUNDS?

- - JANUS BALANCED FUND seeks long-term capital growth, consistent with
preservation of capital and balanced by current income.

- - JANUS EQUITY INCOME FUND seeks current income and long-term growth of capital.

- - JANUS GROWTH AND INCOME FUND seeks long-term capital growth and current
income.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE COMBINATION FUNDS? The
portfolio managers apply a "bottom up" approach in choosing investments. In
other words, they look mostly for equity and income-producing securities that
meet their investment criteria one at a time. If a portfolio manager is unable
to find such investments, much of a Fund's assets may be in cash or similar
investments.

JANUS BALANCED 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. The Fund will normally invest at
least 25% of its assets in fixed-income securities.

JANUS EQUITY INCOME FUND normally emphasizes investments in common stocks, and
growth potential is a significant investment consideration. Normally, it invests
at least 65% of its assets in income-producing equity securities.

JANUS GROWTH AND INCOME FUND normally emphasizes investments in common stocks.
It will normally invest up to 75% of its assets in equity

<PAGE>

securities selected primarily for their growth potential, and at least 25% of
its assets in securities the portfolio manager believes have income potential.
Equity securities may make up part of this income component if they currently
pay dividends or the portfolio manager believes they have potential for
increasing or commencing dividend payments.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE COMBINATION FUNDS? The biggest
risk is that the Funds' returns may vary, and you could lose money. If you are
considering investing in any of the Combination Funds, remember that they are
each designed for long-term investors who can accept the risks of investing in a
portfolio with significant common stock holdings.

The value of a Fund's portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of a Fund's portfolio could also
decrease if the stock market goes down. If the value of a Fund's portfolio
decreases, a Fund's NAV will also decrease, which means if you sell your shares
in a Fund you would get back less money.

The income component of the Funds' portfolios includes fixed-income securities.
A fundamental risk to the income component is that the value of these securities
will fall if interest rates rise. Generally, the value of a fixed-income
portfolio will decrease when interest rates rise, which means the Fund's NAV may
likewise decrease. Another fundamental risk associated with fixed-income
securities is credit risk, which is the risk that an issuer of a bond will be
unable to make principal and interest payments when due.

An investment in these Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

<PAGE>

The following information illustrates how each Combination Fund's performance
has varied over time. The bar chart depicts the change in performance from
year-to-year during the period indicated. The tables compare each Fund's average
annual returns for the period indicated to a broad-based securities market
index.

[TO BE FILED BY AMENDMENT]

JANUS BALANCED FUND

A BAR CHART showing Annual Total Reurns for Janus Balanced Fund from 1993
through 1998:

[To be
Filed
by
10.56% 0.02% 27.31% 15.30% 21.81% Amendment]
1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
--------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (9/1/92)
<S> <C> <C> <C>
Janus Balanced Fund % % %
S&P 500 Index* % % %
Lehman Brothers
Gov't/Corp Bond
Index** % % %
- -------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices.

** Lehman Brothers Gov't/Corp Bond Index is composed of all bonds that are of
investment grade with at least one year until maturity.

<PAGE>

JANUS EQUITY INCOME FUND

A BAR CHART showing Annual Total Returns for Janus Equity Income Fund for 1997
and 1998:

[To be
Filed
by
31.08% Amendment]
1997 1998

The percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
-----------------------------
SINCE
1 YEAR INCEPTION (6/28/96)
<S> <C> <C>
Janus Equity Income Fund % %
S&P 500 Index* % %
- ----------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.

<PAGE>

JANUS GROWTH AND INCOME FUND

A BAR CHART showing Annual Total Returns for Janus Growth and Income Fund from
1992 through 1998:

[To be
Filed
by
5.35% 6.70% -4.87% 36.35% 26.03% 34.66% Amendment]
1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
---------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (5/15/91)
<S> <C> <C> <C>
Janus Growth and
Income Fund % % %
S&P 500 Index* % % %
- --------------------------------------------------------------
</TABLE>

* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a widely
recognized, unmanaged index of common stock prices.

The Combination Funds' past performance does not necessarily indicate how they
will perform in the future.

<PAGE>

FEES AND EXPENSES

SHAREHOLDER FEES, such as sales loads, redemption fees or exchange fees, are
charged directly to an investor's account. All Janus funds are no-load
investments, so you will not pay any shareholder fees when you buy or sell
shares of the Funds.

ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the example shows, these costs are borne indirectly by all shareholders.

<PAGE>

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds. They are based upon gross expenses (without the effect of
expense offset arrangements) for the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL FUND
FEE EXPENSES OPERATING EXPENSES

<S> <C> <C> <C>
Janus Fund 0.65% 0.22% 0.87%
Janus Enterprise Fund 0.72% 0.36% 1.08%
Janus Mercury Fund 0.67% 0.30% 0.97%
Janus Olympus Fund 0.70% 0.31% 1.01%
Janus Special Situations Fund 0.70% 0.38% 1.08%
Janus Twenty Fund 0.65% 0.26% 0.91%
Janus Global Life Sciences Fund 0.75% 0.50%(1) 1.25%
Janus Global Technology Fund 0.75% 0.50%(1) 1.25%
Janus Worldwide Fund 0.65% 0.27% 0.92%
Janus Balanced Fund 0.72% 0.31% 1.03%
Janus Equity Income Fund 0.75% 0.46% 1.21%
Janus Growth and Income Fund 0.67% 0.29% 0.96%
------------------------------------
</TABLE>

(1) "Other Expenses" are based on the estimated expenses that the Fund expects
to incur in its initial fiscal year.
- --------------------------------------------------------------------------------

Example

This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in each of the Funds for the time periods indicated
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Funds'
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
------------------------------------------------
Janus Fund $ 89 $278 $482 $1,073
Janus Enterprise Fund $110 $343 $595 $1,317
Janus Mercury Fund $ 99 $309 $536 $1,190
Janus Olympus Fund $103 $322 $558 $1,236
Janus Special
Situations Fund $110 $343 $595 $1,317
Janus Twenty Fund $ 93 $290 $504 $1,120
Janus Global Life
Sciences Fund $127 $397 N/A N/A
Janus Global
Technology Fund $127 $397 N/A N/A
Janus Worldwide Fund $ 94 $293 $509 $1,131
Janus Balanced Fund $105 $328 $569 $1,259
Janus Equity Income
Fund $123 $384 $665 $1,466
Janus Growth and
Income Fund $ 98 $306 $531 $1,178
</TABLE>

<PAGE>

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS

GROWTH FUNDS

This section takes a closer look at the investment objectives of each of the
Growth Funds, their principal investment strategies and certain risks of
investing in the Growth Funds. Strategies and policies that are noted as
"fundamental" cannot be changed without a shareholder vote.

Please carefully review the "Risks" section of this Prospectus on pages 37-42
for a discussion of risks associated with certain investment techniques. We've
also included a Glossary with descriptions of investment terms used throughout
this Prospectus.

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

DOMESTIC GROWTH FUNDS

JANUS FUND
Janus Fund seeks long-term growth of capital in a manner consistent with the
preservation of capital. It pursues its objective by investing primarily in
common stocks selected for their growth potential. Although the Fund can invest
in companies of any size, it generally invests in larger, more established
companies.

JANUS ENTERPRISE FUND
Janus Enterprise Fund seeks long-term growth of capital. It pursues its
objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 50% of its equity assets in
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P MidCap 400 Index.
Market capitalization is a commonly used measure of the size and value of a
company. The market capitalizations within the Index will vary, but as of
December 31, 1998, they ranged from approximately $ million and $ billion.

<PAGE>

JANUS MERCURY FUND
Janus Mercury Fund seeks long-term growth of capital. It pursues its objective
by investing primarily in common stocks selected for their growth potential. The
Fund may invest in companies of any size, from larger, well-established
companies to smaller, emerging growth companies.

JANUS OLYMPUS FUND
Janus Olympus Fund seeks long-term growth of capital. It pursues its objective
by investing primarily in common stocks selected for their growth potential. The
Fund may invest in companies of any size, from larger, well-established
companies to smaller, emerging growth companies.

JANUS SPECIAL SITUATIONS FUND
Janus Special Situations Fund seeks capital appreciation. It pursues its
objective by investing primarily in common stocks selected for their capital
appreciation potential. The Fund emphasizes stocks of "special situation"
companies that the portfolio manager believes have been overlooked or
undervalued by other investors. A "special situation" arises when, in the
portfolio manager's opinion, securities of a particular company will appreciate
in value due to a specific development. The portfolio manager pays particular
attention to companies that he thinks may have high free cash flows.

JANUS TWENTY FUND
Janus Twenty Fund seeks long-term growth of capital. It pursues its objective by
investing primarily in common stocks selected for their growth potential. The
Fund normally concentrates its investments in a core group of 20-30 common
stocks.

GLOBAL GROWTH FUNDS

JANUS GLOBAL LIFE SCIENCES FUND
Janus Global Life Sciences Fund seeks long-term growth of capital. It pursues
its objective by investing primarily in equity securities of U.S. and foreign
companies selected for their growth potential. Normally, it invests at least 65%
of its total assets in securities of companies that the portfolio manager
believes have a life science orientation. As a fundamental policy, the Fund
normally invests at least 25% of its total assets, in the aggregate,

<PAGE>

in the following industry groups: health care; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.

JANUS GLOBAL TECHNOLOGY FUND
Janus Global Technology Fund seeks long-term growth of capital. It pursues its
objective by investing primarily in equity securities of U.S. and foreign
companies selected for their growth potential. Normally, it invests at least 65%
of its total assets in securities of companies that the portfolio manager
believes will benefit significantly from advances or improvements in technology.
These companies generally fall into two categories:

a. Companies that the portfolio manager believes have or will develop products,
processes or services that will provide significant technological
advancements or improvements; and

b. Companies that the portfolio manager believes rely extensively on technology
in connection with their operations or services.

JANUS WORLDWIDE FUND
Janus Worldwide Fund seeks long-term growth of capital in a manner consistent
with the preservation of capital. It pursues its objective by investing
primarily in common stocks of companies of any size throughout the world. The
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.

<PAGE>

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
THE GROWTH FUNDS' PRINCIPAL INVESTMENT STRATEGIES.

1. HOW ARE COMMON STOCKS SELECTED?
Each of the Funds may invest substantially all of its assets in common stocks if
its portfolio manager believes that common stocks will appreciate in value. The
portfolio managers generally take a "bottom up" approach to selecting companies.
In other words, they seek to identify individual companies with earnings growth
potential that may not be recognized by the market at large. They make this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of principal business activity, or other similar selection
criteria. Realization of income is not a significant consideration when choosing
investments for the Funds. Income realized on the Funds' investments will be
incidental to their objectives.

2. ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES?
Generally, yes. The portfolio managers seek companies that meet their selection
criteria, regardless of where a company is located. 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. There are no limitations on the
countries in which the Funds may invest and the Funds may at times have
significant foreign exposure.

3. WHAT IS A "SPECIAL SITUATION"?
Each Fund may invest in special situations. 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,

<PAGE>

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 previously, Janus Special Situations Fund
emphasizes this type of strategy.

4. WHAT DOES "MARKET CAPITALIZATION" MEAN?
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.

5. WHAT DOES "LIFE SCIENCE ORIENTATION" MEAN IN RELATION TO JANUS GLOBAL LIFE
SCIENCES FUND?
Generally speaking, the "life sciences" relate to maintaining or improving
quality of life. So, for example, companies with a "life science orientation"
include companies engaged in research, development, production or distribution
of products or services related to health and personal care, medicine or
pharmaceuticals. Life science oriented companies also include companies that the
portfolio manager believes have growth potential primarily as a result of
particular products, technology, patents or other market advantages in the life
sciences. Life sciences encompass a variety of industries, including health
care, nutrition, agriculture, medical diagnostics, nuclear and biochemical
research and development and health care facilities ownership and operation.

6. HOW DOES JANUS GLOBAL TECHNOLOGY FUND'S INDUSTRY POLICY DIFFER FROM THAT OF
JANUS GLOBAL LIFE SCIENCES FUND?
Unlike Janus Global Life Sciences Fund, Janus Global Technology Fund will not
concentrate its investments in any particular industry or group of related
industries. As a result, its portfolio manager may have more flexibility to find
companies that he believes will benefit from advances or improvements in
technology in a number of industries. Nevertheless, the Fund may hold a
significant portion of its assets in industries such as:

<PAGE>

aerospace/defense; biotechnology; computers; office/business equipment;
semiconductors; software; telecommunications; and telecommunications equipment.

<PAGE>

COMBINATION FUNDS

This section takes a closer look at the investment objectives of each of the
Combination Funds, their principal investment strategies and certain risks of
investing in the Combination Funds. Strategies and policies that are noted as
"fundamental" cannot be changed without a shareholder vote.

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

JANUS BALANCED FUND
Janus Balanced Fund seeks long-term capital growth, consistent with preservation
of capital and balanced by current income. It pursues its objective by normally
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 securities.

JANUS EQUITY INCOME FUND
Janus Equity Income Fund seeks current income and long-term growth of capital.
It pursues its objective by normally emphasizing investments in common stock,
and growth potential is a significant investment consideration. The Fund tries
to provide a lower level of volatility than the S&P 500 Index. Normally, it
invests at least 65% of its assets in income-producing equity securities
including common and preferred stocks, warrants and securities that are
convertible to common or preferred stocks.

JANUS GROWTH AND INCOME FUND
Janus Growth and Income Fund seeks long-term capital growth and current income.
It normally emphasizes investments in common stocks. It will normally invest up
to 75% of its assets in equity securities selected primarily for their growth
potential, and at least 25% of its assets in securities the portfolio manager
believes have income potential. Because of

<PAGE>

this investment strategy, the Fund is not designed for investors who need
consistent income.

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
THE COMBINATION FUNDS' PRINCIPAL INVESTMENT STRATEGIES.

1. HOW DO THE COMBINATION FUNDS DIFFER FROM EACH OTHER?
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 NAV can be expected to fluctuate
more than the other Combination Funds. Although Janus Equity Income Fund invests
substantially all of its assets in common stocks, it 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 securities selected primarily for their
income potential. As a result it is expected to be the least volatile of the
Combination Funds.

2. HOW DOES JANUS EQUITY INCOME FUND TRY TO LIMIT PORTFOLIO VOLATILITY?
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.

<PAGE>

3. HOW ARE COMMON STOCKS SELECTED FOR THE COMBINATION FUNDS IN COMPARISON TO THE
GROWTH FUNDS?
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 common stocks for these Funds.

4. HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME COMPONENTS OF JANUS
BALANCED FUND'S AND JANUS GROWTH AND INCOME FUND'S PORTFOLIOS?
Janus Balanced Fund and Janus Growth and Income Fund shift assets between the
growth and income components of their portfolios based on the portfolio
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.

5. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE COMBINATION
FUNDS' PORTFOLIOS?
The growth component of the Combination Funds' portfolios is expected to consist
primarily of common stocks, but may also include warrants, preferred stocks or
convertible securities selected primarily for their growth potential.

6. WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT OF JANUS BALANCED
FUND'S AND JANUS GROWTH AND INCOME FUND'S PORTFOLIOS?
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. So, 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.

<PAGE>

CASH POSITION
When a Fund's portfolio manager believes that market conditions are unfavorable
for profitable investing, or when he or she is otherwise unable to locate
attractive investment opportunities, the Funds' 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 generally are a residual - they represent
the assets that remain after a portfolio manager has committed available assets
to desirable investment opportunities. However, a portfolio manager may also
temporarily increase a Fund's cash position to protect its assets or maintain
liquidity. Partly because the portfolio managers act independently of each
other, the cash positions of the Funds may vary significantly.

When a Fund's investments in cash or similar investments increase, it may not
participate in market advances or declines to the same extent that it would if
the Fund remained more fully invested in stocks or bonds.

OTHER TYPES OF INVESTMENTS
The Growth Funds invest primarily in domestic and foreign equity securities,
which may include preferred stocks, common stocks, warrants and securities
convertible into common or preferred stocks. The Combination Funds also invest
in domestic and foreign equity securities with varying degrees of emphasis on
income. The Funds may also invest to a lesser degree in other types of
securities. These securities (which are described in the Glossary) may include:

- - debt securities;

- - indexed/structured securities;

- - high-yield/high-risk securities (less than 35% of each Fund's assets);

- - options, futures, forwards and other types of derivatives for hedging purposes
or for non-hedging purposes such as seeking to enhance return; and

- - securities purchased on a when-issued, delayed delivery or forward commitment
basis.

ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. An
illiquid investment is a security or other position that cannot be

<PAGE>

disposed of quickly in the normal course of business. For example, some
securities are not registered under U.S. securities laws and cannot be sold to
the U.S. public because of SEC regulations (these are known as "restricted
securities"). Under procedures adopted by the Funds' Trustees, certain
restricted securities may be deemed liquid, and will not be counted toward this
15% limit.

FOREIGN SECURITIES
The 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.

SPECIAL SITUATIONS
Each Fund may invest in special situations. 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. A Fund's performance could suffer
if the anticipated development in a "special situation" investment does not
occur or does not attract the expected attention.

PORTFOLIO TURNOVER
The Funds generally intend to purchase securities for long-term investment
although, to a limited extent, a Fund may purchase securities in anticipation of
relatively short-term price gains. Short-term transactions may also 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. 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. 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.

<PAGE>

Janus Global Technology Fund may invest in companies with relatively short
product cycles, for example, 6 to 9 months. Consequently, its portfolio turnover
may be more frequent than other growth funds. 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. Higher costs
associated with increased portfolio turnover may offset gains in a Fund's
performance.

RISKS

Because the Funds may invest substantially all of their assets in common stocks,
the main risk is the risk that the value of the stocks they hold might decrease
in response to the activities of an individual company or in response to general
market and/or economic conditions. If this occurs, a Fund's share price may also
decrease. A Fund's performance may also be affected by risks specific to certain
types of investments, such as foreign securities, derivative investments,
non-investment grade debt securities or companies with relatively small market
capitalizations. Janus Global Life Sciences Fund's and Janus Global Technology
Fund's performance may also be affected by industry risk.

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
SOME OF THE RISKS OF INVESTING IN THE FUNDS.

1. THE FUNDS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS? Particularly in the area of technology, many attractive
investment opportunities may be smaller, start-up companies offering emerging
products or services. Smaller or newer companies may suffer more significant
losses as well as realize more substantial growth than larger or more
established issuers because they may lack depth of management, be unable to
generate funds necessary for growth or potential development, or 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 wide
price fluctuations.

<PAGE>

Investments in such companies tend to be more volatile and somewhat more
speculative.

2. HOW DOES THE NONDIVERSIFIED STATUS OF JANUS ENTERPRISE FUND, JANUS OLYMPUS
FUND, JANUS SPECIAL SITUATIONS FUND, JANUS TWENTY FUND, JANUS GLOBAL LIFE
SCIENCES FUND AND JANUS GLOBAL TECHNOLOGY FUND AFFECT THEIR RISK?

Diversification is a way to reduce risk by investing 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 NAV of a
nondiversified fund, its share price can be expected to fluctuate more than a
comparable diversified fund. This fluctuation, if significant, may affect the
performance of a Fund.

3. WHAT IS "INDUSTRY RISK"?
Industry risk is the possibility that a group of related stocks will decline in
price due to industry-specific developments. Companies in the same or similar
industries may share common characteristics and are more likely to react
similarly to industry-specific market or economic developments. In the life
sciences, for example, many companies are subject to government regulation and
approval of their products and services, which may affect their price or
availability. In addition, the products and services offered by these companies
may quickly become obsolete in the face of scientific or technological
developments. The economic outlook of such companies may fluctuate dramatically
due to changes in regulatory or competitive environments. In technology-related
industries, competitive pressures may have a significant effect on the
performance of companies in which Janus Global Technology Fund may invest. In
addition, technology and technology-related companies often progress at an
accelerated rate, and these companies may be subject to short product cycles and
aggressive pricing which may increase their volatility.

Janus Global Life Sciences Fund invests in a concentrated portfolio, which may
result in greater exposure to related industries. As a result, the Fund may be
more volatile than a less concentrated portfolio. Although Janus Global
Technology Fund does not "concentrate" in a specific group of industries, it may
at times have significant exposure to companies in a variety of
technology-related industries.

<PAGE>

4. I'VE HEARD A LOT ABOUT HOW THE CHANGE TO THE YEAR 2000 COULD AFFECT COMPUTER
SYSTEMS. DOES THIS CREATE ANY SPECIAL RISKS?
The portfolio managers carefully research each potential investment before
making an investment decision and, among other things, consider Year 2000
readiness when selecting portfolio holdings. However, there is no guarantee that
the information a portfolio manager receives regarding a company's Year 2000
readiness is completely accurate. If a company has not satisfactorily addressed
Year 2000 issues, the Fund's performance could suffer.

5. HOW COULD THE FUNDS' INVESTMENTS IN FOREIGN SECURITIES AFFECT THEIR
PERFORMANCE?
The Funds may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities because the Funds' performance may
depend on issues other than the performance of a particular company. These
issues include:

- - CURRENCY RISK. 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 if 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 emerging markets which may have
relatively unstable governments, immature economic structures, national
policies restricting investments by foreigners, different legal systems, 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.

- - REGULATORY RISK. There may be less government supervision of foreign markets.
As a result, foreign issuers may not be subject to the uniform accounting,
auditing and financial reporting standards and practices applicable to
domestic issuers and there may be less publicly available information about
foreign issuers.

<PAGE>

- - MARKET RISK. Foreign securities markets, particularly those of emerging market
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.

- - TRANSACTION COSTS. Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than those involved
in domestic transactions.

6. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH-YIELD/HIGH-RISK
SECURITIES?
High-yield/high-risk securities (or "junk" bonds) are securities rated below
investment grade by the primary rating agencies such as Standard & Poor's
Ratings Services and Moody's Investors Service, Inc. The value of lower quality
securities generally is more dependent on credit risk, or the ability of the
issuer to meet interest and principal payments, than investment grade debt
securities. Issuers of high-yield securities may not be as strong financially as
those issuing bonds with higher credit ratings and are more vulnerable to real
or perceived economic changes, political changes or adverse developments
specific to the issuer.

Please refer to the SAI for a description of bond rating categories.

7. HOW DO THE FUNDS TRY TO REDUCE RISK?
The Funds may use futures, options and other derivative instruments to "hedge"
or protect their portfolios from adverse movements in securities prices and
interest rates. The Funds may also use a variety of currency hedging techniques,
including forward currency contracts, to manage exchange rate risk. The Funds
believe the use of these instruments will benefit the Funds. However, a Fund's
performance could be worse than if the Fund had not used such instruments if a
portfolio manager's judgement proves incorrect. Risks associated with the use of
derivative instruments are described in the SAI.

<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.

[LOGO]
<PAGE>

HOW TO GET IN TOUCH WITH JANUS
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

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 INTERNET ADDRESS
JANUS JANUS.COM
P.O. BOX 173375
DENVER, CO 80217-3375 JANUS
XPRESSLINE(TM) 1-888-979-7737
FOR OVERNIGHT CARRIER FOR 24-HOUR ACCESS TO
JANUS ACCOUNT AND FUND INFORMA-
SUITE 101 TION, EXCHANGES, PURCHASES
3773 CHERRY CREEK NORTH DRIVE AND REDEMPTIONS, AUTO-
DENVER, CO 80209-3811 MATED DAILY QUOTES ON FUND
SHARE PRICES, YIELDS AND
INVESTOR SERVICE TOTAL RETURNS.
REPRESENTATIVES
IF YOU HAVE ANY QUESTIONS WHILE TDD 1-800-525-0056
READING THIS PROSPECTUS, PLEASE A TELECOMMUNICATIONS DEVICE
CALL ONE OF OUR INVESTOR FOR OUR HEARING- AND
SERVICE REPRESENTATIVES AT SPEECH-IMPAIRED
1-800-525-3713 MONDAY-FRIDAY: SHAREHOLDERS.
8:00 A.M.-8:00 P.M., AND
SATURDAY: 10:00 A.M.-4:00 P.M., JANUS LITERATURE
NEW YORK TIME. LINE 1-800-525-8983
TO REQUEST A PROSPECTUS,
SHAREHOLDER REPORTS OR
MARKETING MATERIALS 24
HOURS A DAY.
</TABLE>

MINIMUM INVESTMENTS*

<TABLE>
<S> <C>
TO OPEN A NEW REGULAR ACCOUNT $2,500
TO OPEN A NEW RETIREMENT, EDUCATION, OR UGMA/UTMA
ACCOUNT $ 500
TO OPEN A NEW REGULAR 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.

<PAGE>

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 or visit
our Web site at janus.com to download an application.

- - 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 described
below 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 adviser 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 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

<PAGE>

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.

- - TRADITIONAL AND ROTH INDIVIDUAL RETIREMENT ACCOUNTS: 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: 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
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 addresses listed in the "Quick Address
and Telephone Reference" on page 35.

<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 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.

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 made payable to Janus 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.

<PAGE>

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 XpressLine, 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.

BY INTERNET
You must pre-establish the "Telephone Purchase of Shares Option" to make a
purchase on our Web site at janus.com. If you have questions, please call
1-800-975-9932 to speak to a Janus representative.

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 from your bank account.
If your Fund account is already established, call 1-800-525-3713 to request
the appropriate form.

<PAGE>

- - 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 52.

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 XpressLine,
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.

<PAGE>

BY INTERNET
Exchanges may also be made on our Web site at janus.com.

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 trading in
excess of the limit above (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.

- - 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. This option may be
suspended for 10 days following an address change unless a signature guarantee
is provided.

<PAGE>

IN WRITING
To request a redemption in writing, please follow the instructions for written
requests on page 52.

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 XpressLine,
1-888-979-7737, for access to this option 24 hours a day. (There is a daily
limit of $100,000 per account for redemptions payable by check).

BY INTERNET
Redemptions may also be made on our Web site at janus.com.

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.

<PAGE>

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, ON OUR WEB
SITE, OR THROUGH THE AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUNDS MAY DELAY
THE PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF
PURCHASE TO ALLOW THE PURCHASE TO CLEAR. Unless you provide alternate
instructions, your proceeds will be invested in Janus Money Market Fund -
Investor Shares during the 15 day hold period.

WRITTEN INSTRUCTIONS
To redeem or exchange all or part of your shares in writing, your request should
be sent to one of the addresses listed on page 44 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 or exchanged

- - 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.

<PAGE>

- - 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
donot 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 by check 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.

<PAGE>

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
cannot 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 accepted by a Fund (or a Fund's
agent or authorized designee). 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. 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). 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 XPRESSLINE(TM)
Janus XpressLine, 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 and redemptions
in existing accounts, request literature about any Janus fund, or order
duplicate statements. Janus XpressLine is accessed by calling 1-888-979-7737.
Calls are limited to five minutes.

<PAGE>

information online and accept online instructions (see janus.com and follow the
procedures accordingly). You may also need to have bank account information,
wire instructions or other options established on your account. The Funds and
their agents will not be responsible for any losses resulting from unauthorized
transactions on our Web site when procedures designed for engaging in such
transactions are followed. If you have questions, please call 1-800-975-9932 to
speak to a Janus representative.

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 44 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 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.

<PAGE>

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.

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, calling the Janus XpressLine or visiting our Web
site.

<PAGE>

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.

The Funds produce financial reports, which include a list of each of the Fund's
portfolio holdings, semiannually and update their prospectus annually. To reduce
expenses, the Funds may choose to mail only one report or prospectus 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.

<PAGE>

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER
Janus Capital Corporation, 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 their investment portfolios and other business affairs
of the Funds.

Janus Capital began serving as investment adviser to Janus Fund in 1970 and
currently serves as investment adviser to all of the Janus funds, acts as
sub-adviser for a number of private-label mutual funds and provides separate
account advisory services for institutional accounts.

MANAGEMENT EXPENSES
The Funds pay Janus Capital a management fee which is calculated daily and paid
monthly. The advisory agreement with the Funds 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 ASSETS OF FUNDS ANNUAL RATE PERCENTAGE (%)
- ------------------------------------------------------------------------------
<S> <C>

FIRST $300 MILLION 0.75
NEXT $200 MILLION 0.70
OVER $500 MILLION 0.65

- ------------------------------------------------------------------------------
</TABLE>

Each Fund incurs expenses not assumed by Janus Capital including transfer agent
and custodian fees and expenses, legal and auditing fees, printing and mailing
costs of sending reports and other information to existing shareholders, and
independent Trustees' fees and expenses. The Annual Fund Operating Expenses
table on page 19 lists the actual management fees and total operating expenses
of each Fund for the most recent fiscal year.

<PAGE>

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
Capital 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 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 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 Capital 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.
Mr. Decker received the Chartered Financial Analyst designation.

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 received the Chartered Financial Analyst
designation.

HELEN YOUNG HAYES is Executive Vice President and portfolio manager of Janus
Worldwide Fund. She is also Executive Vice President and co-

<PAGE>

manager of 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
received the Chartered Financial Analyst designation.

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 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. Mr. Lammert received the Chartered Financial Analyst
designation.

C. MIKE LU is Executive Vice President and portfolio manager of Janus Global
Technology Fund, which he has managed since inception. He joined Janus Capital
in 1991 as a research analyst and has consistently focused on companies in the
technology industry. Mr. Lu has a Bachelor of Arts in History and a Bachelor of
Arts in Economics from Yale University. Mr. Lu received the Chartered Financial
Analyst designation.

THOMAS R. MALLEY is Executive Vice President and portfolio manager of Janus
Global Life Sciences Fund, which he has managed since inception. He joined Janus
Capital in 1991 as a research analyst and has focused on companies in the health
care, pharmaceutical and biotechnology industries. Mr. Malley has a Bachelor of
Science in Biology from Stanford University and received the Chartered Financial
Analyst designation.

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 received the Chartered Financial Analyst designation.

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

<PAGE>

1997. Mr. Schoelzel joined Janus Capital in January 1994. He holds a Bachelor of
Arts in Business from Colorado College.

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 January 1992. She holds a Bachelor of
Science in Electrical Engineering from Yale University and received the
Chartered Financial Analyst designation.

ASSISTANT PORTFOLIO MANAGERS
LAURENCE J. CHANG is assistant portfolio manager of Janus Worldwide Fund. He is
also Executive Vice President and co-manager of Janus Overseas Fund. Mr. Chang
joined Janus Capital in 1993 as a research analyst. 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. Mr. Chang
received the Chartered Financial Analyst designation.

KAREN L. REIDY is assistant portfolio manager of Janus Fund. Prior to joining
Janus Capital in 1995, she worked for Price Waterhouse in the Mergers and
Acquisitions area, performing corporate due diligence, and as an audit senior,
analyzing financials for corporate clients. She received an undergraduate degree
in Accounting from the University of Colorado. She is seeking the Chartered
Financial Analyst designation.

<PAGE>

54
OTHER INFORMATION

SIZE OF FUNDS
Although there is no present intention to do so, the Funds may discontinue sales
of their shares if management and the Trustees believe that continued sales may
adversely affect a 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.

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 devoted
considerable internal resources and has engaged one of the foremost experts in
the field to help achieve Year 2000 readiness. Janus Capital does not anticipate
that Year 2000-related issues will have a material impact on its ability to
continue to provide the Funds with service at current levels; however, Janus
Capital cannot make any assurances that the steps it has taken to ensure Year
2000 readiness will be successful. In addition, there can be no assurance that
Year 2000 issues will not affect the companies in which the Funds invest or
worldwide markets and economies.

<PAGE>

55
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 GAINS
ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM
GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS.

DISTRIBUTION SCHEDULE

<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
<S> <C> <C>
Growth Funds Normally declared and paid in Normally declared and paid in
December December
- ---------------------------------------------------------------------------------------
Combination Normally declared and paid in Normally declared and paid in
Funds March, June, December
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.

<PAGE>

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 44 or calling
1-800-525-3713. The Funds offer the following options:

1. REINVESTMENT OPTION. You may reinvest your income dividends and capital gains
distributions in additional shares. This option is assigned automatically if
no other choice is made.

2. CASH OPTION. You may receive your income dividends and capital gains
distributions in cash.

3. REINVEST AND CASH OPTION. You may receive either your income dividends or
capital gains distributions in cash and reinvest the other in additional
shares.

4. REDIRECT OPTION. You may direct your dividends or capital gains to purchase
shares of another Janus fund.

The Funds reserve the right to reinvest 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. Any time you sell or exchange shares of a fund in a taxable account,
it is considered a taxable event. Depending on the purchase price and the sale
price, you may have a gain or loss on the transaction. Any tax liabilities
generated by your transactions are your responsibility.

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.

<PAGE>

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. Distributions may be taxable at different rates
depending on the length of time a Fund holds a security. 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.

The Funds do not expect to pay 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.

<PAGE>

58
FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Funds'
financial performance for the past 5 years (or for Funds with a performance
history shorter than 5 years, from inception through October 31st of each fiscal
year shown). Certain information reflects financial results for a single Fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in each of the Funds (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, are included in the Annual Reports, which are available
upon request and incorporated by reference into the SAI.

FINANCIAL HIGHLIGHTS ARE NOT PRESENTED FOR JANUS GLOBAL LIFE SCIENCES FUND AND
JANUS GLOBAL TECHNOLOGY FUND BECAUSE THESE FUNDS DID NOT COMMENCE OPERATIONS
UNTIL DECEMBER 31, 1998.

<TABLE>
<CAPTION>
JANUS FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $26.65 $23.37 $19.62 $20.81
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.15 0.31 0.16 0.17
3. Net gains or losses on securities
(both realized and unrealized) 5.69 4.23 3.99 (0.03)
- --------------------------------------------------------------------------------------------
4. Total from investment operations 5.84 4.54 4.15 0.14
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.21) (0.13) (0.01) (0.39)
6. Distributions (from capital
gains) (2.92) (1.13) (0.39) (0.94)
- --------------------------------------------------------------------------------------------
7. Total distributions (3.13) (1.26) (0.40) (1.33)
- --------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $29.36 $26.65 $23.37 $19.62
- --------------------------------------------------------------------------------------------
9. Total return 24.18% 20.31% 21.62% 0.75%
- --------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $19,029 $15,313 $11,963 $9,647
11. Average net assets for the period
(in millions) $17,515 $13,753 $10,560 $9,339
12. Ratio of gross expenses to
average net assets 0.87% 0.86% 0.87% N/A
13. Ratio of net expenses to average
net assets 0.86% 0.85% 0.86% 0.91%
14. Ratio of net investment income to
average net assets 0.85% 0.91% 1.25% 1.12%
15. Portfolio turnover rate 132% 104% 118% 139%
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
JANUS ENTERPRISE FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $31.19 $27.14 $24.43 $21.87
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income -- -- 0.52 (0.06)
3. Net gains or losses on securities
(both realized and unrealized) 0.95 5.85 3.09 3.18
- --------------------------------------------------------------------------------------------
4. Total from investment operations 0.95 5.85 3.61 3.12
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) -- -- (0.52) (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)
- --------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $30.86 $31.19 $27.14 $24.43
- --------------------------------------------------------------------------------------------
9. Total return 3.31% 22.43% 15.46% 14.56%
- --------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $552 $732 $459 $370
11. Average net assets for the period
(in millions) $614 $596 $408 $270
12. Ratio of gross expenses to
average net assets 1.07% 1.14% 1.26% N/A
13. Ratio of net expenses to average
net assets 1.04% 1.12% 1.23% 1.25%
14. Ratio of net investment income to
average net assets (0.61%) (0.78%) 0.02% (0.32%)
15. Portfolio turnover rate 111% 93% 194% 193%
- --------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
JANUS MERCURY FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $18.20 $17.38 $14.12 $11.70
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.01) 0.14 0.16 0.02
3. Net gains or losses on securities
(both realized and unrealized) 2.82 2.74 3.37 2.40
- --------------------------------------------------------------------------------------------
4. Total from investment operations 2.81 2.88 3.53 2.42
- --------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------
9. Total return 17.07% 18.18% 25.53% 20.68%
- --------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $1,971 $2,002 $1,521 $596
11. Average net assets for the period
(in millions) $2,046 $1,839 $1,116 $258
12. Ratio of gross expenses to
average net assets 0.98% 1.02% 1.14% N/A
13. Ratio of net expenses to average
net assets 0.96% 1.00% 1.12% 1.33%
14. Ratio of net investment income to
average net assets 0.21% 0.45% 0.50% 0.25%
15. Portfolio turnover rate 157% 177% 201% 283%
- --------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
JANUS OLYMPUS FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996(1)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $14.86 $12.00
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 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 to average
net assets** 0.26% 1.64%
15. Portfolio turnover rate** 244% 303%
- ----------------------------------------------------------------------------------
</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.

<PAGE>

<TABLE>
<CAPTION>
JANUS SPECIAL
SITUATIONS FUND
PERIODS ENDING
OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997(1)
<S> <C> <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%
- -----------------------------------------------------------------------------
</TABLE>

(1) Fiscal period from December 31, 1996 (inception) to October 31, 1997.
* Total return is not annualized.
** Annualized.

<PAGE>

<TABLE>
<CAPTION>
JANUS TWENTY FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $31.90 $30.12 $24.24 $25.85
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.09) 0.37 0.01 0.16
3. Net gains or losses on securities
(both realized and unrealized) 8.85 6.68 5.94 (1.07)
- --------------------------------------------------------------------------------------------
4. Total from investment operations 8.76 7.05 5.95 (0.91)
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.18) -- (0.07) (0.25)
6. Distributions (from capital
gains) (5.32) (5.27) -- (0.45)
- --------------------------------------------------------------------------------------------
7. Total distributions (5.50) (5.27) (0.07) (0.70)
- --------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $35.16 $31.90 $30.12 $24.24
- --------------------------------------------------------------------------------------------
9. Total return 31.65% 27.59% 24.67% (3.52%)
- --------------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $5,871 $3,937 $2,996 $2,743
11. Average net assets for the period
(in millions) $4,990 $3,386 $2,716 $3,051
12. Ratio of gross expenses to
average net assets 0.93% 0.93% 1.00% N/A
13. Ratio of net expenses to average
net assets 0.91% 0.92% 0.99% 1.02%
14. Ratio of net investment income to
average net assets 0.33% 0.67% 0.62% 0.57%
15. Portfolio turnover rate 123% 137% 147% 102%
- --------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
JANUS WORLDWIDE FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $34.60 $27.65 $27.00 $24.16
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.08) 0.49 0.81 0.15
3. Net gains or losses on securities
(both realized and unrealized) 7.73 7.79 1.39 3.34
- ----------------------------------------------------------------------------------------
4. Total from investment operations 7.65 8.28 2.20 3.49
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.15) (0.26) (0.54) (0.27)
6. Distributions (from capital
gains) (2.05) (1.07) (1.01) (0.38)
- ----------------------------------------------------------------------------------------
7. Total distributions (2.20) (1.33) (1.55) (0.65)
- ----------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $40.05 $34.60 $27.65 $27.00
- ----------------------------------------------------------------------------------------
9. Total return 23.34% 31.00% 8.89% 14.76%
- ----------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $10,358 $4,467 $1,804 $1,587
11. Average net assets for the period
(in millions) $7,784 $2,953 $1,622 $1,244
12. Ratio of gross expenses to
average net assets 0.97% 1.02% 1.24% N/A
13. Ratio of net expenses to average
net assets 0.95% 1.01% 1.23% 1.12%
14. Ratio of net investment income to
average net assets 0.65% 0.73% 0.99% 0.42%
15. Portfolio turnover rate 79% 80% 142% 158%
- ----------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
JANUS BALANCED FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $15.20 $13.72 $12.17 $12.23
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.36 0.33 0.61 0.27
3. Net gains or losses on securities
(both realized and unrealized) 2.88 2.22 1.52 (0.09)
- ----------------------------------------------------------------------------------------
4. Total from investment operations 3.24 2.55 2.13 0.18
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.36) (0.26) (0.58) (0.24)
6. Distributions (from capital gains) (1.35) (0.81) -- --
- ----------------------------------------------------------------------------------------
7. Total distributions (1.71) (1.07) (0.58) (0.24)
- ----------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $16.73 $15.20 $13.72 $12.17
- ----------------------------------------------------------------------------------------
9. Total return 23.38% 19.39% 18.26% 1.51%
- ----------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $360 $207 $125 $94
11. Average net assets for the period
(in millions) $283 $159 $107 $86
12. Ratio of gross expenses to average
net assets 1.12% 1.23% 1.35% N/A
13. Ratio of net expenses to average
net assets 1.10% 1.21% 1.32% 1.42%
14. Ratio of net investment income to
average net assets 2.63% 2.35% 2.52% 2.28%
15. Portfolio turnover rate 139% 151% 185% 167%
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
JANUS EQUITY INCOME FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996(1)
<S> <C> <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%
- -------------------------------------------------------------------------------
</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.

<PAGE>

<TABLE>
<CAPTION>
JANUS GROWTH AND INCOME FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $20.05 $18.13 $14.69 $15.24
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.01 0.16 0.11 0.19
3. Net gains or losses on securities
(both realized and unrealized) 6.98 4.01 3.43 (0.31)
- -------------------------------------------------------------------------------------
4. Total from investment operations 6.99 4.17 3.54 (0.12)
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.11) (0.08) (0.10) (0.10)
6. Distributions (from capital
gains) (1.86) (2.17) -- (0.33)
- -------------------------------------------------------------------------------------
7. Total distributions (1.97) (2.25) (0.10) (0.43)
- -------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $25.07 $20.05 $18.13 $14.69
- -------------------------------------------------------------------------------------
9. Total return 37.78% 25.56% 24.20% (0.76%)
- -------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $1,889 $1,033 $583 $490
11. Average net assets for the period
(in millions) $1,416 $773 $498 $500
12. Ratio of gross expenses to
average net assets 0.98% 1.05% 1.19% N/A
13. Ratio of net expenses to average
net assets 0.96% 1.03% 1.17% 1.22%
14. Ratio of net investment income to
average net assets 0.30% 0.70% 1.11% 1.26%
15. Portfolio turnover rate 127% 153% 195% 123%
- -------------------------------------------------------------------------------------
</TABLE>

<PAGE>

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 in
private placements under Section 4(2) of the Securities Act of 1933.

COMMON STOCKS are equity securities representing shares of ownership in a
company and usually carry 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.

DEBT SECURITIES are securities representing money borrowed that must be repaid
at a later date, such securities have specific maturities and usually a specific
rate of interest or on original purchase discount.

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).

<PAGE>

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, 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.

PREFERRED STOCKS are equity securities that generally pay dividends at a
specified rate and have preference over common stock in the payment of dividends
and liquidation. Preferred stock generally does not carry voting rights.

<PAGE>

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.

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 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.

<PAGE>

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.

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.

<PAGE>

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<PAGE>

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<PAGE>

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<PAGE>

[JANUS LOGO]
1-800-525-3713

P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

You can request other information, including a Statement of Additional
Information, Annual Report or Semiannual Report, free of charge, by contacting
Janus at 1-800-525-3713 or visiting our Web site at janus.com. In the Funds'
Annual Reports, you will find a discussion of the market conditions and
investment strategies that significantly affected the Funds' performance during
their last fiscal year. Other information is also available from financial
intermediaries that sell shares of the Funds.

The Statement of Additional Information provides detailed information about the
Funds and is incorporated into this Prospectus by reference. You may review the
Funds' Statement of Additional Information at the Public Reference Room of the
SEC or get text only copies for a fee, by writing to or calling the Public
Reference Room, Washington, D.C. 20549-6009 (1-800-SEC-0330). You may obtain the
Statement of Additional Information for free from the SEC's Web site at
http://www.sec.gov.

Investment Company Act File No. 811-1879
<PAGE>

[JANUS LOGO]

Janus Income Funds
PROSPECTUS
FEBRUARY 17, 1999

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

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Fixed Income Funds ......................................................page 2
Money Market Funds ......................................................page 8
Fees and Expenses .......................................................page 13

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
Fixed Income Funds ......................................................page 15
Money Market Funds ......................................................page 24

SHAREHOLDER'S MANUAL
Minimum Investments .....................................................page 32
Types of Account Ownership ..............................................page 33
How to Open Your Janus Account ..........................................page 34
How to Purchase Shares ..................................................page 34
How to Exchange Shares ..................................................page 37
How to Redeem Shares ....................................................page 38
Shareholder Services and Account Policies ...............................page 42

MANAGEMENT OF THE FUNDS
Investment Adviser ......................................................page 47
Investment Personnel ....................................................page 48

OTHER INFORMATION .......................................................page 49

DISTRIBUTIONS AND TAXES
Distributions ...........................................................page 50
Taxes ...................................................................page 52

FINANCIAL HIGHLIGHTS ....................................................page 54

GLOSSARY
Glossary of Investment Terms ............................................page 60

RATING CATEGORIES
Explanation of Rating Categories ........................................page 66
</TABLE>

<PAGE>

1
<PAGE>

RISK/RETURN SUMMARY

FIXED-INCOME FUNDS

The Fixed-Income Funds are designed for long-term investors who primarily seek
current income.

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE FIXED-INCOME FUNDS?

- - JANUS FLEXIBLE INCOME FUND seeks to obtain maximum total return, consistent
with preservation of capital.

- - JANUS HIGH-YIELD FUND seeks to obtain high current income. Capital
appreciation is a secondary objective when consistent with its primary
objective.

- - JANUS FEDERAL TAX-EXEMPT FUND seeks as high a level of current income exempt
from federal income tax as is consistent with preservation of capital.

- - JANUS SHORT-TERM BOND FUND seeks as high a level of current income as is
consistent with preservation of capital.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE FIXED-INCOME FUNDS?

The portfolio managers apply a "bottom up" approach in choosing investments. In
other words, they look mostly for income-producing securities that meet their
investment criteria one at a time. If a portfolio manager is unable to find such
investments, a Fund's assets may be in cash or similar investments.

JANUS FLEXIBLE INCOME FUND invests primarily in a wide variety of
income-producing securities such as corporate bonds and notes, government
securities and preferred stock. As a fundamental policy, the Fund will invest at
least 80% of its assets in income-producing securities. The Fund may own an
unlimited amount of high-yield/high-risk securities, and these securities may be
a big part of the portfolio.
<PAGE>

JANUS HIGH-YIELD FUND normally invests at least 65% of its assets in
high-yield/high-risk fixed-income securities, and may at times invest all of its
assets in these securities.

JANUS FEDERAL TAX-EXEMPT FUND invests primarily in municipal obligations of any
maturity whose interest is exempt from federal income tax. As a fundamental
policy, the Fund will normally invest at least 80% of its assets in securities
whose interest is exempt from federal income tax, including the federal
alternative minimum tax.

JANUS SHORT-TERM BOND FUND invests primarily in short- and intermediate-term
fixed-income securities. The Fund will normally invest at least 65% of its
assets in debt securities such as corporate bonds or notes, or U.S. Treasury
bonds, and may invest up to 35% of its assets in high-yield/high-risk
securities. Normally, the Fund expects to maintain an average weighted effective
maturity of three years or less.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE FIXED-INCOME FUNDS?

Although the Fixed-Income Funds may be less volatile than funds that invest most
of their assets in common stocks, the Funds' returns and yields will vary, and
you could lose money.

The Funds invest in a variety of fixed-income securities. A fundamental risk is
that the value of these securities will fall if interest rates rise. Generally,
the value of a fixed-income portfolio will decrease when interest rates rise,
which means the Fund's net asset value (NAV) will likewise decrease. Another
fundamental risk associated with fixed-income funds is credit risk, which is the
risk that an issuer of a bond will be unable to make principal and interest
payments when due.

At times, JANUS FEDERAL TAX-EXEMPT FUND may invest more than 25% of its assets
in tax-exempt securities related in such a way that a negative economic,
business or political development or change affecting the invested security
could also negatively affect other securities in the same category.

JANUS FLEXIBLE INCOME FUND AND JANUS HIGH-YIELD FUND may invest an unlimited
amount of their assets in high-yield/high-risk securities, also known as "junk"
bonds. JANUS FEDERAL TAX-EXEMPT FUND AND JANUS SHORT-TERM BOND FUND may invest
up to 35% of their assets in high-yield/high-risk securities. Junk bonds may be
sensitive to economic changes, political changes, or adverse developments
specific to the
<PAGE>

company that issued the bond. These securities generally have a greater credit
risk than other types of fixed-income securities. Because of these factors, the
performance and NAV of the Fixed-Income Funds may vary significantly, depending
upon their holdings of junk bonds.

An investment in these funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

The following information illustrates how each Fixed-Income Fund's performance
has varied over time. The bar charts depict the change in performance from
year-to-year during the period indicated. The tables compare each Fund's average
annual returns for the periods indicated to a broad-based securities market
index.

[TO BE FILED BY AMENDMENT]

JANUS FLEXIBLE INCOME FUND

A BAR CHART showing Annual Total Returns for Janus Flexible Income Fund from
1989 through 1998:

[To be
Filed
by
4.12% -4.62% 25.98% 11.85% 15.70% -2.92% 21.15% 6.88% 11.43% Amendment]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<PAGE>

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
----------------------------------------
SINCE
10 INCEPTION
1 YEAR 5 YEARS YEARS (7/7/87)
<S> <C> <C> <C> <C>
Janus Flexible Income
Fund % % %
Lehman Brothers
Gov't/ Corp Bond
Index* % % %
- ---------------------------------------------------------------
</TABLE>

* Lehman Brothers Gov't/Corp Bond Index is composed of all bonds that are of
investment grade with at least one year until maturity.

JANUS HIGH-YIELD FUND

A BAR CHART showing Annual Total Returns for Janus High-Yield Fund from 1996
through 1998:

[To be
Filed
by
23.93% 15.45% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
------------------------------------
1 YEAR SINCE INCEPTION (12/29/95)
<S> <C> <C>
Janus High-Yield Fund % %
Lehman Brothers
High-Yield Bond
Index* % %
- ------------------------------------------------------------
</TABLE>

* Lehman Brothers High-Yield Bond Index is composed of fixed-rate, publicly
issued, noninvestment grade debt.
<PAGE>

JANUS FEDERAL TAX-EXEMPT FUND

A BAR CHART showing Annual Total Returns for Janus Federal Tax-Exempt Fund from
1994 through 1998:

[To be
Filed
by
- -7.77% 15.84% 4.71% 8.96% Amendment]
1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
--------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (5/3/93)
<S> <C> <C> <C>
Janus Federal
Tax-Exempt Fund % % %
Lehman Brothers
Municipal Bond
Index* % % %
- -------------------------------------------------------------
</TABLE>

* Lehman Brothers Municipal Bond Index is composed of approximately 1,100
bonds; 60% of which are revenue bonds and 40% of which are state
government obligations.
<PAGE>

JANUS SHORT-TERM BOND FUND

A BAR CHART showing Annual Total Returns for Janus Short-Term Bond Fund from
1993 through 1998:

[To be
Filed
by
6.18% 0.35% 7.95% 6.19% 6.61% Amendment]
1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ending 12/31/98
--------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION (9/1/92)
<S> <C> <C> <C>
Janus Short-Term Bond
Fund % % %
Lehman Brothers
Gov't/Corp 1-3 Year
Bond Index* % % %
- -------------------------------------------------------------
</TABLE>

* Lehman Brothers Gov't/Corp 1-3 Year Bond Index is composed of all bonds of
investment grade with a maturity between one and three years.

Call the Janus XpressLine(TM) at 1-888-979-7737 to obtain the Funds' yields.

The Fixed-Income Funds' past performance does not necessarily indicate how they
will perform in the future.
<PAGE>

MONEY MARKET FUNDS

The Money Market Funds are designed for investors who seek current income.

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE MONEY MARKET FUNDS?

- - JANUS MONEY MARKET FUND AND JANUS GOVERNMENT MONEY MARKET FUND seek maximum
current income to the extent consistent with stability of capital.

- - JANUS TAX-EXEMPT MONEY MARKET FUND seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of capital.

The Funds' Trustees may change these objectives without a shareholder vote and
the Funds will notify you of any changes that are material. If there is a
material change in a Fund's objective or policies, you should consider whether
that Fund remains an appropriate investment for you. There is no guarantee that
any Fund will meet its objective.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE MONEY MARKET FUNDS?

The Money Market Funds will invest only in high-quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital.

JANUS MONEY MARKET FUND invests primarily in high quality debt obligations and
obligations of financial institutions. Debt obligations may include commercial
paper, notes and bonds, and variable amount master demand notes. Obligations of
financial institutions include certificates of deposit and time deposits.

JANUS GOVERNMENT MONEY MARKET FUND invests 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.

JANUS TAX-EXEMPT MONEY MARKET FUND invests primarily in municipal securities
whose interest is exempt from federal income taxes, including the federal
alternative minimum tax. The Fund may invest up to 20% of its net assets in
taxable securities and may invest without limit in cash and cash equivalents
that may be federally taxable to the extent the
<PAGE>

portfolio manager cannot locate investment opportunities with desirable
risk/reward characteristics.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE MONEY MARKET FUNDS?

The Funds' yields will vary as the short-term securities in their portfolios
mature and the proceeds are reinvested in securities with different interest
rates. Over time, the real value of a Fund's yield may be eroded by inflation.
Although the Money Market Funds invest only in high-quality, short-term money
market instruments, there is a risk that the value of the securities they hold
will fall as a result of changes in interest rates, an issuer's actual or
perceived credit-worthiness or an issuer's ability to meet its obligations.

Economic, business, or political development or change affecting tax-exempt
securities may affect Janus Tax-Exempt Money Market Fund's holdings similarly.
This could result in increased variability of performance. Income from the
Fund's investments may be taxable by your state or local government.

An investment in the Money Market Funds is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Funds seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
these Funds.
<PAGE>

The following information illustrates how Investor Shares of each Money Market
Fund's performance has varied over time. The bar charts depict the change in
performance from year to year.

[TO BE FILED BY AMENDMENT]

JANUS MONEY MARKET FUND - INVESTOR SHARES

A BAR CHART showing Annual Total Returns for Janus Money Market Fund from 1996
through 1998:

[To be
Filed
by
5.06% 5.25% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.
<PAGE>

JANUS GOVERNMENT MONEY MARKET FUND - INVESTOR SHARES

A BAR CHART showing Annual Total Returns for Janus Government Money Market Fund
from 1996 through 1998:

[To be
Filed
by
4.97% 5.11% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.
<PAGE>

JANUS TAX-EXEMPT MONEY MARKET FUND - INVESTOR SHARES

A BAR CHART showing Annual Total Returns for Janus Tax-Exempt Money Market Fund
from 1996 through 1998:

[To be
Filed
by
3.18% 3.22% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.

The Money Market Funds' past performance does not necessarily indicate how they
will perform in the future.
<PAGE>

FEES AND EXPENSES
SHAREHOLDER FEES, such as sales loads, redemption fees or exchange fees, are
charged directly to an investor's account. All Janus funds are no-load
investments, so you will not pay any shareholder fees when you buy or sell
shares of the Funds.

These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Funds. They are based upon gross expenses (without the effect of
expense offset arrangements) for the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
JANUS JANUS
FLEXIBLE INCOME FUND HIGH-YIELD FUND
<S> <C> <C>
MANAGEMENT FEE 0.58% 0.73%
OTHER EXPENSES 0.26% 0.26%
TOTAL ANNUAL FUND OPERATING EXPENSES 0.84% 0.99%
</TABLE>

<TABLE>
<CAPTION>
JANUS
JANUS FEDERAL SHORT-TERM
TAX-EXEMPT FUND BOND FUND
<S> <C> <C>
MANAGEMENT FEE 0.60 % 0.65 %
OTHER EXPENSES 0.39 % 0.41 %
TOTAL ANNUAL FUND OPERATING EXPENSES
WITHOUT WAIVERS* 0.99 % 1.06 %
TOTAL WAIVERS (0.32)% (0.40)%
TOTAL ANNUAL FUND OPERATING EXPENSES WITH
WAIVERS* 0.67 % 0.66 %
</TABLE>

<TABLE>
<CAPTION>
JANUS MONEY JANUS GOVERNMENT JANUS TAX-EXEMPT
INVESTOR SHARES MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C> <C>
MANAGEMENT FEE 0.20 % 0.20 % 0.20 %
OTHER EXPENSES 0.50 % 0.50 % 0.50 %
TOTAL ANNUAL FUND OPERATING
EXPENSES WITHOUT WAIVERS* 0.70 % 0.70 % 0.70 %
TOTAL WAIVERS (.10)% (.10)% (.10)%
TOTAL ANNUAL FUND OPERATING
EXPENSES WITH WAIVERS* 0.60 % 0.60 % 0.60 %
</TABLE>

* All expenses are stated both with and without waivers by Janus Capital.
Waivers for the Fixed-Income Funds are first applied against the
Management Fee and then against Other Expenses. Janus Capital may
modify or terminate the waivers at any time upon at least 90 days'
notice to the Trustees.

EXAMPLE:
THE FOLLOWING EXAMPLE IS BASED ON FUND EXPENSES WITHOUT WAIVERS.
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in each of the Funds for the time periods
indicated then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, and
that the Funds' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------
<S> <C> <C> <C> <C>
JANUS FLEXIBLE INCOME FUND $ 86 $268 $466 $1,037
JANUS HIGH-YIELD FUND $101 $315 $547 $1,213
JANUS FEDERAL TAX-EXEMPT FUND $101 $315 $547 $1,213
JANUS SHORT-TERM BOND FUND $108 $337 $585 $1,294
JANUS MONEY MARKET FUND - INVESTOR
SHARES $ 72 $224 $390 $ 871
JANUS GOVERNMENT MONEY MARKET
FUND - INVESTOR SHARES $ 72 $224 $390 $ 871
JANUS TAX-EXEMPT MONEY MARKET
FUND - INVESTOR SHARES $ 72 $224 $390 $ 871
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND RISKS

FIXED-INCOME FUNDS
This section takes a closer look at the investment objectives of each of the
Fixed-Income Funds, their principal investment strategies and certain risks of
investing in the Fixed-Income Funds. Strategies and policies that are noted as
"fundamental" cannot be changed without a shareholder vote.

Please carefully review the "Risks" section of this Prospectus on pages 24-27
for a discussion of risks associated with certain investment techniques. We've
also included a Glossary with descriptions of investment terms used throughout
this Prospectus.

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

In addition to considering economic factors such as the affect of interest rates
on a Fund's investments, the portfolio managers apply a "bottom up" approach in
choosing investments. In other words, they look mostly for income-producing
securities that meet their investment criteria one at a time. If a portfolio
manager is unable to find such investments, much of a Fund's assets may be in
cash or similar investments.

JANUS FLEXIBLE INCOME FUND
Janus Flexible Income Fund seeks to obtain maximum total return, consistent with
preservation of capital. It pursues its objective by primarily investing in a
wide variety of income-producing securities such as corporate bonds and notes,
government securities and preferred stock. As a fundamental policy, the Fund
will invest at least 80% of its assets in income-producing securities. The Fund
may own an unlimited amount of high-yield/high-risk securities, and these may be
a big part of the portfolio. This Fund generates total return from a combination
of current income and capital appreciation, but income is usually the dominant
portion.

JANUS HIGH-YIELD FUND
Janus High-Yield Fund seeks to obtain high current income. Capital appreciation
is a secondary objective when consistent with its primary
<PAGE>

objective. It pursues its objectives by normally investing 65% of its assets in
high-yield/high-risk fixed-income securities, and may at times invest all of its
assets in these securities.

JANUS FEDERAL TAX-EXEMPT FUND
Janus Federal Tax-Exempt Fund seeks as high a level of current income exempt
from federal income tax as is consistent with preservation of capital. It
pursues its objective by investing primarily in municipal obligations of any
maturity whose interest is exempt from federal income tax. As a fundamental
policy, the Fund will normally invest at least 80% of its assets in securities
whose interest is exempt from federal income tax, including the federal
alternative minimum tax.

JANUS SHORT-TERM BOND FUND
Janus Short-Term Fund seeks as high a level of current income as is consistent
with preservation of capital. It pursues its objective by investing primarily in
short- and intermediate-term fixed-income securities. The Fund will normally
invest at least 65% of its assets in debt securities such as corporate bonds or
notes, or U.S. Treasury bonds, and may invest up to 35% of its assets in
high-yield/high-risk securities. Normally, the Fund expects to maintain an
average weighted effective maturity of three years or less.

"Effective" maturity differs from actual maturity, which may be longer. In
calculating the "effective" maturity the portfolio manager will estimate the
effect of expected principal payments and call provisions on securities held in
the portfolio. This gives the portfolio manager some additional flexibility in
the securities he purchases, but all else being equal, could result in more
volatility than if the Fund calculated an actual maturity target.

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
THE FIXED-INCOME FUNDS' PRINCIPAL INVESTMENT STRATEGIES.

1. HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
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
<PAGE>

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.

2. HOW DO THE FIXED-INCOME FUNDS MANAGE INTEREST RATE RISK?
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 the 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 risks.

3. WHAT IS MEANT BY A FUND'S "AVERAGE-WEIGHTED EFFECTIVE MATURITY"?
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor. Some types of bonds may also have an
"effective maturity" that is shorter than the stated date due to prepayment or
call provisions. 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.

4. WHAT IS MEANT BY A FUND'S "DURATION"?
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.

5. WHAT IS A HIGH-YIELD/HIGH-RISK SECURITY?
A high-yield/high-risk security (also called a "junk" bond) is a debt security
rated below investment grade by major rating agencies (i.e., BB
<PAGE>

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.

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. So,
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
unfavorable for profitable investing, or when he is otherwise unable to locate
attractive investment opportunities, the Fund's 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 generally are a
residual - they represent the assets that remain after a portfolio manager has
committed available assets to desirable investment opportunities. However, a
portfolio manager may also temporarily increase a Fund's cash position to
protect its assets or maintain liquidity. Partly because the portfolio managers
act independently of each other, the cash positions of the Fixed-Income Funds
may vary significantly.

When a Fixed-Income Fund's 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 remained more fully invested in stocks or
bonds.

OTHER TYPES OF INVESTMENTS
The Fixed-Income Funds invest primarily in fixed-income securities which may
include corporate bonds and notes, government securities, preferred stock,
high-yield/high-risk fixed-income securities and municipal obligations. The
Funds may also invest to a lesser degree in other types of
<PAGE>

securities. These securities (which are described in the Glossary) may include:

- - common stocks

- - mortgage- and asset-backed securities (without limit for Janus Flexible Income
Fund and Janus High-Yield Fund; and up to 25% of Janus Federal Tax-Exempt
Fund's and Janus Short-Term Bond Fund's assets)

- - zero coupon, pay-in-kind and step coupon securities (without limit for Janus
Flexible Income Fund and Janus High-Yield Fund; and up to 10% for Janus
Federal Tax-Exempt Fund and Janus Short-Term Bond Fund)

- - options, futures, forwards and other types of derivatives for hedging purposes
or for non-hedging purposes such as seeking to enhance return

- - securities purchased on a when-issued, delayed delivery or forward commitment
basis

ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. An
illiquid investment is a security or other position that cannot be disposed of
quickly in the normal course of business. For example, some securities are not
registered under U.S. securities laws and cannot be sold to the U.S. public
because of SEC regulations (these are known as "restricted securities"). Under
procedures adopted by the Funds' Trustees, certain restricted securities may be
deemed liquid, and will not be counted toward this 15% limit.

technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security. A Fund's
performance could suffer if the anticipated development in a "special situation"
investment does not occur or does not attract the expected attention.

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. Higher costs associated with increased portfolio turnover
may offset gains in a Fund's performance.
<PAGE>

RISKS

Because the Funds invest substantially all of their assets in fixed-income
securities, they are subject to risks such as, credit or default risks,
decreased value due to interest rate increases. A Fund's performance may also be
affected by risks to certain types of investments, such as foreign securities
and derivative instruments.

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
SOME OF THE RISKS OF INVESTING IN THE FIXED-INCOME FUNDS.

1. HOW DO THE FIXED-INCOME FUNDS DIFFER FROM EACH OTHER IN TERMS OF PRIMARY
INVESTMENT TYPE, CREDIT RISK AND INTEREST RATE RISK?
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. You should consider these factors before you determine whether a
fund is a suitable investment.

<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 LOW HIGH
JANUS SHORT-TERM BOND FUND CORPORATE BONDS MODERATE LOW
</TABLE>

2. WHAT IS MEANT BY "CREDIT QUALITY" AND WHAT ARE THE RISKS ASSOCIATED WITH IT?

Credit quality measures the likelihood that the issuer will meet its obligations
on a bond. One of the fundamental risks associated with all fixed-income funds
is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. government securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. government securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, present the highest
credit risk.

3. HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized statistical rating agencies such as
Standard & Poor's and Moody's are widely accepted measures of credit
<PAGE>

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.

4. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH-YIELD/HIGH-RISK
SECURITIES?
High-yield/high-risk securities (or "junk" bonds) are securities rated below
investment grade by the primary rating agencies such as Standard & Poor's
Ratings Services and Moody's Investors Service, Inc. The value of lower quality
securities generally is more dependent on credit risk, or the ability of the
issuer to meet interest and principal payments, than investment grade debt
securities. Issuers of high-yield securities may not be as strong financially as
those issuing bonds with higher credit ratings and are more vulnerable to real
or perceived economic changes, political changes or adverse developments
specific to the issuer.

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 should be
willing to tolerate a corresponding increase in the risk of significant and
sudden changes in NAV.

Please refer to "Explanation of Rating Categories" on page 70 for a description
of bond rating categories.

5. HOW DO THE FUNDS TRY TO REDUCE RISK?
The Funds may use futures, options and other derivative instruments to "hedge"
or protect their portfolios from adverse movements in securities prices and
interest rates. The Funds may also use a variety of currency hedging techniques,
including forward currency contracts, to manage exchange rate risk. The Funds
believe the use of these instruments will benefit the Funds. However, a Fund's
performance could be worse than if the Fund had not used such instruments if a
portfolio manager's judgement proves incorrect. Risks associated with the use of
derivative instruments are described in the SAI.

6. I'VE HEARD A LOT ABOUT HOW THE CHANGE TO THE YEAR 2000 COULD AFFECT COMPUTER
SYSTEMS. DOES THIS CREATE ANY SPECIAL RISKS?
The portfolio managers carefully research each potential investment before
making an investment decision and, among other things, consider Year
<PAGE>

2000 readiness when selecting portfolio holdings. However, there is no guarantee
that the information a portfolio manager receives regarding a company's Year
2000 readiness is completely accurate. If a company has not satisfactorily
addressed Year 2000 issues, the Fund's performance could suffer.

7. HOW COULD THE FUNDS' INVESTMENTS IN FOREIGN SECURITIES AFFECT THEIR
PERFORMANCE?
The Funds may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities, because the Funds' performance may
depend on issues other than the performance of a particular company. These
issues include:

- - currency risk

- - political and economic risk

- - regulatory risk

- - market risk

- - transaction costs

Such risks are described in the SAI.
<PAGE>

MONEY MARKET FUNDS
This section takes a closer look at the investment objective of each of the
Money Market Funds, their principal investment strategies and certain risks of
investing in the Funds. Strategies and policies that are noted as "fundamental"
cannot be changed without a shareholder vote.

Money market funds are subject to certain specific SEC rule requirements. Among
other things, the Funds are limited to investing in U.S. dollar-denominated
instruments with a remaining maturity of 397 days or less (as calculated
pursuant to Rule 2a-7 under the 1940 Act).

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

JANUS MONEY MARKET FUND
Janus Money Market Fund seeks maximum current income to the extent consistent
with stability of capital. It pursues its objective by investing primarily in
high quality debt obligations and obligations of financial institutions. Debt
obligations may include commercial paper, notes and bonds, and variable amount
master demand notes. Obligations of financial institutions include certificates
of deposit and time deposits.

JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund seeks maximum current income to the extent
consistent with stability of capital. It 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.

JANUS TAX-EXEMPT MONEY MARKET FUND
Janus Tax-Exempt Money Market Fund seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of capital. It
pursues it objective by investing primarily in municipal securities whose
interest is exempt from federal income taxes, including the federal alternative
minimum tax. The Fund may invest up to 20% of its net assets in taxable
securities and may invest without limit in cash and cash equivalents to the
extent the portfolio manager cannot locate investment opportunities with
desirable risk/reward characteristics.
<PAGE>

COMMON INVESTMENT POLICIES
Each of the Money Market Funds will:

- - invest in high quality, short-term money market instruments that present
minimal credit risks, as determined by Janus Capital

- - 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)

- - maintain a dollar-weighted average portfolio maturity of 90 days or less

TYPES OF INVESTMENTS

JANUS MONEY MARKET FUND
Janus Money Market Fund invests primarily in:

- - high quality debt obligations

- - obligations of financial institutions

This Fund may also invest (to a lesser degree) in:

- - U.S. Government Securities (securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities)

- - municipal securities

DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers. Debt obligations
include:

- - commercial paper

- - notes and bonds

- - 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)

- - privately issued commercial paper or other securities that are restricted as
to disposition under the federal securities laws
<PAGE>

OBLIGATIONS OF FINANCIAL INSTITUTIONS
Examples of obligations of financial institutions 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

- - Eurodollar and Yankee bank obligations (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)

- - 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

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.

JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund invests exclusively in:

- - U.S. Government Securities

- - repurchase agreements secured by such obligations

JANUS TAX-EXEMPT MONEY MARKET FUND
Janus Tax-Exempt Money Market Fund invests primarily in municipal securities
whose interest is exempt from federal income taxes, including the federal
alternative minimum tax. However, this Fund reserves the right to invest:

- - up to 20% of its net assets in securities whose interest is federally taxable
<PAGE>

- - without limit in cash and cash equivalents, including obligations that may be
federally taxable (when its portfolio manager is unable to locate investment
opportunities with desirable risk/reward characteristics)

MUNICIPAL SECURITIES
Municipal securities include:

- - municipal notes

- - short-term municipal bonds

- - participation interests in municipal securities

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. Examples include 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
general market conditions, the size of a particular offering, the maturity of
the obligation and the rating of the issue. Municipal securities investments may
lose money if the municipal securities issuer does not pay principal and
interest when due. Bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors may affect the issuer's ability to pay.

MUNICIPAL LEASES
The Fund may invest in municipal leases or participation interests therein. The
issuing municipality's credit will not necessarily back a lease obligation.
Interest on lease obligations may become taxable if the lease is assigned. The
Fund may incur losses if the issuer does not appropriate funds for the lease
payment on an annual basis.

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
<PAGE>

certain securities whose interest is subject to such taxation, as described
under Janus Money Market Fund's investments.

COMMON INVESTMENT TECHNIQUES

The following is a description of other investment techniques that the Money
Market Funds may use:

PARTICIPATION INTERESTS
A participation interest gives a Money Market Fund a proportionate, undivided
interest in underlying debt securities and usually carries a demand feature.

DEMAND FEATURES
Demand features give the Money Market Funds the right to resell securities at
specified periods prior to their maturity dates. Demand features may shorten the
life of a variable or floating rate security, enhance the instrument's credit
quality and 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.

VARIABLE AND FLOATING RATE SECURITIES
The Money Market Funds may invest in securities which 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 an
interest rate index or market interest rate. Variable and floating rate
securities are subject to changes in value based on changes in market interest
rates or changes in the issuer's or guarantor's creditworthiness.
<PAGE>

MORTGAGE- AND ASSET-BACKED SECURITIES
The Money Market Funds may purchase fixed or variable 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 entity. Janus Money Market Fund and
Janus Tax-Exempt Money Market Fund may purchase other mortgage- and asset-backed
securities including securities backed by automobile loans, equipment leases or
credit card receivables.

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 enter into a 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 repurchase price reflects a
market rate of interest and is collateralized by cash or 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.
<PAGE>

30
<PAGE>

Shareholder's Manual

[LOGO]
<PAGE>

HOW TO GET IN TOUCH WITH JANUS
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

The Quick Address and Telephone Reference below includes other ways to get in
touch with Janus.

QUICK ADDRESS AND TELEPHONE REFERENCE

MINIMUM INVESTMENTS*

<TABLE>
<S> <C>
TO OPEN A NEW REGULAR ACCOUNT $ 2,500
TO OPEN A NEW RETIREMENT, EDUCATION, OR UGMA/UTMA
ACCOUNT $ 500
TO OPEN A NEW REGULAR 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.
<PAGE>

- - INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one person.
Joint accounts have two or more owners.

- - 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 described
below 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 adviser or legal counsel before selecting a tax-deferred account.

The following plans require a special application. For an application and more
details about our Retirement Plans, call 1-800-525-3713.

- - 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 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.
<PAGE>

- - 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.

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.

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 INTERNET
Exchanges may also be made on our Web site at janus.com.

- - 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.
<PAGE>

- - 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.

- - 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.

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 XpressLine,
<PAGE>

1-888-979-7737, for access to this option 24 hours a day. (There is a daily
limit of $100,000 per account for redemptions payable by check.)

BY INTERNET
Redemptions may also be made on our Web site at janus.com.

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.

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 ON OUR WEB SITE,
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.

<PAGE>

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 or exchanged

- - 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.
<PAGE>

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 by check 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.

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 cannot
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.

Day, Thanksgiving and Christmas). In order to receive a day's price, your order
must be received by the close of the regular trading session of the NYSE. In
order to receive same day dividends for the Money Market Funds, your purchase
request must be received by 3:00 p.m. New York time for the Janus Money Market
Fund, 5:00 p.m. New York time for the Janus Government Money Market Fund and
12:00 p.m. New York time for the Janus Tax-Exempt Money Market Fund (the daily
yield for the Money Market Funds is calculated after these times). 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.

SHAREHOLDER SERVICES AND ACCOUNT POLICIES

JANUS XPRESSLINE(TM)
Janus XpressLine, 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 and redemptions
in existing accounts, request literature about any Janus fund, or order
duplicate statements. Janus XpressLine is accessed by calling 1-888-979-7737.
Calls are limited to five minutes.
<PAGE>

JANUS WEB SITE
Janus maintains a Web site located at JANUS.COM. You can purchase, exchange and
redeem shares and access information such as your account balance and the Funds'
NAVs through the Web site. In order to engage in transactions on our Web site,
you must authorize us to transmit account information online and accept online
instructions (see janus.com and follow the procedures accordingly). You may also
need to have bank account information, wire instructions or other options
established on your account. The Funds and their agents will not be responsible
for any losses resulting from unauthorized transactions on our Web site when
procedures designed for engaging in such transactions are followed. If you have
questions, please call 1-800-975-9932 to speak to a Janus representative.

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
<PAGE>

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.

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
<PAGE>

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.

TEMPORARY SUSPENSION OF SERVICES
The Funds or their agents may, in case of emergency, temporarily suspend
telephone transactions and other shareholder services.

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.

MANAGEMENT OF THE FUNDS

Janus Capital furnishes continuous advice and recommendations concerning the
Funds' 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
in the SAI.)

FIXED-INCOME FUNDS
The Funds pay Janus Capital a management fee which is calculated daily and paid
monthly. The advisory agreement with the Funds spells out the management fee and
other expenses that the Funds must pay.

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 Fund
Operating Expenses table on page 17 lists the actual management fees and total
operating expenses with and without waivers 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
<PAGE>

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.

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 received
the Chartered Financial Analyst designation.

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. 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 received the Chartered
Financial Analyst designation.

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. He holds a
Bachelor of Arts in Economics from Colorado State University.
<PAGE>

OTHER INFORMATION

CLASSES OF SHARES
Each of the Money Market Funds currently offers three classes of shares. This
prospectus only describes the Investor Shares of the Money Market Funds which
are available to the general public. Institutional Shares of the Money Market
Funds are available only to institutional clients, including corporations,
foundations and trusts, and individuals meeting certain initial investment
requirements. A third class of shares, 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. If you would like additional information, please
call 1-800-525-3713.

SIZE OF FUNDS
The Funds have no present plans to limit their size. However, although there is
no present intention to do so, the Funds may discontinue sales of their shares
if management and the Trustees believe that continued sales may adversely affect
a 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.

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 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.

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 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. Purchase orders 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.
<PAGE>

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 39 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.

TAXES
As with any investment, you should consider the tax consequences of investing in
the Funds. Any time you sell or exchange shares of a Fund in a taxable account,
it is considered a taxable event. Depending on the purchase price and the sale
price, you may have a gain or loss on the transaction. Any tax liabilities
generated by your transactions are your responsibility.

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. These Funds may be
subject to state and local income tax. 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. Distributions may be taxable at different rates
depending on the length of time a Fund holds a security. 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.

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Funds'
financial performance for the past 5 years (or from a Fund's inception, if less
than 5 years through October 31st of each fiscal year shown). Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate that an investor would have earned (or
lost) on an investment in each of the Funds (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Annual Report, which is available upon request
and incorporated by reference into the SAI.

<TABLE>
<CAPTION>
JANUS FLEXIBLE INCOME FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $9.65 $9.55 $8.96 $10.03
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.69 0.73 0.72 0.74
3. Net gains or losses on securities
(both realized and unrealized) 0.37 0.10 0.59 (0.86)
- --------------------------------------------------------------------------------------
4. Total from investment operations 1.06 0.83 1.31 (0.12)
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.69) (0.73) (0.72) (0.72)
6. Distributions (from capital gains) (0.02) -- -- (0.23)
- --------------------------------------------------------------------------------------
7. Total distributions (0.71) (0.73) (0.72) (0.95)
- --------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $10.00 $9.65 $9.55 $8.96
- --------------------------------------------------------------------------------------
9. Total return 11.48% 9.01% 15.35% (1.26)%
- --------------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $727 $604 $580 $377
11. Average net assets for the period
(in millions) $656 $604 $450 $429
12. Ratio of gross expenses to average
net assets 0.87% 0.88% 0.96% N/A
13. Ratio of net expenses to average
net assets 0.86% 0.87% 0.96% 0.93%
14. Ratio of net investment income to
average net assets 7.10% 7.60% 7.91% 7.75%
15. Portfolio turnover rate 207% 214% 250% 137%
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
JANUS HIGH-YIELD FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996(1)
<S> <C> <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.
<PAGE>

<TABLE>
<CAPTION>
JANUS
FEDERAL TAX-EXEMPT FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $6.92 $6.88 $6.45 $7.30
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.35 0.36 0.36 0.36
3. Net gains or losses on securities (both
realized and unrealized) 0.17 0.04 0.43 (0.83)
- ---------------------------------------------------------------------------------------------
4. Total from investment operations 0.52 0.40 0.79 (0.47)
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.35) (0.36) (0.36) (0.36)
6. Distributions (from capital gains) -- -- -- (0.02)
- ---------------------------------------------------------------------------------------------
7. Total distributions (0.35) (0.36) (0.36) (0.38)
- ---------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $7.09 $6.92 $6.88 $6.45
- ---------------------------------------------------------------------------------------------
9. Total return 7.72% 5.94% 12.60% (6.62%)
- ---------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $62 $45 $33 $26
11. Average net assets for the period (in
millions) $54 $36 $29 $28
12. Ratio of gross expenses to average net
assets 0.66%(2) 0.68%(2) 0.70%(2) N/A
13. Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65%(2)
14. Ratio of net investment income to average
net assets 5.00% 5.18% 5.43% 5.20%
15. Portfolio turnover rate 304% 225% 164% 160%
- ---------------------------------------------------------------------------------------------
</TABLE>

(2) The ratio was % in 1998; 1.11% in 1997; 1.14% in 1996; 1.31% in 1995;
and 1.41% in 1994 before waiver of certain Fund expenses.
<PAGE>

<TABLE>
<CAPTION>
JANUS
SHORT-TERM BOND FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
AMENDMENT] 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $2.86 $2.84 $2.87 $3.02
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.17 0.16 0.18 0.18
3. Net gains or losses on securities (both
realized and unrealized) 0.04 0.02 (0.03) (0.15)
- ------------------------------------------------------------------------------------------------------
4. Total from investment operations 0.21 0.18 0.15 0.03
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.17) (0.16) (0.18) (0.17)
6. Distributions (from capital gains) -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------
7. Total distributions (0.17) (0.16) (0.18) (0.18)
- ------------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $2.90 $2.86 $2.84 $2.87
- ------------------------------------------------------------------------------------------------------
9. Total return 7.70% 6.49% 5.55% 1.26%
- ------------------------------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $58 $41 $48 $54
11. Average net assets for the period (in
millions) $48 $42 $47 $60
12. Ratio of gross expenses to average net
assets 0.67%(2) 0.67%(2) 0.66%(2) N/A
13. Ratio of net expenses to average net assets 0.65% 0.65% 0.65% 0.65%(2)
14. Ratio of net investment income to average
net assets 6.03% 5.57% 6.67% 6.08%
15. Portfolio turnover rate 133% 486% 337% 346%
- ------------------------------------------------------------------------------------------------------
</TABLE>

(2) The ratio was % in 1998; 1.20% in 1997; 1.23% in 1996; 1.23% in 1995;
and 1.15% in 1994 before waiver of certain Fund expenses.
<PAGE>

<TABLE>
<CAPTION>
JANUS JANUS
MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND
PERIODS ENDING OCTOBER 31ST PERIODS ENDING OCTOBER 31ST
1998 1998
[TO BE [TO BE
FILED BY FILED BY
INVESTOR SHARES AMENDMENT] 1997 1996 1995(1) AMENDMENT] 1997 1996 1995(1)
<S> <C> <C> <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 0.05 0.05 0.04 0.05 0.05 0.04
3. Net gains or losses
on securities (both
realized and
unrealized) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------
4. Total from
investment
operations 0.05 0.05 0.04 0.05 0.05 0.04
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net
investment income) (0.05) (0.05) (0.04) (0.05) (0.05) (0.04)
6. Distributions (from
capital gains) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------
7. Total distributions (0.05) (0.05) (0.04) (0.05) (0.05) (0.04)
- ------------------------------------------------------------------------------------------------------
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 $199
11. Average net assets
for the period (in
millions) $883 $676 $461 $123 $112 $88
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 waiver.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.

<PAGE>

<TABLE>
<CAPTION>
JANUS
TAX-EXEMPT MONEY MARKET FUND
PERIODS ENDING OCTOBER 31ST
1998
[TO BE
FILED BY
INVESTOR SHARES AMENDMENT] 1997 1996 1995(1)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.03 0.03 0.02
3. Net gains or losses on securities (both realized
and unrealized) -- -- --
- -------------------------------------------------------------------------------------------
4. Total from investment operations 0.03 0.03 0.02
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.03) (0.03) (0.02)
6. Distributions (from capital gains) -- -- --
- -------------------------------------------------------------------------------------------
7. Total distributions (0.03) (0.03) (0.02)
- -------------------------------------------------------------------------------------------
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>

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.

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.

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.

DEBT SECURITIES are securities representing money borrowed that must be repaid
at a later date. Such securities have specific maturities and usually a specific
rate of interest or an original purchase discount.

(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.

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.

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
<PAGE>

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.

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.

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.

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.

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.

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.

INTEREST RATE SWAPS involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).

INVERSE FLOATERS are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. Certain inverse floaters may have an interest rate
reset mechanism that multiplies the effects of change in the underlying index.
Such mechanism may increase the volatility of the security's market value.

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>
<CAPTION>
BOND RATING EXPLANATION
- -------------------------------------------------------------------
<S> <C>
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>
<PAGE>

MOODY'S INVESTORS SERVICE, INC.

<TABLE>
<CAPTION>
BOND RATING EXPLANATION
- -------------------------------------------------------------------
<S> <C>
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.

SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended October 31, 1998, the percentage of securities
holdings for the following Funds by rating category based upon a weighted
monthly average was:

[TO BE FILED BY AMENDMENT]

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, 1998.
<PAGE>

This page intentionally left blank
<PAGE>

[JANUS LOGO]

1-800-525-3713
P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

You can request other information, including a Statement of Additional
Information, Annual Report or Semiannual Report, free of charge, by contacting
Janus at 1-800-525-3713 or visiting our Web site at janus.com. In the Funds'
Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Funds' performance during
their last fiscal year. Other information is also available from financial
intermediaries that sell shares of the Funds.

Investment Company Act File No. 811-1879
<PAGE>

[JANUS LOGO]

Janus Venture Fund
PROSPECTUS
FEBRUARY 17, 1999

THE FUND HAS DISCONTINUED PUBLIC SALES OF ITS SHARES TO NEW INVESTORS, BUT
SHAREHOLDERS WHO HAVE OPEN FUND ACCOUNTS MAY MAKE ADDITIONAL INVESTMENTS AND
REINVEST 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.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Janus Venture Fund...................................................... page 2
Fees and Expenses....................................................... page 4

INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND RISKS
Investment Objective.................................................... page 5
Principal Investment Strategies......................................... page 5
General Portfolio Policies.............................................. page 6
Risks................................................................... page 9

SHAREHOLDER'S MANUAL
Minimum Investments..................................................... page 13
Types of AccountOwnership............................................... page 14
How to Open Your Janus Account.......................................... page 15
How to Purchase Shares.................................................. page 16
How to Exchange Shares.................................................. page 18
How to Redeem Shares.................................................... page 20
Shareholder Services and Account Policies............................... page 24

MANAGEMENT OF THE FUND
Investment Adviser...................................................... page 28
Portfolio Managers...................................................... page 29

OTHER INFORMATION....................................................... page 30

DISTRIBUTIONS AND TAXES
Distributions........................................................... page 31
Taxes................................................................... page 33

FINANCIAL HIGHLIGHTS.................................................... page 24

GLOSSARY
Glossary of Investment Terms............................................ page 35
</TABLE>

<PAGE>

RISK/RETURN SUMMARY

JANUS VENTURE FUND

1. WHAT IS THE INVESTMENT OBJECTIVE OF JANUS VENTURE FUND? The Fund seeks
capital appreciation.

The Fund's Trustees may change this objective without shareholder vote and the
Fund will notify you of any changes that are material. If there is a material
change in the Fund's objective or policies, you should consider whether the Fund
remains an appropriate investment for you.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF JANUS VENTURE FUND? The Fund
invests in equity securities of U.S. and foreign companies selected for their
potential for capital appreciation. The Fund normally invests at least 50% of
its equity assets in small-sized companies.

The portfolio managers apply a "bottom up" approach in choosing investments. In
other words, they look for companies with earnings growth potential one at a
time. If the portfolio managers are unable to find investments with earnings
growth potential, a significant portion of the Fund's assets may be in cash or
similar investments.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN JANUS VENTURE FUND? The biggest risk
of investing in this Fund is that its returns may vary and you could lose money.
If you're considering investing in the Fund, remember that it is designed for
long-term investors who can accept the risks of investing in a portfolio with
significant common stock holdings. Common stocks tend to be more volatile than
other investment choices.

The value of the Fund's portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of the Fund's portfolio could also
decrease if the stock market goes down. If the value of the Fund's portfolio
decreases, the Fund's net asset value (NAV) will also decrease which means if
you sell your shares in the Fund you would get back less money. Normally, the
Fund invests at least 50% of its equity assets in securities issued by
small-sized companies, which tend to be more volatile than securities issued by
larger or more established companies. As a result, the Fund's returns may be
more volatile than one holding securities of large, established companies.

An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

<PAGE>

The following information illustrates how the Fund's performance has varied over
time. The bar chart depicts the change in the Fund's performance from
year-to-year during the periods indicated. The table compares the Fund's average
annual returns for the periods indicated to a broad-based securities market
index.

[TO BE FILED BY AMENDMENT]

JANUS VENTURE FUND

A BAR CHART showing Annual Total Returns for Janus Venture Fund from 1989
to 1998:

[To be
Filed
by
38.74% -0.40% 47.82% 7.44% 9.08% 5.46% 26.46% 8.02% 12.62% Amendment]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
-------------------------------------------
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (4/30/85)
<S> <C> <C> <C> <C>
Janus Venture % % % %
Russell 2000(R)
Index* % % % %
- ------------------------------------------------------------------
</TABLE>

* The Russell 2000(R) Index is an index that measures the performance of the
2,000 smallest companies in the Russell 3,000 Index with an average market
capitalization of approximately $421 million.

The Fund's past performance does not necessarily indicate how it will perform in
the future.

<PAGE>
4

FEES AND EXPENSES

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. You do not pay these fees directly
but, as the example below shows, these costs are borne indirectly by all
shareholders.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. It is based upon gross expenses (without the effect of
expense offset arrangements) for the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL FUND
FEE EXPENSES OPERATING EXPENSES

<S> <C> <C> <C>
Janus Venture Fund 0.68% 0.26% 0.94%
--------------------------------------------
</TABLE>

- -------------------------------------------------------------------------------

Example

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated then redeem all of
your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
-----------------------------------------
Janus Venture Fund $ 96 $300 $520 $1,155
</TABLE>

<PAGE>

5
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT
STRATEGIES AND RISKS

This section takes a closer look at the investment objective of the Fund, its
principal investment strategies and certain risks of investing in the Fund.
Strategies and policies that are noted as "fundamental" cannot be changed
without a shareholder vote.

Please carefully review the "Risks" section of this Prospectus on pages 8-11 for
a discussion of risks associated with certain investment techniques. We've also
included a Glossary with descriptions of investment terms used throughout this
Prospectus.

INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES

Janus Venture Fund seeks capital appreciation. Normally, the Fund pursues its
objective by investing at least 50% of its equity assets in 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. 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 FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES.

1. HOW ARE COMMON STOCKS SELECTED?
The Fund may invest substantially all of its assets in common stocks if its
portfolio managers believe that common stocks will appreciate in value. The
portfolio managers generally take a "bottom up" approach to selecting companies.
In other words, they seek to identify individual companies with earnings growth
potential that may not be recognized by the market at large. They make this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of principal business activity, or other similar selection
criteria. Realization of income is not a significant consideration when choosing
investments for the Fund. Income realized on the Fund's investments will be
incidental to its objective.

<PAGE>

2. ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES? Generally, yes. The
portfolio managers seek companies that meet their selection criteria regardless
of where a company is located. 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. There are no limitations on the countries in which the Fund
may invest and the Fund may at times have significant foreign exposure.

3. WHAT DOES "MARKET CAPITALIZATION" MEAN?
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.

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.
So, for example, if the Fund exceeds a limit as a result of market fluctuations
or the sale of securities, it will not be required to dispose of any securities.

CASH POSITION
When the Fund's portfolio managers believe that market conditions are
unfavorable for profitable investing, or when they are otherwise unable to
locate attractive investment opportunities, the Fund's cash or similar
investments may increase. In other words, the Fund does not always stay fully
invested in stocks. Cash and similar investments generally are a residual - they
represent the assets that remain after the portfolio managers have committed
available assets to desirable investment opportunities. However, the portfolio
managers may also temporarily increase the Fund's cash position to protect its
assets or maintain liquidity. When the Fund's investments in cash or similar
investments increase, it may not participate

<PAGE>

in market advances or declines to the same extent that it would if the Fund
remained more fully invested in stocks.

OTHER TYPES OF INVESTMENTS
The Fund invests primarily in a portfolio of equity securities, which may
include preferred stocks, common stocks, warrants and securities convertible
into common or preferred stocks, but it may also invest to a lesser degree in
other types of securities. These securities (which are described in the
Glossary) may include:

- - debt securities;

- - indexed/structured securities;

- - high-yield/high-risk securities (less than 35% of the Fund's assets);

- - options, futures, forwards and other types of derivatives for hedging purposes
or for non-hedging purposes such as seeking to enhance return; and

- - securities purchased on a when-issued, delayed delivery or forward commitment
basis.

ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments. An
illiquid investment is a security or other position that cannot be disposed of
quickly in the normal course of business. For example, some securities are not
registered under the U.S. securities laws and cannot be sold to the U.S. public
because of SEC regulations (these are known as "restricted securities"). Under
procedures adopted by the Fund's Trustees, certain restricted securities may be
deemed liquid, and will not be counted toward this 15% limit.

FOREIGN SECURITIES
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.

<PAGE>
8

SPECIAL SITUATIONS
The Fund may invest in special situations. 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. 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. The Fund's performance could
suffer if the anticipated development in a "special situation" investment does
not occur or does not attract the expected attention.

PORTFOLIO TURNOVER
The Fund generally intends to purchase securities for long-term investment
although, to a limited extent, the Fund may purchase securities in anticipation
of relatively short-term price gains. Short-term transactions may also 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. 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. 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.

<PAGE>

RISKS

Because the Fund may invest substantially all of its assets in common stocks,
the main risk is the risk that the value of the stocks it holds might decrease
in response to the activities of an individual company or in response to general
market and/or economic conditions. If this occurs, the Fund's share price may
also decrease. The Fund's performance may also be affected by risks specific to
certain types of investments, such as foreign securities, derivative
investments, non-investment grade debt securities or companies with relatively
small market capitalizations.

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
SOME OF THE RISKS OF INVESTING IN THE FUND.

1. THE FUND NORMALLY INVESTS AT LEAST 50% OF ITS EQUITY ASSETS IN SECURITIES OF
SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY SPECIAL RISKS?
Many attractive investment opportunities may be smaller, start-up companies
offering emerging products or services. Smaller or newer companies may suffer
more significant losses as well as realize more substantial growth than larger
or more established issuers because they may lack depth of management, be
unable to generate funds necessary for growth or potential development, or 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 wide
price fluctuations. Investments in such companies tend to be more volatile and
somewhat more speculative.

2. I'VE HEARD A LOT ABOUT HOW THE CHANGE TO THE YEAR 2000 COULD AFFECT COMPUTER
SYSTEMS. DOES THIS CREATE ANY SPECIAL RISKS?
The portfolio managers carefully research each potential investment before
making an investment decision and, among other things, consider Year 2000
readiness when selecting portfolio holdings. However, there is no guarantee
that the information a portfolio manager receives regarding a company's Year
2000 readiness is completely accurate. If a company has

<PAGE>

not satisfactorily addressed Year 2000 issues, the Fund's performance could
suffer.

3. HOW COULD THE FUND'S INVESTMENTS IN FOREIGN SECURITIES AFFECT ITS
PERFORMANCE?

The Fund may invest without limit in foreign securities either indirectly (e.g.,
depositary receipts) or directly in foreign markets. Investments in foreign
securities, including those of foreign governments, may involve greater risks
than investing in domestic securities because the Fund's performance may depend
on issues other than the performance of a particular company. These issues
include:

- - currency risk

- - political and economic risk

- - regulatory risk

- - market risk

- - transaction costs

Such risks are described in the SAI.

4. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH-YIELD/HIGH-RISK
SECURITIES?

High-yield/high-risk securities (or "junk" bonds) are securities rated below
investment grade by the primary rating agencies such as Standard & Poor's
Ratings Services and Moody's Investors Service, Inc. The value of lower quality
securities generally is more dependent on credit risk, or the ability of the
issuer to meet interest and principal payments, than investment grade debt
securities. Issuers of high-yield securities may not be as strong financially as
those issuing bonds with higher credit ratings and are more vulnerable to real
or perceived economic changes, political changes or adverse developments
specific to the issuer.

Please refer to the SAI for a description of bond rating categories.

5. HOW DOES THE FUND TRY TO REDUCE RISK?

The Funds may use futures, options and other derivative instruments to "hedge"
or protect its portfolio from adverse movements in securities

<PAGE>

prices and interest rates. The Fund may also use a variety of currency hedging
techniques, including forward currency contracts, to manage exchange rate risk.
The Fund believes the use of these instruments will benefit the Fund. However,
the Fund's performance could be worse than if the Fund had not used such
instruments if the portfolio managers' judgement proves incorrect. Risks
associated with the use of derivative instruments are described in the SAI.

<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.

[LOGO]

<PAGE>

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 25.

100 Fillmore Street, Suite 100
Denver, CO 80206

3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209

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 INTERNET ADDRESS
JANUS JANUS.COM
P.O. BOX 173375
DENVER, CO 80217-3375 JANUS
XPRESSLINE(TM) 1-888-979-7737
FOR OVERNIGHT CARRIER FOR 24-HOUR ACCESS TO
JANUS ACCOUNT AND FUND INFORMA-
SUITE 101 TION, EXCHANGES, PURCHASES
3773 CHERRY CREEK NORTH DRIVE AND REDEMPTIONS, AUTO-
DENVER, CO 80209-3811 MATED DAILY QUOTES ON FUND
SHARE PRICES, YIELDS AND
INVESTOR SERVICE TOTAL REFUNDS.
REPRESENTATIVES
IF YOU HAVE ANY QUESTIONS WHILE TDD 1-800-525-0056
READING THIS PROSPECTUS, PLEASE A TELECOMMUNICATIONS DEVICE
CALL ONE OF OUR INVESTOR FOR OUR HEARING- AND
SERVICE REPRESENTATIVES AT SPEECH-IMPAIRED
1-800-525-3713 MONDAY-FRIDAY: SHAREHOLDERS.
8:00 A.M.-8:00 P.M., AND
SATURDAY: 10:00 A.M.-4:00 P.M., JANUS LITERATURE
NEW YORK TIME. LINE 1-800-525-8983
TO REQUEST A PROSPECTUS,
SHAREHOLDER REPORTS OR
MARKETING MATERIALS 24
HOURS A DAY.
</TABLE>

<PAGE>

MINIMUM INVESTMENTS*

<TABLE>
<S> <C>
TO OPEN A NEW REGULAR ACCOUNT..................... $2,500
TO OPEN A NEW RETIREMENT, EDUCATION OR UGMA/UTMA
ACCOUNT......................................... $ 500
TO OPEN A NEW REGULAR 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.

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.

<PAGE>

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 adviser 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 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.

- - 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.

<PAGE>

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 addresses listed in the "Quick Address and
Telephone Reference" on page 13.

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.

<PAGE>

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.

<PAGE>

HOW TO EXCHANGE SHARES
On any business day, you may exchange all or a portion of your shares into any
other available Janus fund.

IN WRITING
To request an exchange in writing, please follow the instructions for written
requests on page 15.

<PAGE>

BY INTERNET
Exchanges may also be made on our Web site at janus.com.

- - 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 trading in excess of
the limit above (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.

<PAGE>

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. This option
may be suspended for 10 days following an address change unless a signature
guarantee is provided.

IN WRITING
To request a redemption in writing, please follow the instructions for written
requests noted on page 15.

BY INTERNET
Redemptions may also be made on our Web site at janus.com.

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.

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.

<PAGE>

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, ON OUR WEB
SITE, 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 15 and must include the following
information:

- - the name of the Fund

- - the account number

- - the amount of money or number of shares being redeemed or exchanged

- - 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.

<PAGE>

- - 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.

- - 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 by check 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.

<PAGE>

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 accepted by the Fund (or the
Fund's agent or authorized designee). 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. 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). 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.

<PAGE>

JANUS WEB SITE
Janus maintains a Web site located at JANUS.COM. You can purchase, exchange and
redeem shares and access information such as your account balance and the Fund's
NAV through the Web site. In order to engage in transactions on our Web site,
you must authorize us to transmit account information online and accept online
instructions (see janus.com and follow the procedures accordingly). You may also
need to have bank account information, wire instructions or other options
established on your account. The Fund and its agents will not be responsible for
any losses resulting from unauthorized transactions on our Web site when
procedures designed for engaging in such transactions are followed. If you have
questions, please call 1-800-975-9932 to speak to a Janus representative.

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.

<PAGE>

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 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

<PAGE>

representative by telephone, please consider sending written instructions,
stopping by a Service Center, calling the Janus XpressLine or visiting our Web
site.

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.

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.

The Fund produces financial reports, which include a list of the Fund's
portfolio holdings, semiannually and updates its prospectus annually. To reduce
expenses, the Fund may choose to mail only one report or prospectus 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.

<PAGE>

MANAGEMENT OF THE FUND

INVESTMENT ADVISER
Janus Capital Corporation, 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 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.

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 incurs expenses not assumed by Janus Capital, including transfer agent
and custodian fees and expenses, legal and auditing fees, printing and mailing
costs of sending reports and other information to existing shareholders, and
independent Trustees' fees and expenses. The Annual Fund Operating Expenses
table on page 4 lists the actual management fee and total operating expenses of
the Fund for the most recent fiscal year.

<PAGE>

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 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 Janus Capital 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 Capital, 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 and received the Chartered
Financial Analyst designation.

<PAGE>

OTHER INFORMATION

SIZE OF THE FUND
The Fund has discontinued sales of its shares because its management and the
Trustees believe 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 13.

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 devoted
considerable internal resources and has engaged one of the foremost experts in
the field to help achieve Year 2000 readiness. Janus Capital does not anticipate
that Year 2000-related issues will have a material impact on its ability to
continue to provide the Fund with service at current levels; however, Janus
Capital cannot make any assurances that the steps it has taken to ensure Year
2000 readiness will be successful. In addition, there can be no assurance that
Year 2000 issues will not affect the companies in which the Fund invests or
worldwide markets and economies.

<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 GAINS
ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM
GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS. DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS ARE NORMALLY DECLARED AND PAID IN DECEMBER.

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

<PAGE>

option at any time by writing the Fund at one of the addresses on page 15 or
calling 1-800-525-3713. The Fund offers the following options:

1. REINVESTMENT OPTION. You may reinvest your income dividends and capital gains
distributions in additional shares. This option is assigned automatically if
no other choice is made.

2. CASH OPTION. You may receive your income dividends and capital gains
distributions in cash.

3. REINVEST AND CASH OPTION. You may receive either your income dividends or
capital gains distributions in cash and reinvest the other in additional
shares.

4. REDIRECT OPTION. You may direct your dividends or capital gains to purchase
shares of another Janus fund.

The Fund reserves the right to reinvest into your account undeliverable and
uncashed dividend and distribution checks that remain outstanding for six months
in shares of the Fund at the NAV next computed after the check is cancelled.
Subsequent distributions may also be reinvested.

TAXES
As with any investment, you should consider the tax consequences of investing in
the Fund. Any time you sell or exchange shares of a Fund in a taxable account,
it is considered a taxable event. Depending on the purchase price and the sale
price, you may have a gain or loss on the transaction. Any tax liabilities are
your responsibility.

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. Distributions may be taxable at different rates
depending on the length of time the Fund holds a security. 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.

<PAGE>

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.

The Fund does not expect to pay 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.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years through October 31st of each fiscal
year shown. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an investor would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements, are included in
the annual report, which is available upon request and incorporated by reference
into the SAI.

<TABLE>
<CAPTION>
1998
[TO BE
FILED BY
PERIODS ENDING OCTOBER 31ST AMENDMENT] 1997 1996 1995 1994
<S> <C> <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 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 to
average net assets 0.11% (0.33%) 0.29% 0.27%
15. Portfolio turnover rate 146% 136% 113% 114%
- -----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

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.

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 in
private placements under Section 4(2) of the Securities Act of 1933.

COMMON STOCKS are equity securities representing shares of ownership in a
company, and usually carry 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.

DEBT SECURITIES are equity securities representing money borrowed that must be
repaid at a later date. Such securities have specific maturities and usually a
specific rate of interest or an original purchase discount.

<PAGE>

GLOSSARY OF INVESTMENT TERMS

MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, the portfolio 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.

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.

<PAGE>

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.

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.

<PAGE>

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 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.

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.

<PAGE>

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<PAGE>

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<PAGE>

[JANUS LOGO]

1-800-525-3713

P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

You can request other information, including a Statement of Additional
Information, Annual Report or Semiannual Report free of charge, by contacting
Janus at 1-800-525-3713 or visiting our Web site at janus.com. In the Fund's
Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. Other information is also available from financial
intermediaries that sell shares of the Fund.

The Statement of Additional Information provides detailed information about the
Fund and is incorporated into this Prospectus by reference. You may review the
Fund's Statement of Additional Information at the Public Reference Room of the
SEC or get text only copies for a fee, by writing to or calling the Public
Reference Room, Washington, D.C. 20549-6009 (1-800-SEC-0330). You may obtain the
Statement of Additional Information for free from the SEC's Web site at
http://www.sec.gov.

Investment Company Act File No. 811-1879

<PAGE>

[JANUS LOGO]

Janus Overseas Fund
PROSPECTUS
FEBRUARY 17, 1999

THE FUND HAS DISCONTINUED PUBLIC SALES OF ITS SHARES TO NEW INVESTORS,
BUT SHAREHOLDERS WHO HAVE OPEN FUND ACCOUNTS MAY MAKE ADDITIONAL
INVESTMENTS AND REINVEST 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.

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Janus Overseas Fund ............................................. page 2
Fees and Expenses ............................................... page 4

INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND RISKS
Investment Objective ............................................ page 5
Principal Investment Strategies ................................. page 5
General Portfolio Policies ...................................... page 6
Risks ........................................................... page 9

SHAREHOLDER'S MANUAL
Minimum Investments ............................................. page 15
Types of Account Ownership ...................................... page 15
How to Open Your Janus Account .................................. page 16
How to Purchase Shares .......................................... page 17
How to Exchange Shares .......................................... page 19
How to Redeem Shares ............................................ page 20
Shareholder Services and Account Policies ....................... page 24

MANAGEMENT OF THE FUND
Investment Adviser .............................................. page 28
Portfolio Managers .............................................. page 29

OTHER INFORMATION ............................................... page 30

DISTRIBUTIONS AND TAXES
Distributions ................................................... page 31
Taxes ........................................................... page 32

FINANCIAL HIGHLIGHTS ............................................ page 34

GLOSSARY
Glossary of Investment Terms .................................... page 35
</TABLE>

<PAGE>

1
<PAGE>

RISK/RETURN SUMMARY

JANUS OVERSEAS FUND

1. WHAT IS THE INVESTMENT OBJECTIVE OF JANUS OVERSEAS FUND?
The Fund seeks long-term growth of capital.

The Fund's Trustees may change this objective without a shareholder vote and the
Fund will notify you of any changes that are material. If there is a material
change in the Fund's objective or policies, you should consider whether the Fund
remains an appropriate investment for you.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF JANUS OVERSEAS FUND?
The Fund normally invests at least 65% of its total assets in securities of
issuers from at least five different countries, 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.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN JANUS OVERSEAS FUND?
The biggest risk of investing in this Fund is that its returns may vary and you
could lose money. If you're considering investing in the Fund, remember that it
is designed for long-term investors who can accept the risks of investing in a
portfolio with significant foreign common stock holdings. Common stocks tend to
be more volatile than other investment choices.

The value of the Fund's portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of the Fund's portfolio could also
decrease if the stock market goes down. If the value of the Fund's portfolio
decreases, the Fund's net asset value (NAV) will also decrease which means if
you sell your shares in the Fund you would get back less money. Because the Fund
has significant exposure to foreign markets and may invest without limit in
foreign securities, its returns and NAV may be affected to a large degree by
fluctuations in currency exchange rates or political or economic conditions in a
particular country.
<PAGE>

An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

[TO BE FILED BY AMENDMENT]

JANUS OVERSEAS FUND

A BAR CHART showing Annual Total Returns for Janus Overseas Fund from 1995
through 1998:

[To be
Filed
by
22.05% 28.83% 18.25% Amendment]
1995 1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

<TABLE>
<CAPTION>
Average annual total return
for periods ended 12/31/98
----------------------------
SINCE INCEPTION
1 YEAR (5/2/94)
<S> <C> <C>
Janus Overseas Fund % %
Morgan Stanley Capital
International EAFE Index* % %
- ---------------------------------------------------------
</TABLE>

* The Morgan Stanley Capital International EAFE Index is a market
capitalization weighted index composed of companies representative of the
market structure of 20 Developed Market countries in Europe, Australasia
and the Far East.

The Fund's past performance does not necessarily indicate how it will perform in
the future.
<PAGE>
4

FEES AND EXPENSES

<TABLE>
<CAPTION>
MANAGEMENT TOTAL ANNUAL FUND
FEE OTHER OPERATING EXPENSES
EXPENSES
<S> <C> <C> <C>
Janus Overseas Fund 0.66% 0.30% 0.96%
-------------------------------------
</TABLE>

- ------------------------------------------------------------------------------

Example

This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods
indicated then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and
that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
----------------------------------
Janus Overseas Fund $98 $306 $531 $1,178
</TABLE>
<PAGE>

INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISKS

INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES

Janus Overseas Fund seeks long-term growth of capital. Normally, the Fund
pursues its objective by investing at least 65% of its total assets in
securities of issuers from at least five different countries, 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.

The Fund may invest substantially all of its assets in common stocks of foreign
issuers if its portfolio managers believe that common stocks will appreciate in
value. The portfolio managers generally take a "bottom up" approach to selecting
companies. In other words, they seek to identify individual companies with
earnings growth potential that may not be recognized by the market at large.
They make this assessment by looking at companies one at a time, regardless of
size, country of organization, place of principal business activity, or other
similar selection criteria. Realization of income is not a significant
consideration when choosing investments for the Fund. Income realized on the
Fund's investments will be incidental to its objective.

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
<PAGE>

geographic areas may warrant greater consideration in selecting foreign
securities.

GENERAL PORTFOLIO POLICIES
In investing its portfolio assets, the Fund will follow the general policies
listed below. The percentage limitations included in these policies and
elsewhere in this Prospectus apply at the time of purchase of the security. So,
for example, if the Fund exceeds a limit as a result of market fluctuations or
the sale of securities, it will not be required to dispose of any securities.

- - debt securities;

- - indexed/structured securities;

- - high-yield/high-risk securities (less than 35% of the Fund's assets);

- - options, futures, forwards and other types of derivatives for hedging purposes
or for non-hedging purposes such as seeking to enhance return; and
<PAGE>

- - securities purchased on a when-issued, delayed delivery or forward commitment
basis.

of the investment decision. 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. 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.

RISKS

THE FOLLOWING QUESTIONS AND ANSWERS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND
SOME OF THE RISKS OF INVESTING IN THE FUND.

1. HOW COULD THE FUND'S INVESTMENTS IN FOREIGN SECURITIES AFFECT ITS
PERFORMANCE?
The Fund may invest without limit in foreign securities either indirectly (e.g.,
depositary receipts) or directly in foreign markets. Investments in foreign
securities, including those of foreign governments, may involve greater risks
than investing in domestic securities because the Fund's performance may depend
on issues other than the performance of a particular company. These issues
include:

- - CURRENCY RISK. 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 if the security increases in value in its home country. U.S.
dollar denominated securities of foreign issuers may also be affected by
currency risk.

- - TRANSACTION COSTS. Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than those involved
in domestic transactions.

2. THE FUND MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS?
Many attractive investment opportunities may be smaller, start-up companies
offering emerging products or services. Smaller or newer companies may suffer
more significant losses as well as realize more substantial growth than larger
or more established issuers because they may lack depth of management, be unable
to generate funds necessary for growth or potential development, or 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 wide
price fluctuations. Investments in such companies tend to be more volatile and
somewhat more speculative.

3. I'VE HEARD A LOT ABOUT HOW THE CHANGE TO THE YEAR 2000 COULD AFFECT COMPUTER
SYSTEMS. DOES THIS CREATE ANY SPECIAL RISKS?
The portfolio managers carefully research each potential investment before
making an investment decision and, among other things, consider Year 2000
readiness when selecting portfolio holdings. However, there is no guarantee that
the information a portfolio manager receives regarding a
<PAGE>

company's Year 2000 readiness is completely accurate. If a company has not
satisfactorily addressed Year 2000 issues, the Fund's performance could suffer.

Please refer to the SAI for a description of bond rating categories.

5. HOW DOES THE FUND TRY TO REDUCE RISK?
The Fund may use futures, options and other derivative instruments to "hedge" or
protect its portfolio from adverse movements in securities prices and interest
rates. The Fund may also use a variety of currency hedging techniques, including
forward currency contracts, to manage exchange rate risk. The Fund believes the
use of these instruments will benefit the Fund. However, the Fund's performance
could be worse than if the Fund had not used such instruments if the portfolio
managers' judgement proves incorrect. Risks associated with the use of
derivative instruments are described in the SAI.
<PAGE>

12
<PAGE>

Shareholder's Manual

[LOGO]
<PAGE>

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 26.

100 Fillmore Street, Suite 100
Denver, CO 80206

3773 Cherry Creek North Drive, Suite 101
Denver, CO 80209

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 JANUS INTERNET ADDRESS
P.O. BOX 173375 JANUS.COM
DENVER, CO 80217-3375
JANUS
FOR OVERNIGHT CARRIER XPRESSLINE(TM) 1-888-979-7737
JANUS FOR 24-HOUR ACCESS TO
SUITE 101 ACCOUNT AND FUND INFORMA-
3773 CHERRY CREEK NORTH DRIVE TION, EXCHANGES, PURCHASES
DENVER, CO 80209-3811 AND REDEMPTIONS, AUTO-
MATED DAILY QUOTES ON FUND
INVESTOR SERVICE SHARE PRICES, YIELDS AND
REPRESENTATIVES TOTAL RETURNS.
IF YOU HAVE ANY QUESTIONS WHILE
READING THIS PROSPECTUS, PLEASE TDD 1-800-525-0056
CALL ONE OF OUR INVESTOR A TELECOMMUNICATIONS DEVICE
SERVICE REPRESENTATIVES AT FOR OUR HEARING- AND
1-800-525-3713 MONDAY-FRIDAY: SPEECH-IMPAIRED
8:00 A.M.-8:00 P.M., AND SHAREHOLDERS.
SATURDAY: 10:00 A.M.-4:00 P.M.,
NEW YORK TIME. JANUS LITERATURE
LINE 1-800-525-8983
TO REQUEST A PROSPECTUS,
SHAREHOLDER REPORTS OR
MARKETING MATERIALS 24
HOURS A DAY.
</TABLE>
<PAGE>

MINIMUM INVESTMENTS*

<TABLE>
<S> <C>
TO OPEN A NEW REGULAR ACCOUNT $2,500
TO OPEN A NEW RETIREMENT, EDUCATION OR UGMA/UTMA
ACCOUNT $ 500
TO OPEN A NEW REGULAR ACCOUNT WITH AN AUTOMATIC
INVESTMENT PROGRAM $ 500**
TO ADD TO ANY TYPE OF AN ACCOUNT $ 100+
</TABLE>

TYPES OF ACCOUNT OWNERSHIP
If you are investing for the first time, you will need to establish an account.
You can establish the following types of accounts by completing 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.

- - 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.

purpose. Investors should consult their tax adviser 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 account maintenance fee of
$12 for each 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.

- - TRADITIONAL AND ROTH INDIVIDUAL RETIREMENT ACCOUNTS: Both types of IRAs allow
most individuals under the age of 70 1/2 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 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: 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
Complete and sign the appropriate application. Please be sure to provide your
Social Security or taxpayer identification number on the application
<PAGE>

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 addresses listed in the "Quick
Address and Telephone Reference" on page 14.

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.

or written instructions to one of the addresses listed previously. You may also
request a booklet of remittance slips for non-retirement accounts.

BY WIRE
Purchases may also be made by wiring money from your bank account to your Janus
account. Call 1-800-525-3713 to receive wiring instructions.

AUTOMATIC INVESTMENT PROGRAMS
Janus offers several automatic investment programs to help investors achieve
their financial goals as simply and conveniently as possible. You may open a new
account with a $500 initial purchase and $100 automatic subsequent investments.

- - BY SYSTEMATIC EXCHANGE
With a Systematic Exchange you determine the amount of money ($100 minimum)
you would like automatically exchanged from one Janus account to another on
any day of the month. For more information on how to establish this option,
call 1-800-525-3713.

HOW TO EXCHANGE SHARES
On any business day, you may exchange all or a portion of your shares into any
other available Janus fund.

IN WRITING
To request an exchange in writing, please follow the instructions for written
requests on page 22.

BY SYSTEMATIC EXCHANGE
As noted above, you may establish a Systematic Exchange for as little as a $100
subsequent purchase per month on established accounts. You may establish a new
account with a $500 initial purchase and subsequent $100 systematic exchanges.
If the balance in the account you are exchanging from falls below the systematic
exchange amount, all remaining shares will be exchanged and the program will be
discontinued.
<PAGE>

BY INTERNET
Exchanges may also be made on our Web site at janus.com.

- - Exchanges between existing accounts must meet the $100 subsequent investment
requirement.

- - 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.

- - 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.

If the shares are held in certificate form, the certificate must be returned
with or before your redemption request. Your transaction will be
<PAGE>

processed at the next NAV calculated after your order is received and accepted.
This option may be suspended for 10 days following an address change unless a
signature guarantee is provided.

IN WRITING
To request a redemption in writing, please follow the instructions for written
requests noted on page 22.

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 XpressLine
1-888-979-7737, for access to this option 24 hours a day. (There is a daily
limit of $100,000 per account for redemptions payable by check).

BY INTERNET
Redemptions may also be made on our Web site at janus.com.

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.

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 ON OUR WEB SITE,
OR THROUGH THE AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUND MAY DELAY THE
PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE
TO ALLOW THE PURCHASE TO CLEAR. Unless you provide alternate instructions, your
proceeds will be invested in Janus Money Market Fund - Investor Shares during
the 15 day hold period.

WRITTEN INSTRUCTIONS
To redeem or exchange all or part of your shares in writing, your request should
be sent to one of the addresses listed on page 16 and must include the following
information:

- - the name of the Fund

- - the account number

- - the amount of money or number of shares being redeemed or exchanged

- - 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.
<PAGE>

- - 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(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 by check 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 FUND RESERVES THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER
CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR
MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713.

HOW TO OBTAIN A SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized account transfers. The
following financial institutions may guarantee signatures: banks, savings and
loan associations, trust companies, credit unions, broker-dealers and member
firms of a national securities exchange. Call your financial
<PAGE>

institution to see if they have the ability to guarantee a signature. A
signature guarantee cannot 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 accepted by the Fund (or the
Fund's agent or authorized designee). 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. 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). 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 Fund's
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. See the SAI for more detailed information.

SHAREHOLDER SERVICES AND ACCOUNT POLICIES

follow the procedures accordingly). You may also need to have bank account
information, wire instructions or other options established on your account. The
Fund and its agents will not be responsible for any losses resulting from
unauthorized transactions on our Web site when procedures designed for engaging
in such transactions are followed. If you have questions, please call
1-800-975-9932 to speak to a Janus representative.

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 14 or to close such accounts. This policy will apply to accounts
participating in the Automatic Monthly Investment Program only if your account
balance does not reach the required minimum initial investment or falls below
such minimum and you have discontinued monthly investments. This policy does not
apply to accounts that fall below the minimums solely as a result of market
value fluctuations. It is expected that accounts will be valued in September 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
<PAGE>

and certain Processing Organizations may receive compensation from the Fund for
shareholder recordkeeping and similar services.

TAXPAYER IDENTIFICATION NUMBER
On the application or other appropriate form, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that you
are not subject to backup withholding for failing to report income to the IRS.
If you are subject to the 31% backup withholding or you did not certify your
taxpayer identification 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.

TEMPORARY SUSPENSION OF SERVICES
The Fund or its agents may, in case of emergency, temporarily suspend telephone
transactions and other shareholder services.

STATEMENTS AND REPORTS
Investors participating in an automatic investment program will receive
quarterly confirmations of all transactions. In addition, the Fund will send you
an immediate transaction confirmation statement after every non-systematic
transaction. The Fund distributes dividend information annually.

MANAGEMENT OF THE FUND

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.

PORTFOLIO MANAGERS
HELEN YOUNG HAYES is Executive Vice President and co-manager of the Fund, which
she has managed since its inception. Ms. Hayes joined Janus Capital in 1987 and
has also managed or co-managed Janus Worldwide Fund since its inception. She
holds a Bachelor of Arts in Economics from Yale University and received the
Chartered Financial Analyst designation.

LAURENCE J. CHANG is Executive Vice President and co-manager of the Fund, which
he has co-managed since April 1998, and assistant portfolio manager of Janus
Worldwide Fund. Mr. Chang joined Janus Capital in 1993 as a research analyst. 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. Mr. Chang received the Chartered Financial Analyst designation.
<PAGE>

OTHER INFORMATION

31
DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES THE FUND TO DISTRIBUTE NET
INCOME AND ANY NET GAINS REALIZED ON ITS INVESTMENTS ANNUALLY. THE FUND'S INCOME
FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM GAINS ARE PAID TO
SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM GAINS ARE PAID
TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS. DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS ARE NORMALLY DECLARED AND PAID IN DECEMBER.

HOW DISTRIBUTIONS AFFECT A FUND'S NAV
Distributions are paid to shareholders as of the record date of the distribution
of the Fund, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in the Fund's daily NAV. The
share price of the Fund drops by the amount of the distribution, net of any
subsequent market fluctuations. As an example, assume that on December 31, the
Fund declared a dividend in the amount of $0.25 per share. If the Fund's share
price was $10.00 on December 30, the Fund's share price on December 31 would be
$9.75, barring market fluctuations. Shareholders should be aware that
distributions from a taxable mutual fund are not value-enhancing and may create
income tax obligations.

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
<PAGE>

option at any time by writing the Fund at one of the addresses listed on page 16
or calling 1-800-525-3713. The Fund offers the following options:

1. REINVESTMENT OPTION. You may reinvest your income dividends and capital gains
distributions in additional shares. This option is assigned automatically if
no other choice is made.

2. CASH OPTION. You may receive your income dividends and capital gains
distributions in cash.

3. REINVEST AND CASH OPTION. You may receive either your income dividends or
capital gains distributions in cash and reinvest the other in additional
shares.

4. REDIRECT OPTION. You may direct your dividends or capital gains to purchase
shares of another Janus fund.

Information regarding the tax status of income dividends and capital gains
distributions will be mailed to shareholders on or before January 31st of each
year.

TAXATION OF THE FUND
Dividends, interest and some capital gains received by the Fund on foreign
securities may be subject to tax withholding or other foreign taxes. 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.

The Fund does not expect to pay federal income or excise taxes because it
intends to meet certain requirements of the Internal Revenue Code. It is
important that the Fund meets these requirements so that any earnings on your
investment will not be taxed twice.
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance from May 2, 1994 through October 31st of each fiscal year
shown. Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Annual Report, which is available upon request and incorporated by reference
into the SAI.

<TABLE>
<CAPTION>
1998
[TO BE
FILED BY
PERIODS ENDING OCTOBER 31ST AMENDMENT] 1997 1996 1995 1994(1)
<S> <C> <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 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 to
average net assets** 0.81% 0.73% 0.36% (0.64%)
15. Portfolio turnover rate** 72% 71% 188% 181%
- ---------------------------------------------------------------------------------------------
</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.
<PAGE>

35
GLOSSARY OF INVESTMENT TERMS

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 in
private placements under Section 4(2) of the Securities Act of 1933.

COMMON STOCKS are equity securities representing shares of ownership in a
company, and usually carry 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.

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.

MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, the portfolio manager may
have to reinvest the proceeds from the securities at a lower rate. Potential
market gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.

PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICS") are any foreign corporations
which generate 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.

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.

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 on 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.

INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices or other financial
indicators. Such securities may be positively or negatively indexed (i.e., their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments. The Fund bears
<PAGE>

the market risk of an investment in the underlying instruments, as well as the
credit risk of the issuer.

This page intentionally left blank
<PAGE>

[JANUS LOGO]

1-800-525-3713

P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

Investment Company Act File No. 811-1879
<PAGE>

[JANUS LOGO]
Janus Money Market Fund
Janus Government Money Market Fund
Janus Tax-Exempt Money Market Fund
Institutional Shares

PROSPECTUS
FEBRUARY 17, 1999

Janus Money Market Fund, Janus Government Money Market Fund, and Janus
Tax-Exempt Money Market Fund 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
($5,000,000 for Janus Money Market Fund and $250,000 for Janus Government Money
Market Fund and Janus Tax-Exempt Money Market Fund). Each Fund is a separate
series of Janus Investment Fund, an open-end management investment company.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S> <C>
RISK/RETURN SUMMARY
Janus Money Market Fund.......................................... page 2
Janus Government Money Market Fund............................... page 2
Janus Tax-Exempt Money Market Fund............................... page 2
Fees and Expenses................................................ page 7

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RISKS
Investment Objectives............................................ page 8
Principal Investment Strategies.................................. page 8
Common Investment Policies....................................... page 9
Types of Investments............................................. page 9
Common Investment Techniques..................................... page 12

INVESTMENT ADVISER............................................... page 14

DISTRIBUTIONS AND TAXES.......................................... page 15

FINANCIAL HIGHLIGHTS............................................. page 17

OTHER INFORMATION................................................ page 19

SHAREHOLDER'S GUIDE
How to Open an Account........................................... page 22
Purchasing Shares................................................ page 23
How to Exchange Shares........................................... page 25
How to Redeem Shares............................................. page 25
Special Shareholder Services and Other Information............... page 27
</TABLE>

<PAGE>

RISK/RETURN SUMMARY

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE MONEY MARKET FUNDS?

- - JANUS MONEY MARKET FUND AND JANUS GOVERNMENT MONEY MARKET FUND seek maximum
current income to the extent consistent with stability of capital.

- - JANUS TAX-EXEMPT MONEY MARKET FUND seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of capital.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE MONEY MARKET FUNDS?

The Money Market Funds will invest only in high-quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital.

<PAGE>

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE MONEY MARKET FUNDS?

<PAGE>

The following information illustrates how Institutional Shares of each Money
Market Fund's performance has varied over time. The bar charts depict the change
in performance from year to year.

[TO BE FILED BY AMENDMENT]

JANUS MONEY MARKET FUND - INSTITUTIONAL SHARES

A BAR CHART showing Annual Total Returns for Janus Money Market Fund -
Institutional Shares from 1996 through 1998:

[To be
Filed
by
5.53% 5.72% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the Fund's
current yield, call the Janus XpressLine(TM) at 1-888-979-7737.

<PAGE>

JANUS GOVERNMENT MONEY MARKET FUND - INSTITUTIONAL SHARES

A BAR CHART showing Annual Total Returns for Janus Government Money Market Fund
- - Institutional Shares from 1996 through 1998:

[To be
Filed
by
5.44% 5.59% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the Fund's
current yield, call the Janus XpressLine(TM) at 1-888-979-7737.

<PAGE>

JANUS TAX-EXEMPT MONEY MARKET FUND - INSTITUTIONAL SHARES

A BAR CHART showing Annual Total Returns for Janus Tax-Exempt Money Market Fund
- - Institutional Shares from 1996 through 1998:

[To be
Filed
by
3.64% 3.68% Amendment]
1996 1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the Fund's
current yield, call the Janus XpressLine(TM) at 1-888-979-7737.

The Money Market Funds' past performance does not necessarily indicate how they
will perform in the future.

<PAGE>

FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the example below shows, these costs are borne indirectly by all
shareholders.

These tables describe the fees and expenses that you may pay if you buy and hold
Shares of the Funds. They are based upon gross expenses (without the effect of
expense offset arrangements) for the fiscal year ended October 31, 1998.

<TABLE>
<CAPTION>
JANUS MONEY JANUS GOVERNMENT JANUS TAX-EXEMPT
INSTITUTIONAL SHARES MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C> <C>
MANAGEMENT FEE .20 % .20 % .20 %
OTHER EXPENSES .15 % .15 % .15 %
TOTAL ANNUAL FUND OPERATING
EXPENSES WITHOUT WAIVERS* .35 % .35 % .35 %
TOTAL WAIVERS (.20)% (.20)% (.20)%
TOTAL ANNUAL FUND OPERATING
EXPENSES WITH WAIVERS* .15 % .15 % .15 %
</TABLE>

- --------------------------------------------------------------------------------

* All expenses are stated both with and without waivers by Janus Capital.
Janus Capital may modify or terminate the waivers at any time upon at least
90 days' notice to the Trustees.
- ------------------------------------------------------------------------------

Example

THE FOLLOWING EXAMPLE IS BASED ON FUND EXPENSES WITHOUT WAIVERS.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------
<S> <C> <C> <C> <C>
Janus Money Market Fund $36 $113 $197 $443
Janus Government Money Market Fund $36 $113 $197 $443
Janus Tax-Exempt Money Market Fund $36 $113 $197 $443
</TABLE>

<PAGE>

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND RISKS

This section takes a closer look at the investment objective of each of the
Funds, their principal investment strategies and certain risks of investing in
the Funds. Strategies and policies that are noted as "fundamental" cannot be
changed without a shareholder vote.

<PAGE>

COMMON INVESTMENT POLICIES Each of the Money Market Funds will:

- - invest in high quality, short-term money market instruments that present
minimal credit risks, as determined by Janus Capital

- - 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)

- - maintain a dollar-weighted average portfolio maturity of 90 days or less

TYPES OF INVESTMENTS

JANUS MONEY MARKET FUND
Janus Money Market Fund invests primarily in:

- - high quality debt obligations

- - obligations of financial institutions

This Fund may also invest (to a lesser degree) in:

- - U.S. Government Securities (securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities)

- - municipal securities

DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers. Debt obligations
include:

- - commercial paper

- - notes and bonds

- - privately issued commercial paper or other securities that are restricted as
to disposition under the federal securities laws

<PAGE>

OBLIGATIONS OF FINANCIAL INSTITUTIONS
Examples of obligations of financial institutions include:

JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund invests exclusively in:

- - U.S. Government Securities

- - repurchase agreements secured by such obligations

- - up to 20% of its net assets in securities whose interest is federally taxable

<PAGE>

MUNICIPAL SECURITIES Municipal securities include:

- - municipal notes

- - short-term municipal bonds

- - participation interests in municipal securities

<PAGE>

certain securities whose interest is subject to such taxation, as described
under Janus Money Market Fund's investments.

COMMON INVESTMENT TECHNIQUES

The following is a description of other investment techniques that the Money
Market Funds may use:

PARTICIPATION INTERESTS
A participation interest gives a Money Market Fund a proportionate, undivided
interest in underlying debt securities and usually carries a demand feature.

<PAGE>

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, acts as sub-adviser for a number of
private-label mutual funds and provides separate account advisory services for
institutional accounts.

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. However, 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. You will be notified of any
change in this limit.

<PAGE>

DISTRIBUTIONS AND TAXES

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. 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.

<PAGE>

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.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the
financial performance of the Fund's Shares from April 17, 1995 through October
31st of each fiscal year shown. Certain information reflects financial results
for a single Fund share. The total returns in the tables represent the rate that
an investor would have earned on an investment in the Shares of each of the
Funds, (assuming the reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Funds' financial statements, are included in the Annual Report, which
is available upon request, and incorporated by reference into the SAI.

JANUS MONEY MARKET FUND
PERIODS ENDING OCTOBER 31ST

1998
[TO BE FILED
INSTITUTIONAL SHARES BY AMENDMENT] 1997 1996 1995(1)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income . 0.06 0.05 0.03
- --------------------------------------------------------------------------------
3. Net gains or losses on securities
(both realized and unrealized) -- -- -- --
- --------------------------------------------------------------------------------
4. Total from investment operations . 0.06 0.05 0.03
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (. ) (0.06) (0.05) (0.03)
- --------------------------------------------------------------------------------
6. Distributions (from capital
gains) -- -- -- --
- --------------------------------------------------------------------------------
7. Total distributions (. ) (0.06) (0.05) (0.03)
- --------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
9. Total return* % 5.71% 5.61% 3.25%
- --------------------------------------------------------------------------------
10. Net assets, end of period (in millions) $ $2,771 $1,706 $305
11. Average net assets for the
period (in millions) $ $2,545 $874 $202
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** % 5.54% 5.41% 5.86%
- --------------------------------------------------------------------------------
</TABLE>

(1) Period from April 17, 1995 (inception of Shares) through October 31, 1995.
(2) The ratio was .35% before waiver.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.

<PAGE>

- -

(continued)

JANUS GOVERNMENT MONEY MARKET FUND
PERIODS ENDING OCTOBER 31ST

1998
[TO BE FILED
INSTITUTIONAL SHARES BY AMENDMENT] 1997 1996 1995(1)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income . 0.05 0.05 0.03
- -----------------------------------------------------------------------------------
3. Net gains or losses on securities
(both realized and unrealized) -- -- -- --
- -----------------------------------------------------------------------------------
4. Total from investment operations . 0.05 0.05 0.03
- -----------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (0.05) (0.05) (0.03)
- -----------------------------------------------------------------------------------
6. Distributions (from capital gains) -- -- -- --
- -----------------------------------------------------------------------------------
7. Total distributions (. ) (0.05) (0.05) (0.03)
- -----------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------
9. Total return* % 5.58% 5.50% 3.20%
- -----------------------------------------------------------------------------------
10. Net assets, end of period (in
millions) $ $36 $59 $44
11. Average net assets for the period
(in millions) $ $57 $53 $25
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** % 6.04% 5.34% 5.75%
- -----------------------------------------------------------------------------------
</TABLE>

JANUS TAX-EXEMPT MONEY MARKET FUND
PERIODS ENDING OCTOBER 31ST

<TABLE>
<CAPTION>
1998
[TO BE FILED
INSTITUTIONAL SHARES BY AMENDMENT] 1997 1996 1995(1)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income . 0.04 0.04 0.02
3. Net gains or losses on securities
(both realized and unrealized) -- -- -- --
- -----------------------------------------------------------------------------------
4. Total from investment operations . 0.04 0.04 0.02
- -----------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) (. ) (0.04) (0.04) (0.02)
6. Distributions (from capital gains) -- -- -- --
- -----------------------------------------------------------------------------------
7. Total distributions (. ) (0.04) (0.04) (0.02)
- -----------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF PERIOD $1.00 $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>

<PAGE>

OTHER INFORMATION

CLASSES OF SHARES
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
minimum investment requirements. A second class of shares of each Fund, Service
Shares, are available only through banks or other 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 19, 1999, the following Institution owned more than 25% of the
Shares of Janus Money Market Fund:

<TABLE>
<CAPTION>
Institution Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
[TO BE FILED BY AMENDMENT]
- -------------------------------------------------------------------------------
</TABLE>

Thus, these shareholders may have the power to control any vote of the Shares of
these Funds.

<PAGE>

Shareholder's Guide

This section contains information about opening your account with Janus,
purchases and redemptions, and other services and options available to
shareholders.

You may visit our Web site at janus.com for more information about the Shares.

[LOGO]

<PAGE>

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.

<PAGE>

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. Contact the Institutional Services Money Desk at
1-800-29JANUS for complete instructions. Purchase requests received before 3:00
p.m. for Janus Money 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 (the daily
yield for the Funds is calculated after these times). 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.

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 Institutional Services Money Desk 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.

<PAGE>

MINIMUM INVESTMENT
JANUS MONEY MARKET FUND
The minimum investment for the Institutional Shares of Janus Money Market Fund
is $5,000,000. Shares may be purchased with an initial $250,000 investment,
however, the $5,000,000 minimum must be reached within six months of opening the
account. Shareholders who do not reach or maintain the $5,000,000 minimum will
be given the option of (1) exchanging into Investor Shares of Janus Money Market
Fund, Institutional Shares of Janus Government Money Market Fund or Janus
Tax-Exempt Money Market Fund, or shares of another Janus fund or (2) having
their shares redeemed. Shareholders' balances that fall below the required
minimum will have 30 days to reach an account balance of $5,000,000.

JANUS GOVERNMENT MONEY MARKET FUND AND JANUS TAX-EXEMPT MONEY MARKET FUND The
minimum initial investment in these 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 shares of another Janus fund or having their Shares
redeemed.

NET ASSET VALUE
The net asset value 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. The NAV of Fund shares is
not determined on the days the NYSE is closed (generally, New Year's Day, Martin
Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas). 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

<PAGE>

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 Institutional Services 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.

<PAGE>

IN WRITING
To redeem all or part of your Shares in writing, send a letter of instruction to
the following address:

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, 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.

<PAGE>

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 30 days for Janus Money
Market Fund or 60 days for Janus Government Money Market Fund and Janus
Tax-Exempt Money Market Fund 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.

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

<PAGE>

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.

<PAGE>

[JANUS LOGO]

1-800-525-3713

P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

You can request other information, including a Statement of Additional
Information, Annual Report or Semiannual Report, free of charge, by contacting
Janus at 1-800-525-3713 or visiting our Web site at janus.com. In the Funds'
Annual Report you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during their last
fiscal year. Other information is also available from financial intermediaries
that sell shares of the Funds.

Investment Company Act File No. 811-1879

<PAGE>

[JANUS LOGO]
Janus Money Market Fund
Janus Government Money Market Fund
Janus Tax-Exempt Money Market Fund
Service Shares
PROSPECTUS
FEBRUARY 17, 1999

Janus Money Market Fund, Janus Government Money Market Fund, and Janus
Tax-Exempt Money Market Fund 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, an open-end management investment company.

TABLE OF CONTENTS

<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Janus Money Market Fund .................................................page 2
Janus Government Money Market Fund ......................................page 2
Janus Tax-Exempt Money Market Fund ......................................page 2
Fees and Expenses .......................................................page 7

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RISKS
Investment Objectives ...................................................page 8
Principal Investment Strategies .........................................page 8
Common Investment Policies ..............................................page 8
Types of Investments ....................................................page 9
Common Investment Techniques ............................................page 12

INVESTMENT ADVISER.......................................................page 14

DISTRIBUTIONS AND TAXES..................................................page 15

FINANCIAL HIGHLIGHTS.....................................................page 17

OTHER INFORMATION........................................................page 18

SHAREHOLDER'S GUIDE
Purchases ...............................................................page 20
Minimum Investment ......................................................page 21
Net Asset Value .........................................................page 21
Redemptions .............................................................page 21
Shareholder Communication ...............................................page 22
</TABLE>
<PAGE>

1
<PAGE>

RISK/RETURN SUMMARY

1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE MONEY MARKET FUNDS?

- - JANUS MONEY MARKET FUND AND JANUS GOVERNMENT MONEY MARKET FUND seek maximum
current income to the extent consistent with stability of capital.

- - JANUS TAX-EXEMPT MONEY MARKET FUND seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of capital.

2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE MONEY MARKET FUNDS?

The Money Market Funds will invest only in high-quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital.

3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE MONEY MARKET FUNDS?

The following information illustrates how Service Shares of each Money Market
Fund's performance has varied over time. The bar charts depict the change in
performance from year to year.

[TO BE FILED BY AMENDMENT]

JANUS MONEY MARKET FUND - SERVICE SHARES

A BAR CHART showing Annual Total Returns for Janus Money Market Fund -
Service Shares from 1997 through 1998:

[To be
Filed
by
5.46% Amendment]
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.
<PAGE>

JANUS GOVERNMENT MONEY MARKET FUND - SERVICE SHARES

A BAR CHART showing Annual Total Returns for Janus Government Money Market
Fund - Service Shares from 1997 through 1998:

[To be
Filed
by
5.33% Amendment]
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.
<PAGE>

JANUS TAX-EXEMPT MONEY MARKET FUND - SERVICE SHARES

A BAR CHART showing Annual Total Returns for Janus Tax-Exempt Money Market Fund
- - Service Shares from 1997 through 1998:

[To be
Filed
by
3.44% Amendment]
1997 1998

Each percentage is represented by a bar of proportionate size with the actual
total return printed above the bar.

Best Quarter _____ _____%
Worst Quarter _____ _____%

The 7-day yield for the Fund's Shares on December 31, 1998 was %. For the
Fund's current yield, call the Janus XpressLine(TM) at 1-888-979-7737.

The Money Market Funds' past performance does not necessarily indicate how they
will perform in the future.
<PAGE>

ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and include fees
for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the example below shows, these costs are borne indirectly by all
shareholders.

<TABLE>
<CAPTION>
JANUS MONEY JANUS GOVERNMENT JANUS TAX-EXEMPT
SERVICE SHARES MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C> <C>
MANAGEMENT FEE .20% .20% .20%
OTHER EXPENSES .40% .40% .40%
TOTAL ANNUAL FUND OPERATING
EXPENSES WITHOUT WAIVERS* .60% .60% .60%
TOTAL WAIVERS (.20)% (.20)% (.20)%
TOTAL ANNUAL FUND OPERATING
EXPENSES WITH WAIVERS* .40% .40% .40%
</TABLE>

* All expenses are stated both with and without waivers by Janus Capital.
Janus Capital may modify or terminate the waivers at any time upon at
least 90 days' notice to the Trustees.

Example

THE FOLLOWING EXAMPLE IS BASED ON FUND EXPENSES WITHOUT WAIVERS.

This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in each of the Funds for the time periods
indicated then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and
that the Funds' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------
<S> <C> <C> <C> <C>
Janus Money Market Fund $61 $192 $335 $750
Janus Government Money Market Fund $61 $192 $335 $750
Janus Tax-Exempt Money Market Fund $61 $192 $335 $750
</TABLE>
<PAGE>

INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT
STRATEGIES AND RISKS

COMMON INVESTMENT POLICIES
Each of the Money Market Funds will:

- - invest in high quality, short-term money market instruments that present
minimal credit risks, as determined by Janus Capital

- - 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)

- - maintain a dollar-weighted average portfolio maturity of 90 days or less

TYPES OF INVESTMENTS

JANUS MONEY MARKET FUND
Janus Money Market Fund invests primarily in:

- - high quality debt obligations

- - obligations of financial institutions

This Fund may also invest (to a lesser degree) in:

- - U.S. Government Securities (securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities)

- - municipal securities

DEBT OBLIGATIONS
The Fund may invest in debt obligations of domestic issuers. Debt obligations
include:

- - commercial paper

- - notes and bonds

- - privately issued commercial paper or other securities that are restricted as
to disposition under the federal securities laws
<PAGE>

OBLIGATIONS OF FINANCIAL INSTITUTIONS
Examples of obligations of financial institutions include:

JANUS GOVERNMENT MONEY MARKET FUND
Janus Government Money Market Fund invests exclusively in:

- - U.S. Government Securities

- - repurchase agreements secured by such obligations

- - up to 20% of its net assets in securities whose interest is federally taxable
<PAGE>

MUNICIPAL SECURITIES
Municipal securities include:

- - municipal notes

- - short-term municipal bonds

- - participation interests in municipal securities

certain securities whose interest is subject to such taxation, as described
under Janus Money Market Fund's investments.

COMMON INVESTMENT TECHNIQUES

The following is a description of other investment techniques that the Money
Market Funds may use:

PARTICIPATION INTERESTS
A participation interest gives a Money Market Fund a proportionate, undivided
interest in underlying debt securities and usually carries a demand feature.

MORTGAGE- AND ASSET-BACKED SECURITIES
The Money Market Funds may purchase fixed or variable 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 other government-related entity. Janus Money Market Fund
and Janus Tax-Exempt Money Market Fund may purchase other mortgage- and
asset-backed securities including securities backed by automobile loans,
equipment leases or credit card receivables.

INVESTMENT ADVISER

The Funds have entered into an Administrative Agreement with Janus Capital where
Janus Capital is compensated for providing administrative, compliance and
accounting services including custody and transfer agency services. Janus
Capital may use all or a portion of its administrative 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 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 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 acting in the administrative capacities described
above or should Congress relax current restriction on depository institutions,
the Trustees will consider appropriate changes in the services.
<PAGE>

DISTRIBUTIONS AND TAXES

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
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.

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Funds'
financial performance of the Funds' Shares from November 22, 1996 through
October 31st of each year shown. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned on an investment in the Shares of each of the
Funds, (assuming the reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Funds' financial statements, are included in the Annual Report, which
is available upon request, and incorporated by reference into the SAI.

<TABLE>
<CAPTION>
JANUS JANUS
JANUS GOVERNMENT MONEY TAX-EXEMPT MONEY
MONEY MARKET FUND MARKET FUND MARKET FUND
PERIODS ENDED OCTOBER 31ST ---------------------- ---------------------- ------------------------
1998 1998 1998
[TO BE FILED [TO BE FILED [TO BE FILED
BY BY BY
SERVICE SHARES AMENDMENT] 1997(1) AMENDMENT] 1997(1) AMENDMENT] 1997(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 0.05 0.05 0.03
3. Net gains or losses on
securities (both
realized and unrealized) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
4. Total from investment
operations 0.05 0.05 0.03
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
5. Dividends (from net
investment income) (0.05) (0.05) (0.03)
6. Distributions (from
capital gains) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
7. Total distributions (0.05) (0.05) (0.03)
- --------------------------------------------------------------------------------------------------------
8. NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $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 waiver.
* Total return is not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
<PAGE>

OTHER INFORMATION

CLASSES OF SHARES
Each Fund currently offers three classes of shares by separate prospectuses. The
Shares offered by this Prospectus 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. 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 minimum 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 19, 1999, the following shareholder owned more than 25% of the
Shares of Janus Money Market Fund:

<TABLE>
<CAPTION>
Shareholder Address Percentage Ownership
- -------------------------------------------------------------------------------
<S> <C> <C>
[TO BE FILED BY AMENDMENT]
- -------------------------------------------------------------------------------
</TABLE>

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.

[LOGO]
<PAGE>

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.
<PAGE>

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 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 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. 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). 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.

REDEMPTIONS
Redemptions, like purchases, may be effected only through the accounts of
participating Financial Institutions. Your Financial Institution will provide
<PAGE>

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.
<PAGE>

[JANUS LOGO]

1-800-525-3713
P.O. Box 173375
Denver, Colorado 80217-3375
janus.com

You can request other information, including a Statement of Additional
Information, Annual Report or Semiannual Report, free of charge, by contacting
Janus at 1-800-525-3713 or visiting our Web site at janus.com. In the Funds'
Annual Report you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during their last
fiscal year. Other information is also available from financial intermediaries
that sell Shares of the Funds.

Investment Company Act File No. 811-1879
<PAGE>

This page intentionally left blank
<PAGE>

JANUS INVESTMENT FUND

100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 17, 1999

DOMESTIC GROWTH FUNDS
Janus Fund

Janus Enterprise Fund
Janus Mercury Fund
Janus Olympus Fund
Janus Special Situations Fund
Janus Twenty Fund

GLOBAL GROWTH FUNDS
Janus Global Life Sciences Fund

Janus Global Technology Fund

Janus Worldwide 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 pertains to the funds listed above,
each of which is a separate series of Janus Investment Fund, a Massachusetts
business trust.

This SAI is not a Prospectus and should be read in conjunction with the Funds'
Prospectuses dated February 17, 1999, 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. The Annual Reports,
which contain important financial information about the Funds, are incorporated
by reference into this SAI and are also available, without charge, at the above
phone number or address.

[JANUS LOGO]
<PAGE>

JANUS INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Classification, Portfolio Turnover, Investment Policies and Restrictions,

and Investment Strategies and Risks.................................... page 3

Investment Adviser...................................................... page 32

Custodian, Transfer Agent and Certain Affiliations...................... page 36

Portfolio Transactions and Brokerage.................................... page 37

Trustees and Officers................................................... page 43

Purchase of Shares...................................................... page 49

Net Asset Value Determination...................................... page 50

Reinvestment of Dividends and Distributions........................ page 51

Redemption of Shares.................................................... page 51

Shareholder Accounts.................................................... page 52

Telephone Transactions............................................. page 52

Systematic Redemptions............................................. page 52

Tax-Deferred Accounts................................................... page 53

Income Dividends, Capital Gains Distributions and Tax Status............ page 54

Principal Shareholders.................................................. page 55

Miscellaneous Information............................................... page 55

Shares of the Trust................................................ page 56

Shareholder Meetings............................................... page 56

Voting Rights...................................................... page 56

Master/Feeder Option............................................... page 57

Independent Accountants............................................ page 57

Registration Statement............................................. page 57

Performance Information................................................. page 57

Financial Statements.................................................... page 60

Appendix A.............................................................. page 61
- --------------------------------------------------------------------------------

2
<PAGE>

CLASSIFICATION, PORTFOLIO TURNOVER, INVESTMENT POLICIES AND RESTRICTIONS, AND
INVESTMENT STRATEGIES AND RISKS

CLASSIFICATION

The Funds are open-end, management investment companies. The investment Company
Act of 1940 ("1940 Act") classifies investment companies as either diversified
or nondiversified. Janus Enterprise Fund, Janus Olympus Fund, Janus Special
Situations Fund, Janus Twenty Fund, Janus Global Life Sciences Fund and Janus
Global Technology Fund are nondiversified funds. Each of these Funds reserves
the right to become a diversified investment company by limiting the investments
in which more than 5% of its total assets are invested. Janus Fund, Janus
Mercury Fund, Janus Worldwide Fund, Janus Balanced Fund, Janus Equity Income
Fund, Janus Growth and Income Fund, Janus Flexible Income Fund, Janus High-Yield
Fund, Janus Federal Tax-Exempt Fund and Janus Short-Term Bond Fund are deemed to
be diversified funds.

PORTFOLIO TURNOVER

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 turnover rates for the fiscal periods indicated.
The information below is for fiscal years ended October 31.

<TABLE>
<CAPTION>
1998
[TO BE
FILED BY
FUND NAME Amendment] 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Janus Fund...................................... 132%
Janus Enterprise Fund........................... 111%
Janus Mercury Fund.............................. 157%
Janus Olympus Fund.............................. 244%
Janus Special Situations Fund................... 146%(1)
Janus Twenty Fund............................... 123%
Janus Global Life Sciences Fund(2).............. N/A N/A
Janus Global Technology Fund(2)................. N/A N/A
Janus Worldwide Fund............................ 79%
Janus Balanced Fund............................. 139%
Janus Equity Income Fund........................ 180%
Janus Growth and Income Fund.................... 127%
Janus Flexible Income Fund...................... 207%
Janus High-Yield Fund........................... 404%
Janus Federal Tax-Exempt Fund................... 304%
Janus Short-Term Bond Fund...................... 133%
- ----------------------------------------------------------------------
</TABLE>

(1) Annualized rate based on the ten month period ended October 31, 1997.

(2) The Fund had not commenced operations as of October 31, 1998.

3
<PAGE>

INVESTMENT POLICIES AND RESTRICTIONS APPLICABLE TO ALL FUNDS

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, no Fund may:

(1) Own more than 10% of the outstanding voting securities of any one issuer
and, as to fifty percent (50%) of the value of its total assets for the
nondiversified Funds and as to seventy-five percent (75%) of the value of the
total assets of the diversified Funds, purchase the securities of any one issuer
(except cash items and "government securities" as defined under the 1940 Act, as
amended), if immediately after and as a result of such purchase, the value of
the holdings of a Fund 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, the nondiversified Funds may invest in the securities of as few as
two issuers.

(2) Invest 25% or more of the value of its total assets in any particular
industry (other than U.S. government securities). This policy does not apply to
Janus Global Life Sciences Fund. This policy does not apply to Janus Federal
Tax-Exempt Fund regarding municipal obligations only. 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
the 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).

4
<PAGE>

(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, 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 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,

5
<PAGE>

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 repayment to a lending Fund could
result in a lost investment opportunity or additional borrowing costs.

6
<PAGE>

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 the purposes of each Fund's policies on investing in particular industries,
the Funds will rely primarily on industry or industry group classifications
published by Bloomberg L.P. To the extent that Bloomberg L.P. industry
classifications are so broad that the primary economic characteristics in a
single industry 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 GLOBAL LIFE SCIENCES FUND. As a fundamental policy, Janus Global Life
Sciences Fund will normally invest at least 25% of its total assets, in the
aggregate, in the following industry groups: health care; pharmaceuticals;
agriculture; cosmetics/personal care; and biotechnology.

JANUS BALANCED FUND. As an operational policy, at least 25% of the assets of
Janus Balanced Fund normally will be invested in fixed-income securities.

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 expects to
maintain an average weighted effective maturity of three years or less.

7
<PAGE>

The portfolio manager may consider estimated prepayment dates or call dates of
certain securities in computing the portfolio's effective maturity.

INVESTMENT STRATEGIES AND RISKS

CASH POSITION

As discussed in the Prospectus, when a Fund's portfolio manager believes that
market conditions are unfavorable for profitable investing, or when he is
otherwise unable to locate attractive investment opportunities, the Fund's
investment in cash and similar investments may increase. Securities that the
Funds may invest in as a means of receiving a return on idle cash include
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. (See "Investment Company Securities"
on page 11).

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
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"). 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.

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. Because illiquid securities may not be readily
marketable, a

8
<PAGE>

portfolio manager may not be able to dispose of them in a timely manner. As a
result, a Fund may be forced to hold illiquid securities while their price
depreciates. Depreciation in the price of illiquid securities may cause the net
asset value of a Fund to decline.

FOREIGN SECURITIES

The Funds may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities, because the Funds' performance may
depend on issues other than the performance of a particular company. These
issues include:

- - TRANSACTION COSTS. Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than those involved
in domestic transactions.

9
<PAGE>

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.

ZERO COUPON, STEP COUPON AND PAY-IN-KIND 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. For the purposes of any Fund's
restriction on investing 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).

Current federal income tax law requires holders of zero coupon 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

10
<PAGE>

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 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.

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<PAGE>

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 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 nor the 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

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<PAGE>

purchased or leased by the municipality; however, if the municipality stops
making payments, there generally will be no recourse against the vendor. 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 in
excess of the limitations of Section 12(d)(1) under the terms of an SEC
exemptive order obtained by Janus Capital and the Janus funds.

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 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.

Depositary Receipts are generally subject to the same sort of risks as direct
investments in a foreign country, such as, currency risk, political and economic
risk, and market risk, because their values depend on the performance of a
foreign security denominated in its home currency. The risks of foreign
investing are addressed in some detail in the Funds' prospectuses.

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.

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<PAGE>

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 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. 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.

In order to most effectively use these investments, a portfolio manager must
correctly assess probable movements in interest rates. This involves different
skills than those used to select most portfolio securities. If the portfolio
manager incorrectly forecasts such movements, a Fund could be adversely affected
by the use of variable or floating rate obligations.

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. No Fund will
invest

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<PAGE>

more than 5% of its assets in inverse floaters. Similar to variable and floating
rate obligations, effective use of inverse floaters requires skills different
from those needed to select most portfolio securities. If movements in interest
rates are incorrectly anticipated, a Fund could lose money or its NAV could
decline by the use of inverse floaters.

STRIP BONDS. 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.

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.

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 consists of 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 are 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 obtain 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

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<PAGE>

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
securities that are rated below investment grade (e.g., securities rated BB or
lower by Standard & Poor's Ratings Services or Ba or lower by Moody's Investors
Service, Inc.). 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.

Any 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, 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 its portfolio manager believes, based upon his 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
manager's belief about the resumption of income, however, the purchase of any

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<PAGE>

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.

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

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<PAGE>

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 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

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<PAGE>

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 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

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<PAGE>

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 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.

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<PAGE>

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 specified currency for an agreed price (which may be in U.S.
dollars or a foreign currency). A Fund will exchange foreign currencies

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<PAGE>

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

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<PAGE>

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.

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

24
<PAGE>

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 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.

25
<PAGE>

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, 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.

26
<PAGE>

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.

27
<PAGE>

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 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

28
<PAGE>

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 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

29
<PAGE>

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 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

30
<PAGE>

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 changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

31
<PAGE>

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 Global Life Sciences Fund,
Janus Global Technology Fund, Janus Worldwide 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

32
<PAGE>

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.

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.

33
<PAGE>

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>
1998
[To Be Filed by Amendment] 1997 1996
-------------------------- ------------------------ ------------------------
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 -
Janus Enterprise Fund $ 4,438,870 - $ 4,348,549 -
Janus Mercury Fund $ 13,721,557 - $12,407,830 -
Janus Olympus Fund $ 3,801,421 - $ 1,783,296(3) -
Janus Special
Situations Fund $ 1,090,013(4) - N/A -
Janus Twenty Fund $ 32,875,794 - $22,477,667 -
Janus Global Life
Sciences Fund(1) N/A - N/A - N/A -
Janus Global
Technology Fund(1) N/A - N/A - N/A -
Janus Worldwide Fund $ 51,015,512 - $19,645,721 -
Janus Balanced Fund $ 2,167,710 - $ 1,264,551 -
Janus Equity Income
Fund $ 394,962 - $ 71,858(2) -
Janus Growth and
Income Fund $ 9,650,498 - $ 5,501,734 -
Janus Flexible Income
Fund $ 3,910,319 - $ 3,620,317 -
Janus High-Yield Fund $ 1,993,630 $ 18,746 $ 556,207(3) $122,504
Janus Federal
Tax-Exempt Fund $ 321,447 $236,762 $ 217,873 $167,598
Janus Short-Term Bond
Fund $ 314,737 $258,118 $ 274,319 $238,092
- ------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund had not commenced operations as of October 31, 1998.

(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 (except Janus
Global Life Sciences Fund and Janus Global Technology Fund which are dated
September 14, 1998). Each Advisory Agreement will continue in effect until July
1, 1999 (except Janus Global Life Sciences Fund's and Janus Global Technology
Fund's agreements which will continue in effect until July 1, 2000), 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 a Fund or Janus
Capital on 60 days' written notice; (ii) terminates automatically in the event
of its assignment; and (iii) generally, may not be

34
<PAGE>

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 acts as sub-adviser for a number of private-label mutual funds and
provides separate account advisory services for institutional 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.

Kansas City Southern Industries, Inc. ("KCSI") owns approximately 82% 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.

KCSI has announced its intention to separate its transportation and financial
services businesses. KCSI is currently studying alternatives for completion of
the separation that meet its business objectives without risking adverse tax
consequences. KCSI expects completion of the separation to be contemplated in
1999.

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.

Janus Capital does not permit the Funds' portfolio managers to purchase and sell
securities for their own accounts except under the limited exceptions

35
<PAGE>

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.

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 required to be 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.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

State Street Bank and Trust Company, 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, 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 in each Fund 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

36
<PAGE>

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., 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 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.

37
<PAGE>

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 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.

38
<PAGE>

For the year ended October 31, 1998, 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:

[TO BE FILED BY AMENDMENT]

<TABLE>
<CAPTION>
Fund Name Commissions Transactions
- ------------------------------------------------------------------------
<S> <C> <C>
Janus Fund $ $
Janus Enterprise Fund $ $
Janus Mercury Fund $ $
Janus Olympus Fund $ $
Janus Special Situations Fund $ $
Janus Twenty Fund $ $
Janus Global Life Sciences Fund(1) N/A N/A
Janus Global Technology Fund(1) N/A N/A
Janus Worldwide Fund $ $
Janus Balanced Fund $ $
Janus Equity Income Fund $ $
Janus Growth and Income Fund $ $
Janus High-Yield Fund(2) $ $
- ------------------------------------------------------------------------
</TABLE>

(1) The Fund had not commenced operations as of October 31, 1998.

(2) 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 execution 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

39
<PAGE>

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 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.

40
<PAGE>

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>
1998
Fund Name [To Be Filed By Amendment] 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Fund $44,265,867 $29,000,380
Janus Enterprise Fund $ 1,366,558 $ 1,188,690
Janus Mercury Fund $ 5,379,505 $ 5,337,713
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
Janus Global Life Sciences
Fund(4) N/A - -
Janus Global Technology
Fund(4) N/A - -
Janus Worldwide Fund $26,537,096 $10,947,924
Janus Balanced Fund $ 642,234 $ 64,843
Janus Equity Income Fund $ 179,800 $ 63,683(1)
Janus Growth and Income Fund $ 3,401,847 $ 1,985,334
Janus Flexible Income Fund $ 35,674 $ 15,386
Janus High-Yield Fund $ 55,654 $ 39,981(2)
Janus Short-Term Bond Fund $ 3,092 -
- -------------------------------------------------------------------------------------
</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.

(4) The Fund had not commenced operations as of October 31, 1998.

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.

41
<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:

[TO BE FILED BY AMENDMENT]

<TABLE>
<CAPTION>
Commission Paid
through DSTS for
the Period Ended Reduction
October 31, of % of Total % of Total
Fund Name 1998* Expenses* Commissions+ Transactions
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Fund $ $ % %
Janus Enterprise Fund $ $ % %
Janus Mercury Fund $ $ % %
Janus Olympus Fund $ $ % %
Janus Special Situations
Fund $ $ % %
Janus Twenty Fund $ $ % %
Janus Worldwide Fund $ $ % %
Janus Balanced Fund $ $ % %
Janus Equity Income Fund $ $ % %
Janus Growth and Income
Fund $ $ % %
- --------------------------------------------------------------------------------------------
</TABLE>

Note: Funds that did not execute trades with DSTS during the stated period are
not included in the table.

<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 1997* Expenses* October 31, 1996* Expenses*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Fund $1,118,869 $839,152 $ 470,414 $352,810
Janus Enterprise Fund $ 33,551 $ 28,388 $ 11,030 $ 8,273
Janus Mercury Fund $ 95,033 $ 71,275 $ 88,645 $ 66,483
Janus Olympus Fund $ 5,922 $ 4,442 $ 1,117(2) $ 838
Janus Twenty Fund $ 177,408 $133,056 $ 183,255 $137,441
Janus Worldwide Fund $ 177,943 $133,457 $ 104,173 $ 78,130
Janus Balanced Fund $ 2,636 $ 1,977 $ 9,591 $ 7,194
Janus Equity Income
Fund $ 1,920 $ 1,440 $ 83(1) $ 62
Janus Growth and
Income Fund $ 76,575 $ 57,431 $ 79,006 $ 59,254
- ------------------------------------------------------------------------------------------------
</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.

42
<PAGE>

As of October 31, 1998, 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>
[TO BE FILED BY AMENDMENT]
</TABLE>

TRUSTEES AND OFFICERS

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, Age 61 - 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.

James P. Craig, III, Age 42 - 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.
43
<PAGE>

William D. Stewart, Age 54 - Trustee#

5330 Sterling Drive

Boulder, CO 80302

Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, CO (manufacturer of vacuum fittings and valves).

Gary O. Loo, Age 58 - 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, CO (investments).

Dennis B. Mullen, Age 55 - Trustee

7500 E. McCormick Parkway, #24

Scottsdale, AZ 85258

Trustee of Janus Aspen Series. Private Investor. Formerly (1997-1998),
Chief Financial Officer-Boston Market Concepts, Boston Chicken, Inc.,
Golden, CO (restaurant chain); (1993-1997), President and Chief Executive
Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc.,
Bellevue, WA (restaurant chain).

Martin H. Waldinger, Age 60 - Trustee

4940 Sandshore Court

San Diego, CA 92130

Trustee of Janus Aspen Series. Private Consultant. Formerly (1993-1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, CA.

James T. Rothe, Age 55 - Trustee

102 South Tejon Street, Suite 1100

Colorado Springs, CO 80903

Trustee of Janus Aspen Series. Professor of Business, University of
Colorado, Colorado Springs, CO. Principal, Phillips-Smith Retail Group,
Colorado Springs, CO (a venture capital firm). Formerly (1986-1994), Dean
of the College of Business, University of Colorado, Colorado Springs, CO.

- --------------------------------------------------------------------------------
#Member of the Trust's Executive Committee.
44
<PAGE>

David J. Corkins, Age 32 - 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).

David C. Decker, Age 32 - 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, Age 34 - 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, Age 37 - 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).

Thomas R. Malley, Age 30 - Executive Vice President*

100 Fillmore Street

Denver, CO 80206-4928

Executive Vice President and Portfolio Manager of Janus Global Life
Sciences Fund. Formerly, research analyst at Janus Capital (1991-1998).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+Mr. Corkins and Mr. Lammert are related by marriage.
45
<PAGE>

C. Mike Lu, Age 29 - Executive Vice President

100 Fillmore Street

Denver, CO 80206-4928

Executive Vice President and Portfolio Manager of Janus Global Technology
Fund. Formerly, research analyst at Janus Capital (1991-1998).

Ronald V. Speaker, Age 34 - 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, Age 36 - Executive Vice President*+

100 Fillmore Street
Denver, CO 80206-4928

Executive Vice President and Portfolio Manager of Janus Worldwide Fund.
Executive Vice President and Co-Manager of Janus Overseas Fund. Executive
Vice President of Janus Aspen Series. Vice President of Janus Capital.

Blaine P. Rollins, Age 31 - 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).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.

+Ms. Hayes and Ms. Young are sisters.

46
<PAGE>

Sandy R. Rufenacht, Age 33 - 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, Age 40 - 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.

Darrell W. Watters, Age 35 - 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, Age 33 - 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).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+Ms. Young and Ms. Hayes are sisters.
47
<PAGE>

Thomas A. Early, Age 44 - Vice President and General Counsel*

100 Fillmore Street

Denver, CO 80206-4928

Vice President and General Counsel of Janus Aspen Series. Vice President,
General Counsel and Secretary of Janus Capital. Vice President and General
Counsel of Janus Service Corporation, Janus Distributors, Inc. and Janus
Capital International, Ltd. Director of Janus World Funds Plc. Formerly
(1997-1998), Executive Vice President and General Counsel of Prudential
Investments Fund Management LLC, Newark, NJ. Formerly (1994-1997), Vice
President and General Counsel of Prudential Retirement Services, Newark,
NJ. Formerly (1988-1994), Associate General Counsel and Chief Financial
Services Counsel, Frank Russell Company, Tacoma, WA.

Steven R. Goodbarn, Age 41 - 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
Capital, Janus Service Corporation and Janus Distributors, Inc. Director of
Janus Service Corporation, Janus Distributors, Inc. and Janus World Funds
Plc. 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, Age 40 - 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, Age 33 - Assistant Vice President and Secretary*

100 Fillmore Street
Denver, CO 80206-4928

Assistant Vice President and 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, MA (mutual fund administration
services).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
48
<PAGE>

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,
Massachusetts law or the 1940 Act.

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 receives 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
October 31, 1998 December 31, 1998**
[TO BE FILED BY [TO BE FILED BY
NAME OF PERSON, POSITION AMENDMENT] AMENDMENT]
<S> <C> <C>
- -----------------------------------------------------------------------------
Thomas H. Bailey,
Chairman and Trustee* $ $
James P. Craig, Trustee* $ $
John W. Shepardson,
Trustee $ $
William D. Stewart,
Trustee $ $
Gary O. Loo, Trustee $ $
Dennis B. Mullen, Trustee $ $
Martin H. Waldinger,
Trustee $ $
James T. Rothe, Trustee $ $
- -----------------------------------------------------------------------------
</TABLE>

* An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.

** As of December 31, 1998, Janus Funds consisted of two registered investment
companies comprised of a total of 33 funds.

PURCHASE OF 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.

49
<PAGE>

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). As
stated in the Prospectus, 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 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

50
<PAGE>

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 payment 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 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

51
<PAGE>

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.

52
<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. Traditional and Roth Individual Retirement Accounts may be used by
most individuals who have taxable compensation. Simplified Employee Pensions 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 adviser or legal counsel before selecting a tax-deferred account.

Contributions under Traditional 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 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 adviser 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 Traditional 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 Traditional 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.

53
<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 Special Situations Fund,
Janus Twenty Fund, Janus Global Life Sciences Fund, Janus Global Technology 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.
Accordingly, a Fund will invest no more than 25% of its total assets in a single
issuer (other than U.S. government securities).

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

54
<PAGE>

will represent an expense to each Fund which will reduce its investment company
taxable income.

PRINCIPAL SHAREHOLDERS

[TO BE FILED BY AMENDMENT]

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 21 separate series, three of which currently offer three classes of
shares. 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

55
<PAGE>

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 power as is customary, but a Fund is
not bound to recognize any transfer until it is recorded on its books.

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.

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

56
<PAGE>

other matters on which a shareholder vote is required by the 1940 Act, the
Declaration of Trust, the Trust's Bylaws or the Trustees.

MASTER/FEEDER OPTION

The Trust may in the future seek to achieve a Fund's 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.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers 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

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 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.

57
<PAGE>

The average annual total return of each Fund, computed as of October 31, 1998,
is shown in the table below:

[TO BE FILED BY AMENDMENT]

<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 2/5/70 245 % % % %
Janus Enterprise Fund 9/1/92 74 % % N/A %
Janus Mercury Fund 5/3/93 66 % % N/A %
Janus Olympus Fund 12/29/95 34 % N/A N/A %
Janus Special Situations Fund 12/31/96 22 % N/A N/A %
Janus Twenty Fund 5/2/85 162 % % % %
Janus Global Life Sciences
Fund 12/31/98 * N/A N/A N/A N/A
Janus Global Technology Fund 12/31/98 * N/A N/A N/A N/A
Janus Worldwide Fund 5/15/91 89.5 % % N/A %
Janus Balanced Fund 9/1/92 74 % % N/A %
Janus Equity Income Fund 6/28/96 28 % N/A N/A %
Janus Growth and Income Fund 5/15/91 89.5 % % N/A %
Janus Flexible Income Fund 7/2/87 136 % % % %
Janus High-Yield Fund 12/29/95 34 % N/A N/A %
Janus Federal Tax-Exempt Fund 5/3/93 66 % % N/A %
Janus Short-Term Bond Fund 9/1/92 74 % % N/A %
- -------------------------------------------------------------------------------------------
</TABLE>

* The Fund had not commenced operations as of October 31, 1998.

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

58
<PAGE>

a portion of its assets in obligations that are 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, 1998, for the Fixed-Income
Funds is shown below:

<TABLE>
<S> <C>
[TO BE FILED BY AMENDMENT]
Janus Flexible Income Fund %
Janus High-Yield Fund %
Janus Federal Tax-Exempt Fund %
Janus Short-Term Bond Fund %
</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. ("Lipper"), Ibbotson Associates, Micropal or
Morningstar, Inc. ("Morningstar") 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 (for example, peer groups created by Lipper or
Morningstar), 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 may also compare its performance
to the record of global market indicators, such as the Morgan Stanley
International World 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.

59
<PAGE>

FINANCIAL STATEMENTS

The following audited financial statements for the period ended October 31, 1998
are hereby incorporated into this SAI by reference to the Funds' Annual Reports
dated October 31, 1998 (with the exception of Janus Global Life Sciences Fund
and Janus Global Technology Fund which did not commence operations until
December 31, 1998). Copies of such reports accompany this SAI.

DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS:

Schedules of Investments as of October 31, 1998

Statements of Operations for the period ended October 31, 1998

Statements of Assets and Liabilities as of October 31, 1998

Statements of Changes in Net Assets for the periods ended October 31, 1998

and 1997

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.

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<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>

61
<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.

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<PAGE>

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<PAGE>

JANUS INVESTMENT FUND

JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
Investor Shares

100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 17, 1999

This Statement of Additional Information 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. The Funds are each a separate series of
Janus Investment Fund, a Massachusetts business trust.

This SAI is not a Prospectus and should be read in conjunction with the
Prospectus dated February 17, 1999, 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. The Annual Report, which contains
important financial information about the Funds, is incorporated by reference
into this SAI and is also available, without charge, at the above phone number
or address.

LOGO
<PAGE>

JANUS MONEY MARKET FUND
JANUS GOVERNMENT MONEY MARKET FUND
JANUS TAX-EXEMPT MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Investment Restrictions and Investment Strategies....................... page 3

Performance Data........................................................ page 14

Determination of Net Asset Value........................................ page 17

Investment Adviser and Administrator.................................... page 17

Custodian, Transfer Agent and Certain Affiliations...................... page 20

Portfolio Transactions and Brokerage.................................... page 21

Trustees and Officers................................................... page 23

Purchase of Shares...................................................... page 27

Redemption of Shares.................................................... page 27

Shareholder Accounts.................................................... page 28

Tax-Deferred Accounts................................................... page 28

Dividends and Tax Status................................................ page 29

Principal Shareholders.................................................. page 31

Miscellaneous Information............................................... page 32

Shares of the Trust................................................ page 32

Voting Rights...................................................... page 33

Independent Accountants............................................ page 33

Registration Statement............................................. page 34

Financial Statements.................................................... page 35

Appendix A - Description of Securities Ratings.......................... page 36

Appendix B - Description of Municipal Securities........................ page 39

- --------------------------------------------------------------------------------

2
<PAGE>

INVESTMENT RESTRICTIONS AND INVESTMENT STRATEGIES

INVESTMENT RESTRICTIONS

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
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 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

3
<PAGE>

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.

Investment restriction (1) is intended to reflect the requirements under Section
5(b)(1) of the 1940 Act for a diversified fund. Rule 2a-7 provides that money
market funds that comply with the diversification limits of Rule 2a-7 are deemed
to comply with the diversification limits of Section 5(b)(1). Thus, the Funds
interpret restriction (1) in accordance with Rule 2a-7. Accordingly, if
securities are subject to a guarantee provided by a non-controlled person, the
Rule 2a-7 diversification tests apply to the guarantor, and the diversification
test in restriction (1) does not apply to the issuer.

4
<PAGE>

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.

(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.

5
<PAGE>

so broad that the primary economic characteristics in a single industry are
materially different, the Funds may further classify issuers in accordance with
industry classifications as published by the SEC.

INVESTMENT STRATEGIES

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. Investment
in demand features, guarantees and other types of instruments or features are
subject to the diversification limits under Rule 2a-7.

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.

6
<PAGE>

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.

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. 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.

7
<PAGE>

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 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

8
<PAGE>

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 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

9
<PAGE>

("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 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

10
<PAGE>

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 in excess of the limitations of Section 12(d)(1) under the terms of an
SEC exemptive order obtained by Janus Capital and the Janus Funds.

DEBT OBLIGATIONS

Janus Money Market Fund may invest in debt obligations of domestic issuers. In
general, sales of these securities may not be made absent registration under the
Securities Act of 1933 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

Janus Money Market 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

11
<PAGE>

penalties and 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.

U.S. GOVERNMENT SECURITIES

Janus Government Money Market Fund and to a lesser extent, Janus Money Market
Fund, invest in 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.

12
<PAGE>

MUNICIPAL SECURITIES

The municipal securities in which Janus Tax-Exempt Money Market 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.

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.

MUNICIPAL LEASES

Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest in
municipal leases. 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. 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

13
<PAGE>

the appropriate legislative body on a yearly or other periodic basis. The Funds
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".

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

14
<PAGE>

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.

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).

15
<PAGE>

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, 1998 is shown below:

[TO BE FILED BY AMENDMENT]

<TABLE>
<CAPTION>
Seven-day Effective
Fund Name Yield Seven-day Yield
- ---------------------------------------------------------------------------
<S> <C> <C>
Janus Money Market Fund - Investor Shares % %
Janus Government Money Market Fund -
Investor Shares % %
Janus Tax-Exempt Money Market Fund -
Investor Shares* % %
- ---------------------------------------------------------------------------
</TABLE>

*Janus Tax-Exempt Money Market Fund Investor Shares' tax equivalent yield for
the seven day period ended October 31, 1998 was %.

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 not necessarily be used to compare the Shares with investment
alternatives which are insured or guaranteed.

16
<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.

17
<PAGE>

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 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>
1998 1997 1996
----------------------- ----------------------- -----------------------
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
Janus Government
Money Market Fund $ $ $362,308 $181,154 $330,914 $165,457
Janus Tax-Exempt
Money Market Fund $ $ $158,812 $79,406 $140,898 $70,449
- --------------------------------------------------------------------------------------------------
</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>
1998 1997 1996
-------------- -------------- --------------
Administration Administration Administration
Fund Name Fees Fees Fees
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund - Investor Shares $ $4,415,259 $3,381,669
Janus Government Money Market Fund - Investor
Shares $ $615,966 $560,294
Janus Tax-Exempt Money Market Fund - Investor
Shares $ $379,650 $343,475
- -----------------------------------------------------------------------------------------------
</TABLE>

Advisory fees are paid on the Fund level while administration fees are paid on
the class level.

18
<PAGE>

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 acts as sub-adviser for a number of private-label mutual
funds and provides separate account advisory services for institutional
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.

19
<PAGE>

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 required to be 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.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

UMB Bank, N.A. ("UMB"), P.O. Box 419226, Kansas City, Missouri 64141-6226, is
the Funds' current custodian. However, it is expected that Citibank, N.A., 111
Wall Street 24th Floor, Zone 5, New York, NY 10043, will replace UMB as
custodian for the Funds in the first quarter of 1999. The custodian holds the
Funds' assets in safekeeping and collects and remits the income thereon, subject
to the instructions of each Fund.

20
<PAGE>

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

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

21
<PAGE>

received from brokers or dealers is supplemental to Janus Capital's own research
efforts.

For the fiscal year ended October 31, 1998, 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, 1998, October 31, 1997 and October 31,
1996, the total brokerage commissions paid by the Funds are summarized below:

<TABLE>
<CAPTION>
1998
FUND NAME [To Be Filed By Amendment] 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Money Market Fund $ $0 $4,851
Janus Government Money
Market Fund $ $0 $0
Janus Tax-Exempt Money
Market Fund $ $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 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.

22
<PAGE>

As of October 31, 1998, 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>
[TO BE FILED BY AMENDMENT]
</TABLE>

TRUSTEES AND OFFICERS

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, Age 61 - 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.

James P. Craig, III, Age 42 - Trustee*#
100 Fillmore Street
Denver, CO 80206-4928

William D. Stewart, Age 54 - Trustee#
5330 Sterling Drive
Boulder, CO 80302

Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, CO (manufacturer of vacuum fittings and valves).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
23
<PAGE>

Gary O. Loo, Age 58 - 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, CO (investments).

Dennis B. Mullen, Age 55 - Trustee
7500 E. McCormick Parkway, #24
Scottsdale, AZ 85258

Martin H. Waldinger, Age 60 - Trustee
4940 Sandshore Court
San Diego, CA 92130

Trustee of Janus Aspen Series. Private Consultant. Formerly (1993 - 1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, CA.

James T. Rothe, Age 55 - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903

Sharon S. Pichler, Age 49 - 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.
24
<PAGE>

Thomas A. Early, Age 44 - Vice President and General Counsel*

100 Fillmore Street

Denver, CO 80206-4928

Steven R. Goodbarn, Age 41 - Vice President and Chief Financial Officer*
100 Fillmore Street
Denver, CO 80206-4928

Glenn P. O'Flaherty, Age 40 - 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, Age 33 - Assistant Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928

Assistant Vice President and Secretary of Janus Aspen Series. Director and
President of Janus Distributors, Inc. Assistant Vice President and
Associate Counsel of Janus Capital. Formerly (1990 - 1994), with The Boston
Company Advisors, Inc., Boston, MA (mutual fund administration services).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
25
<PAGE>

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.

<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Funds for from the Janus Funds for
fiscal year ended calendar year ended
October 31, 1998 December 31, 1998**
[TO BE FILED BY [TO BE FILED BY
NAME OF PERSON, POSITION AMENDMENT] AMENDMENT]
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $ $
James P. Craig, Trustee* $ $
John W. Shepardson,
Trustee $ $
William D. Stewart,
Trustee $ $
Gary O. Loo, Trustee $ $
Dennis B. Mullen, Trustee $ $
Martin H. Waldinger,
Trustee $ $
James T. Rothe, Trustee $ $
- -----------------------------------------------------------------------------
</TABLE>

*An interested person of the Funds and of Janus Capital. Compensated by Janus
Capital and not the Funds.

**As of December 31, 1998, Janus Funds consisted of two registered investment
companies comprised of a total of 33 funds.

26
<PAGE>

PURCHASE OF 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 payment 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.

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

27
<PAGE>

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.

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").
Traditional and Roth Individual Retirement Accounts may be used by most
individuals who have taxable compensation. Simplified Employee Pensions and the
Defined Contribution Plans may be used by most employers, including
corporations, partnerships and sole proprietors, for the benefit of business

28
<PAGE>

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 adviser or legal counsel
before selecting a tax-deferred account.

Contributions under Traditional 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 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 adviser 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.

DIVIDENDS AND TAX STATUS

29
<PAGE>

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 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. Accordingly, a

30
<PAGE>

Fund will invest no more than 25% of its total assets in a single issuer (other
than U.S. government securities).

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

[TO BE FILED BY AMENDMENT]

31
<PAGE>

MISCELLANEOUS INFORMATION

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 institutions that meet minimum investment requirements in
connection with trust accounts, cash management programs and similar

32
<PAGE>

programs. A third class of shares, Institutional Shares, is offered only to
clients meeting certain minimum investment criteria.

SHAREHOLDER MEETINGS

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.

INDEPENDENT ACCOUNTANTS

33
<PAGE>

34
<PAGE>

FINANCIAL STATEMENTS

The following audited financial statements of the Funds for the period ended
October 31, 1998 are hereby incorporated into this SAI by reference to the
Funds' Annual Report dated October 31, 1998. A copy of such report accompanies
this SAI.

DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT

Schedules of Investments as of October 31, 1998

Statements of Operations for the period ended October 31, 1998

Statements of Assets and Liabilities as of October 31, 1998

Statements of Changes in Net Assets for the periods ended October 31,
1998 and 1997

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.

35
<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 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. 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

36
<PAGE>

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,
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.
</TABLE>

37
<PAGE>
<TABLE>
<S> <C>
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>

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>

- --------------------------------------------------------------------------------

38
<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.

39
<PAGE>

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.

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).

40
<PAGE>

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 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

41
<PAGE>

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.

42
<PAGE>

JANUS INVESTMENT FUND

JANUS VENTURE FUND

100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 17, 1999

Janus Venture 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 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 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 is not a Prospectus and should be read
in conjunction with the Fund's Prospectus dated February 17, 1999, 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. The Annual Report, which contains important financial information
about the Fund, is incorporated by reference into this SAI and is also
available, without charge, at the above phone number or address.

LOGO
<PAGE>

JANUS VENTURE FUND
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Classification, Portfolio Turnover, Investment Policies and Restrictions,

and Investment Strategies and Risks................................... page 3

Investment Adviser...................................................... page 30

Custodian, Transfer Agent and Certain Affiliations...................... page 33

Portfolio Transactions and Brokerage.................................... page 34

Trustees and Officers................................................... page 37

Purchase of Shares...................................................... page 40

Net Asset Value Determination...................................... page 41

Reinvestment of Dividends and Distributions........................ page 42

Redemption of Shares.................................................... page 42

Shareholder Accounts.................................................... page 43

Telephone Transactions............................................. page 43

Systematic Redemptions............................................. page 43

Tax-Deferred Accounts................................................... page 44

Income Dividends, Capital Gains Distributions and Tax Status............ page 45

Principal Shareholders.................................................. page 45

Miscellaneous Information............................................... page 45

Shares of the Trust................................................ page 46

Shareholder Meetings............................................... page 46

Voting Rights...................................................... page 47

Master/Feeder Option............................................... page 47

Independent Accountants............................................ page 47

Registration Statement............................................. page 48

Performance Information................................................. page 48

Financial Statements.................................................... page 49

Appendix A.............................................................. page 50

- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>

CLASSIFICATION, PORTFOLIO TURNOVER, INVESTMENT POLICIES AND RESTRICTIONS, AND
INVESTMENT STRATEGIES AND RISKS

CLASSIFICATION

The Fund is an open-end, management investment company. The Investment Company
Act of 1940 ("1940 Act") classifies investment companies as either diversified
or nondiversified, and the Fund is a diversified fund.

PORTFOLIO TURNOVER

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, 1998 and October 31, 1997, were [TO BE FILED BY AMENDMENT] % and
146%, respectively.

INVESTMENT POLICIES AND RESTRICTIONS

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 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

4
<PAGE>

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 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

5
<PAGE>

lending Fund could result in a lost investment opportunity or additional
borrowing costs.

For the purposes of the Fund's policies on investing in particular industries,
the Fund will rely primarily on industry or industry group classifications
published by Bloomberg L.P. To the extent that Bloomberg L.P. industry
classifications are so broad that the primary economic characteristics in a
single industry are materially different, the Fund may further classify issuers
in accordance with industry classifications as published by the SEC.

INVESTMENT STRATEGIES AND RISKS

CASH POSITION

As discussed in the Prospectus, when the Fund's portfolio managers believe that
market conditions are unfavorable for profitable investing, or when they are
otherwise unable to locate attractive investment opportunities, the Fund's
investment in cash and similar investments may increase. Securities that the
Fund may invest in as a means of receiving a return on idle cash include
commercial paper, certificates of deposit, repurchase agreements or other
short-term debt obligations. The Fund may also invest in money market funds,
including funds managed by Janus Capital. (See "Investment Company Securities"
on page 9.)

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 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

6
<PAGE>

securities market is not deemed to be a restricted security subject to these
procedures.

If illiquid securities exceed 15% of the 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. Because illiquid securities may not be readily
marketable, the portfolio managers may not be able to dispose of them in a
timely manner. As a result, the Fund may be forced to hold illiquid securities
while their price depreciates. Depreciation in the price of illiquid securities
may cause the net asset value of the Fund to decline.

FOREIGN SECURITIES

The Fund may invest without limit in foreign securities either indirectly (e.g.,
depositary receipts) or directly in foreign markets. Investments in foreign
securities, including those of foreign governments, may involve greater risks
than investing in domestic securities, because the Fund's performance may depend
on issues other than the performance of a particular company. These issues
include:

7
<PAGE>

may be encountered in settling securities transactions. In some foreign
markets, there may not be protection against failure by other parties to
complete transactions.

- - TRANSACTION COSTS. Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than those involved
in domestic transactions.

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.

ZERO COUPON, STEP COUPON AND PAY-IN-KIND 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 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

8
<PAGE>

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.

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.

9
<PAGE>

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.

Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as 20 or 30 years, the borrowers
can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. The Fund's portfolio managers will
consider estimated prepayment rates in calculating the average weighted maturity
of the Fund. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining interest
rates, higher yielding mortgage-backed securities held by the Fund might be
converted to cash and the Fund will be forced to accept lower interest rates
when that cash is used to purchase additional securities in the mortgage-backed
securities sector or in other investment sectors. Additionally, prepayments
during such periods will limit the Fund's ability to participate in as large a
market gain as may be experienced with a comparable security not subject to
prepayment.

10
<PAGE>

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. 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 in
excess of the limitations of Section 12(d)(1) under the terms of an SEC
exemptive order obtained by Janus Capital and the Janus funds.

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.

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

11
<PAGE>

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. 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. 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."

In order to most effectively use these investments, the portfolio managers must
correctly assess probable movements in interest rates. This involves different
skills than those used to select most portfolio securities. If the portfolio
managers incorrectly forecast such movements, the Fund could be adversely
affected by the use of variable or floating rate obligations.

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.

12
<PAGE>

INVERSE FLOATERS. Inverse floaters are debt instruments whose interest bears an
inverse relationship to the interest rate on another security. The Fund will not
invest more than 5% of its assets in inverse floaters. Similar to variable and
floating rate obligations, effective use of inverse floaters requires skills
different from those needed to select most portfolio securities. If movements in
interest rates are incorrectly anticipated, the Fund could lose money or its NAV
could decline by the use of 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.

HIGH-YIELD/HIGH-RISK SECURITIES

The Fund intends to invest less than 35% of its net assets in securities that
are rated below investment grade (e.g., securities rated BB or lower by Standard
& Poor's Ratings Services or Ba or lower by Moody's Investors Service, Inc.).
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
13
<PAGE>

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 about 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:

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.

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 consists of 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

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<PAGE>

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
are 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 obtain 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.

15
<PAGE>

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.

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<PAGE>

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 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.

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 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

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<PAGE>

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 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.

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<PAGE>

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.

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<PAGE>

the value of the Fund's assets. A forward currency contract is an obligation to
buy or sell an amount of a specified currency for an agreed price (which may be
in U.S. dollars or a foreign currency). The Fund will exchange foreign
currencies for U.S. dollars and for other foreign currencies in the normal
course of business and may buy and sell currencies through forward currency
contracts in order to fix a price for securities it has agreed to buy or sell
("transaction hedge"). The Fund also may hedge some or all of its investments
denominated in a foreign currency 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

21
<PAGE>

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.

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

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<PAGE>

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 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.

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<PAGE>

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, when the premium to be received from the cross-
hedge transaction would exceed that which would be received from writing a

24
<PAGE>

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.

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.

25
<PAGE>

price of the purchase transaction is more than the premium received from writing
the option or the price received from a sale transaction is less than the
premium paid to buy the option. Because increases in the market of a call option
generally will reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by the
Fund.

An option position may be closed out only where a secondary market for an option
of the same series exists. If a secondary market does not exist, the Fund may
not be able to effect closing transactions in particular options and the Fund
would have to exercise the options in order to realize any profit. If the Fund
is unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. The absence of a liquid
secondary market may be due to the following: (i) insufficient trading interest
in certain options, (ii) restrictions imposed by a national securities exchange
("Exchange") on which the option is traded on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances that interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.

The Fund may write options in connection with buy-and-write transactions. In
other words, the Fund may buy a security and then write a call option against
that security. The exercise price of such call will depend upon the expected
price movement of the underlying security. The exercise price of a call option
may be below ("in-the-money"), equal to ("at-the-money") or above ("out-of-
the-money") the current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call options may be
used when it is expected that the price of the underlying security will remain
flat or decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected that the price

26
<PAGE>

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.

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.

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<PAGE>

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.

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.

28
<PAGE>

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.

29
<PAGE>

governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

In addition, options on U.S. government securities, futures contracts, options
on futures contracts, forward contracts and options on foreign currencies may be
traded on foreign exchanges and over-the-counter in foreign countries. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.

INVESTMENT ADVISER

As stated in the Prospectus, the Fund has an Investment Advisory Agreement with
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. 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

30
<PAGE>

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.

For the fiscal year ended October 31, 1998, the investment advisory fee was [TO
BE FILED BY AMENDMENT] $ . For the fiscal years ended October 31,
1997 and October 31, 1996, the Fund incurred investment advisory fees of
$9,406,417 and $12,316,252, 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, 1999, 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 acts as sub-adviser for a number of private-label mutual
funds and provides separate account advisory services for institutional
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

31
<PAGE>

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.

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.

32
<PAGE>

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.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

State Street Bank and Trust Company, 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, 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."

33
<PAGE>

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,

34
<PAGE>

legislative developments, changes in accounting practices, economic factors and
trends and portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services, and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment, software,
information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist Janus Capital
in carrying out its responsibilities.

Most brokers and dealers used by Janus Capital provide research and other
services described above. For the year ended October 31, 1998 [TO BE FILED BY
AMENDMENT], the Fund paid $ 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
$ . 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 execution 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.

35
<PAGE>

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, 1998, was [TO BE FILED BY AMENDMENT] $ . For
the fiscal years ended October 31, 1997 and October 31, 1996, the Fund paid
brokerage commissions of $3,599,484 and $3,945,142, respectively. Included in
the brokerage commissions paid for the fiscal year ended October 31, 1998 [TO BE
FILED BY AMENDMENT], was $ paid through DSTS, which served to reduce by
$ certain out-of-pocket expenses paid by the Fund. Included in brokerage
commissions paid for the fiscal years ended October 31, 1997 and October 31,
1996, was $51,096 and $64,665, respectively, paid through DSTS which served to
reduce by $38,322 and $48,499, 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.

As of October 31, 1998, the Fund owned securities of its regular broker-dealers
(or parents), as shown below: [TO BE FILED BY AMENDMENT]

36
<PAGE>

TRUSTEES AND OFFICERS

Thomas H. Bailey, Age 61 - 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.

James P. Craig, III, Age 42 - Trustee and Executive Vice President*#
100 Fillmore Street
Denver, CO 80206-4928

William D. Stewart, Age 54 - Trustee#
5330 Sterling Drive
Boulder, CO 80302

Trustee of Janus Aspen Series. President of HPS Division of MKS
Instruments, Boulder, CO (manufacturer of vacuum fittings and valves).

Gary O. Loo, Age 58 - 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, CO (investments).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
37
<PAGE>

Dennis B. Mullen, Age 55 - Trustee
7500 E. McCormick Parkway, #24
Scottsdale, AZ 85258

Martin H. Waldinger, Age 60 - Trustee
4940 Sandshore Court
San Diego, CA 92130

Trustee of Janus Aspen Series. Private Consultant. Formerly (1993-1996),
Director of Run Technologies, Inc., a software development firm, San
Carlos, CA.

James T. Rothe, Age 55 - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903

William H. Bales, Age 30 - 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, Age 27 - 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).

- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
38
<PAGE>

Thomas A. Early, Age 44 - Vice President and General Counsel*

100 Fillmore Street

Denver, CO 80206-4928

Steven R. Goodbarn, Age 41 - Vice President and Chief Financial Officer*
100 Fillmore Street
Denver, CO 80206-4928

Glenn P. O'Flaherty, Age 40 - 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, Age 33 - Assistant Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928

Assistant Vice President and Secretary of Janus Aspen Series. Director and
President of Janus Distributors, Inc. Assistant Vice President and
Associate Counsel of Janus Capital. Formerly (1990-1994), with The Boston
Company Advisors, Inc., Boston, MA (mutual fund administration services).

- --------------------------------------------------------------------------------

*Interested person of the Trust and of Janus Capital.

39
<PAGE>

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 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 Capital (collectively, the "Janus Funds") for the periods indicated. None
of the Trustees receives 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
October 31, 1998 December 31, 1998**
[TO BE FILED BY [TO BE FILED BY
NAME OF PERSON, POSITION AMENDMENT] AMENDMENT]
- -----------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey,
Chairman and Trustee* $ $
James P. Craig, Trustee* $ $
John W. Shepardson,
Trustee $ $
William D. Stewart,
Trustee $ $
Gary O. Loo, Trustee $ $
Dennis B. Mullen, Trustee $ $
Martin H. Waldinger,
Trustee $ $
James T. Rothe, Trustee $ $
- -----------------------------------------------------------------------------
</TABLE>

*An interested person of the Fund and of Janus Capital. Compensated by Janus
Capital and not the Fund.

**As of December 31, 1998, Janus Funds consisted of two registered investment
companies comprised of a total of 33 funds.

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.

40
<PAGE>

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). As stated in the Prospectus, 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 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

41
<PAGE>

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 payment 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 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

42
<PAGE>

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.

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<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. Traditional and Roth Individual Retirement Accounts may be used by
most individuals who have taxable compensation. Simplified Employee Pensions 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 adviser or legal counsel before selecting a tax-deferred account.

Contributions under Traditional 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 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.

To receive additional information about Traditional 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 Traditional 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.

44
<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. Accordingly, the Fund will invest no
more than 25% of its total assets in a single issuer (other than U.S. government
securities).

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

[TO BE FILED BY AMENDMENT]

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

45
<PAGE>

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 offers 21 separate series, three of which currently offer
three classes of shares.

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.

SHAREHOLDER MEETINGS

46
<PAGE>

shareholder vote under the 1940 Act. Separate votes are taken by the Fund only
if a matter affects or requires the vote of only 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.

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.

As mentioned above in "Shareholder Meetings," 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.

MASTER/FEEDER OPTION

The Trust may in the future seek to achieve the Fund's 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.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers 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.

47
<PAGE>

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

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, 1998, for each of those periods, are [TO BE FILED BY AMENDMENT] %,
%, % and %, 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. ("Lipper"), Ibbotson Associates, Micropal or Morningstar, Inc.
("Morningstar") 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
(for example, peer groups created by Lipper or Morningstar), mutual fund
averages or recognized stock market indicators, including, but not limited to,
the Russell 2000 Index and the NASDAQ composite. In addition, the Fund may
compare its total return to the yield on U.S. Treasury obligations and to the
percentage change in the Consumer Price Index. Such performance ratings or
comparisons may be made with funds that may have different investment
restrictions, objectives, policies or techniques than the Fund and such other
funds or market

48
<PAGE>

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, 1998
are hereby incorporated into this SAI by reference to the Fund's Annual Report
dated October 31, 1998. A copy of such report accompanies this SAI.

DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT:

Schedule of Investments as of October 31, 1998

Statement of Operations for the period ended October 31, 1998

Statement of Assets and Liabilities as of October 31, 1998

Statements of Changes in Net Assets for the periods ended October 31, 1998 and
1997

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.

49
<PAGE>

APPENDIX A

STANDARD & POOR'S RATINGS SERVICES

50
<PAGE>

MOODY'S INVESTORS SERVICE, INC.

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.

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<PAGE>

JANUS INVESTMENT FUND

JANUS OVERSEAS FUND

100 Fillmore Street
Denver, CO 80206-4928
(800) 525-3713

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 17, 1999

Janus Overseas Fund is a no-load, diversified mutual fund that seeks long-term
growth of capital. It invests primarily 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, 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.

The Fund is a separate series of Janus Investment Fund, a Massachusetts business
trust.

LOGO
<PAGE>

JANUS OVERSEAS FUND

STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

Classification, Portfolio Turnover, Investment Policies and Restrictions,

and Investment Strategies and Risks................................... page 3

Investment Adviser...................................................... page 29

Custodian, Transfer Agent and Certain Affiliations...................... page 32

Portfolio Transactions and Brokerage.................................... page 33

Trustees and Officers................................................... page 36

Purchase of Shares...................................................... page 39

Net Asset Value Determination...................................... page 40

Reinvestment of Dividends and Distributions........................ page 41

Redemption of Shares.................................................... page 41

Shareholder Accounts.................................................... page 42

Telephone Transactions............................................. page 42

Systematic Redemptions............................................. page 42

Tax-Deferred Accounts................................................... page 42

Income Dividends, Capital Gains Distributions and Tax Status............ page 44

Principal Shareholders.................................................. page 44

Miscellaneous Information............................................... page 44

Shares of the Trust................................................ page 45

Shareholder Meetings............................................... page 45

Voting Rights...................................................... page 45

Master/Feeder Option............................................... page 46

Independent Accountants............................................ page 46

Registration Statement............................................. page 46

Performance Information................................................. page 47

Financial Statements.................................................... page 48

Appendix A.............................................................. page 49
- --------------------------------------------------------------------------------

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<PAGE>

CLASSIFICATION, PORTFOLIO TURNOVER, INVESTMENT POLICIES AND RESTRICTIONS, AND
INVESTMENT STRATEGIES AND RISKS

CLASSIFICATION

PORTFOLIO TURNOVER

INVESTMENT POLICIES AND RESTRICTIONS

(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 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.

(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.

(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

4
<PAGE>

(g) The Fund may not invest in companies for the purpose of exercising control
of management.

5
<PAGE>

lending Fund could result in a lost investment opportunity or additional
borrowing costs.

INVESTMENT STRATEGIES AND RISKS

CASH POSITION

6
<PAGE>

securities market is not deemed to be a restricted security subject to these
procedures.

SHORT SALES

ZERO COUPON, STEP COUPON AND PAY-IN-KIND SECURITIES

7
<PAGE>

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.

8
<PAGE>

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.

Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Fund), like the payments on the underlying
loans, represent both principal and interest. Although the underlying mortgage
loans are for specified periods of time, such as 20 or 30 years, the borrowers
can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. The Fund's portfolio managers will
consider estimated prepayment rates in calculating the average weighted maturity
of the Fund. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining interest
rates, higher yielding mortgage-backed securities held by the Fund might be
converted to cash and the Fund will be forced to accept lower interest rates
when that cash is used to purchase additional securities in the mortgage-backed
securities sector or in other investment sectors. Additionally, prepayments
during such periods will limit the Fund's ability to participate in as large a
market gain as may be experienced with a comparable security not subject to
prepayment.

Asset-backed securities represent interests in pools of consumer loans and are
backed by paper or accounts receivables originated by banks, credit card

9
<PAGE>

companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor nor the 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.
These obligations are likely to involve unscheduled prepayments of principal.

INVESTMENT COMPANY SECURITIES

10
<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. 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. 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."

In order to most effectively use these investments, the portfolio managers must
correctly assess probable movements in interest rates. This involves different
skills than those used to select most portfolio securities. If the portfolio
managers incorrectly forecasts such movements, the Fund could be adversely
affected by the use of variable or floating rate obligations.

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-

11
<PAGE>

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.

The Fund will purchase standby commitments, tender option bonds and instruments
with demand features primarily for the purpose of increasing the liquidity of
its portfolio.

HIGH-YIELD/HIGH-RISK SECURITIES

12
<PAGE>

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 about 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:

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

13
<PAGE>

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
are 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.

14
<PAGE>

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.

15
<PAGE>

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 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.

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

16
<PAGE>

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.

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.

17
<PAGE>

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.

18
<PAGE>

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.

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

19
<PAGE>

meet the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.

The following discussion summarizes the Fund's principal uses of forward foreign
currency exchange contracts ("forward currency contracts"). The Fund may enter
into forward currency contracts with stated contract values of up to the value
of the Fund's assets. A forward currency contract is an obligation to buy or
sell an amount of a specified currency for an agreed price (which may be in U.S.
dollars or a foreign currency). The Fund will exchange foreign currencies for
U.S. dollars and for other foreign currencies in the normal course of business
and may buy and sell currencies through forward currency contracts in order to
fix a price for securities it has agreed to buy or sell ("transaction hedge").
The Fund also may hedge some or all of its investments denominated in a foreign
currency 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.

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<PAGE>

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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<PAGE>

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.

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<PAGE>

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.

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<PAGE>

not less than the market value of the underlying security, marked-to-market
daily. The Fund would write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received from the cross-
hedge transaction would exceed that which would be received from writing a
covered call option and its portfolio managers believe that writing the option
would achieve the desired hedge.

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<PAGE>

The Fund will realize a profit from a closing transaction if the price of the
purchase transaction is less than the premium received from writing the option
or the price received from a sale transaction is more than the premium paid to
buy the option. The Fund will realize a loss from a closing transaction if the
price of the purchase transaction is more than the premium received from writing
the option or the price received from a sale transaction is less than the
premium paid to buy the option. Because increases in the market of a call option
generally will reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option is likely to be offset
in whole or in part by appreciation of the underlying security owned by the
Fund.

An option position may be closed out only where a secondary market for an option
of the same series exists. If a secondary market does not exist, the Fund may
not be able to effect closing transactions in particular options and the Fund
would have to exercise the options in order to realize any profit. If the Fund
is unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. The absence of a liquid
secondary market may be due to the following: (i) insufficient trading interest
in certain options, (ii) restrictions imposed by a national securities exchange
("Exchange") on which the option is traded on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances that interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.

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<PAGE>

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>

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.

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.

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<PAGE>

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.

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.

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<PAGE>

certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign countries
for this purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

INVESTMENT ADVISER

The Fund pays custodian and transfer agent fees and expenses, brokerage
commissions and dealer spreads and other expenses in connection with the

29
<PAGE>

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.

For the fiscal year ended October 31, 1998, the investment advisory fee was [TO
BE FILED BY AMENDMENT] $ . For the fiscal years ended October 31,
1997 and October 31, 1996, the Fund incurred investment advisory fees of
$14,049,919 and $2,528,345, respectively. Janus Capital did not waive any
portion of its fee in any of these years.

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<PAGE>

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.

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>

The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.

CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS

State Street Bank and Trust Company, 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.

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<PAGE>

Janus Distributors, Inc., 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 and is a member of the National Association of Securities Dealers, Inc.
Janus Distributors acts as the agent of the Fund in connection with the sale of
its shares in all states in which the shares are registered and in which Janus
Distributors is qualified as a broker-dealer. Under the Distribution Agreement,
Janus Distributors continuously offers the Fund's shares and accepts orders at
net asset value. No sales charges are paid by investors. Promotional expenses in
connection with offers and sales of shares are paid by Janus Capital.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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<PAGE>

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.

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 execution 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

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<PAGE>

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.

The total amount of brokerage commissions paid by the Fund during the fiscal
year ended October 31, 1998, was [TO BE FILED BY AMENDMENT] $ . For
the fiscal years ended October 31, 1997 and October 31, 1996, the Fund paid
brokerage commissions of $9,508,507 and $1,900,947, respectively. Included in
the brokerage commissions paid for the fiscal year ended October 31, 1998 [TO BE
FILED BY AMENDMENT], was $ paid through DSTS, which served to reduce by
$ certain out-of-pocket expenses paid by the Fund. Included in brokerage
commissions paid for the fiscal years ended October 31, 1997 and October 31,
1996, was $15,169 and $5,123, respectively, paid through DSTS which served to
reduce by $11,377 and $3,842, 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

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<PAGE>

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.

As of October 31, 1998, the Fund owned securities of its regular broker-dealers
(or parents), as shown below: