CONTENTS
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PORTFOLIOS AT A GLANCE
Brief description of each Portfolio ......................................... 1
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EXPENSE INFORMATION
Each Portfolio's annual operating expenses .................................. 2
A summary of financial data ................................................. 3
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PERFORMANCE TERMS
An explanation of performance terms ......................................... 5
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THE PORTFOLIOS IN DETAIL
The Portfolios' Investment Objectives and Policies .......................... 6
General Portfolio Policies .................................................. 10
Additional Risk Factors ..................................................... 11
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MANAGEMENT OF THE PORTFOLIOS
Investment Adviser and Investment Personnel ................................. 13
Management Expenses ......................................................... 14
Portfolio Transactions ...................................................... 14
Other Service Providers ..................................................... 14
Other Information ........................................................... 15
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DISTRIBUTIONS AND TAXES
Distributions ............................................................... 16
Taxes ....................................................................... 16
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SHAREHOLDER'S GUIDE
Purchases ................................................................... 17
Redemptions ................................................................. 17
Shareholder Communications .................................................. 17
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APPENDIX A
Glossary of Investment Terms ................................................ 18
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APPENDIX B
Explanation of Rating Categories ............................................ 20
[LOGO]
JANUS ASPEN SERIES
Prospectus
May 1, 1996
This prospectus describes seven mutual funds with a variety of investment
objectives, including growth of capital, current income and a combination of
growth and income (the "Portfolios"). Janus Capital Corporation ("Janus
Capital") serves as investment adviser to each Portfolio. Janus Capital has been
in the investment advisory business for over 25 years and currently manages more
than $35 billion in assets.
Each Portfolio is a series of Janus Aspen Series (the "Trust"). The Trust is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company. Shares of the Trust are issued and redeemed only
in connection with investment in and payments under variable annuity contracts
and variable life insurance contracts (collectively "variable insurance
contracts"), as well as certain qualified retirement plans. The Trust sells and
redeems its shares at net asset value without any sales charges, commissions or
redemption fees. Each variable insurance contract involves fees and expenses not
described in this Prospectus. Certain Portfolios may not be available in
connection with a particular contract and certain contracts may limit
allocations among the Portfolios. See the accompanying contract prospectus for
information regarding contract fees and expenses and any restrictions on
purchases or allocations.
This Prospectus contains information about the Portfolios that a prospective
purchaser of a variable insurance contract should consider before allocating
purchase payments or premiums to the Portfolios. It should be read carefully in
conjunction with the separate account prospectus of the specific insurance
product that accompanies this Prospectus and retained for future reference.
Additional information about the Portfolios is contained in a Statement of
Additional Information ("SAI") filed with the SEC. The SAI dated May 1, 1996 is
incorporated by reference into this Prospectus. Copies of the SAI are available
upon request and without charge by writing or calling your insurance company.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
May 1, 1996
<PAGE>
PORTFOLIOS AT A GLANCE
This section is designed to provide you with a brief overview of the Portfolios
and their investment emphasis. A more detailed discussion of the Portfolios'
investment objectives and policies begins on page 6.
GROWTH PORTFOLIO
Focus: A diversified portfolio that seeks long-term growth of capital by
investing primarily in common stocks, with an emphasis on companies with larger
market capitalizations.
Inception: September 1993
Manager: James P. Craig, III
AGGRESSIVE GROWTH PORTFOLIO
Focus: A nondiversified portfolio that seeks long-term growth of capital by
investing primarily in common stocks, with an emphasis on securities issued by
medium-sized companies.
Inception: September 1993
Manager: James P. Goff
WORLDWIDE GROWTH PORTFOLIO
Focus: A diversified portfolio that seeks long-term growth of capital by
investing primarily in common stocks of foreign and domestic issuers.
Inception: September 1993
Manager: Helen Young Hayes
INTERNATIONAL GROWTH PORTFOLIO
Focus: A diversified portfolio that seeks long-term growth of capital by
investing primarily in common stocks of foreign issuers.
Inception: May 1994
Manager: Helen Young Hayes
BALANCED PORTFOLIO
Focus: A diversified portfolio that seeks long-term growth of capital, balanced
by current income. The Portfolio 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.
Inception: September 1993
Manager: Blaine P. Rollins
FLEXIBLE INCOME PORTFOLIO
Focus: A diversified portfolio that seeks to maximize total return from a
combination of income and capital appreciation by investing primarily in
income-producing securities. THIS PORTFOLIO MAY HAVE SUBSTANTIAL HOLDINGS OF
LOWER RATED DEBT SECURITIES OR "JUNK" BONDS.
Inception: September 1993
Manager: Ronald V. Speaker
SHORT-TERM BOND PORTFOLIO
Focus: A diversified portfolio that seeks a high level of current income while
minimizing interest rate risk by investing in shorter term fixed-income
securities. Its average-weighted maturity is normally less than three years.
Inception: September 1993
Manager: Sandy R. Rufenacht
JANUS SPECTRUM
The spectrum below shows Janus Capital's assessment of the potential overall
risk of the Portfolios relative to one another and should not be used to compare
the Portfolios to other mutual funds or other types of investments. The spectrum
was determined based on a number of factors such as the types of securities in
which the Portfolios intend to invest, the degree of diversification intended
and/or permitted, and the sizes of the Portfolios and, in addition, was
significantly affected by the portfolio managers' investment styles. These
factors were considered as of the date of this prospectus and will be reassessed
with each new prospectus. Specific risks of certain types of instruments in
which some of the Portfolios may invest, including foreign securities, junk
bonds and derivative instruments such as futures contracts and options, are
described under "Additional Risk Factors" on page 11. THE SPECTRUM IS NOT
INDICATIVE OF THE FUTURE VOLATILITY OR PERFORMANCE OF A PORTFOLIO AND RELATIVE
POSITIONS OF PORTFOLIOS WITHIN THE SPECTRUM MAY CHANGE IN THE FUTURE.
[SPECTRUM CHART]
The spectrum illustrates the potential overall risk of the Portfolios relative
to one another. The Portfolios' risk ranges from conservative to aggressive.
Growth Portfolio is shown as moderate; Aggressive Growth Portfolio is shown as
aggressive; Worldwide Growth Portfolio is shown as moderate-aggressive;
International Growth Portfolio is shown as moderate-aggressive (but more
aggressive than Worldwide Growth Portfolio); Balanced Portfolio is shown as
moderate; Flexible Income Portfolio is shown as conservative-moderate;
Short-Term Bond Portfolio is shown as conservative; High-Yield Portfolio, which
will commence operations on May 1, 1996, and is offered by a separate
prospectus, is shown as moderate-aggressive; and Money Market Portfolio, which
is offered by a separate prospectus, is shown as conservative.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
1
<PAGE>
EXPENSE INFORMATION
The tables and example below are designed to assist participants in qualified
plans that invest in the Portfolios in understanding the various costs and
expenses that you will bear directly or indirectly as an investor in the
Portfolios. OWNERS OF VARIABLE INSURANCE CONTRACTS THAT INVEST IN THE PORTFOLIOS
SHOULD REFER TO THE VARIABLE INSURANCE CONTRACT PROSPECTUS FOR A DESCRIPTION OF
COSTS AND EXPENSES, AS THE TABLES AND EXAMPLE DO NOT REFLECT DEDUCTIONS AT THE
SEPARATE ACCOUNT LEVEL OR CONTRACT LEVEL FOR ANY CHARGES THAT MAY BE INCURRED
UNDER A CONTRACT.
SHAREHOLDER TRANSACTION EXPENSES (applicable to each Portfolio)
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fee None
Exchange fee None
ANNUAL PORTFOLIO OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fee Other Expenses Total Portfolio Operating Expenses
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<S> <C> <C> <C>
Growth Portfolio .65% .13% .78%
Aggressive Growth Portfolio .75% .11% .86%
Worldwide Growth Portfolio .68% .22% .90%
International Growth Portfolio .84% 1.85% 2.69%
Balanced Portfolio .82% .55% 1.37%
Flexible Income Portfolio .65% .42% 1.07%
Short-Term Bond Portfolio .00% .70% .70%
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</TABLE>
(1) The fees and expenses in the table above are based on gross expenses before
expense offset arrangements for the fiscal year ended December 31, 1995.
The information for each Portfolio other than the Flexible Income Portfolio
is net of fee waivers or reductions from Janus Capital. Fee reductions for
the Growth, Aggressive Growth, Worldwide Growth, International Growth and
Balanced Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses and Total
Portfolio Operating Expenses would have been 0.85%, 0.13%, and 0.98% for
Growth Portfolio; 0.82%, 0.11% and 0.93% for Aggressive Growth Portfolio;
0.87%, 0.22% and 1.09% for Worldwide Growth Portfolio; 1.00%, 2.57% and
3.57% for International Growth Portfolio; 1.00%, 0.55% and 1.55% for
Balanced Portfolio; and 0.65%, 0.72% and 1.37% for Short-Term Bond
Portfolio, respectively. Janus Capital may modify or terminate the waivers
or reductions at any time upon 90 days' notice to the Trustees.
EXAMPLE
Assume you invest $1,000, the Portfolios return 5% annually and each Portfolio's
expense ratios remain as listed above. The example below shows the operating
expenses that you would indirectly bear as an investor in the Portfolios.
1 Year 3 Years 5 Years 10 Years
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Growth Portfolio $ 8 $25 $ 43 $ 97
Aggressive Growth Portfolio $ 9 $27 $ 48 $106
Worldwide Growth Portfolio $ 9 $29 $ 50 $111
International Growth Portfolio $27 $84 $142 $302
Balanced Portfolio $14 $43 $ 75 $165
Flexible Income Portfolio $11 $34 $ 59 $131
Short-Term Bond Portfolio $ 7 $22 $ 39 $ 87
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THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
2
<PAGE>
FINANCIAL HIGHLIGHTS
The information below is for fiscal periods ending on December 31 of each year,
and has been audited by the accounting firm of Price Waterhouse LLP. Their
report is included in the Portfolios' Annual Report, which is incorporated by
reference into the SAI. Expense and income ratios and portfolio turnover rates
have been annualized for periods of less than one year. Total returns for
periods of less than one year are not annualized. A detailed explanation of the
Financial Highlights can be found on page 5.
<TABLE>
<CAPTION>
Growth Portfolio Aggressive Growth Portfolio
1995 1994 1993(1) 1995 1994 1993(1)
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<S> <C> <C> <C> <C> <C> <C>
1. Net asset value, beginning of period $10.57 $10.32 $10.00 $13.62 $11.80 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
2. Net investment income .28 .09 .03 .24 .11 .01
3. Net gains or (losses) on securities
(both realized and unrealized) 2.90 .20 .32 3.47 1.82 1.80
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4. Total from investment operations 3.18 .29 .35 3.71 1.93 1.81
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Less distributions:
5. Dividends (from net investment income) (.30) (.04) (.03) (.25) (.11) (.01)
6. Dividends (in excess of net investment income) -- -- -- -- -- --
7. Distributions (from capital gains) -- -- -- -- -- --
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8. Total distributions (.30) (.04) (.03) (.25) (.11) (.01)
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9. Net asset value, end of period $13.45 $10.57 $10.32 $17.08 $13.62 $11.80
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10. Total return 30.17% 2.76% 3.50% 27.48% 16.33% 18.05%
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11. Net assets, end of period (in thousands) $126,911 $43,549 $7,482 185,911 $41,289 $1,985
12. Ratio of gross expenses to average net assets 0.78%(4)(7) N/A N/A 0.86%(4)(7) N/A N/A
13. Ratio of net expenses to average net assets 0.76%(4) 0.88%(3)(6) 0.25%(5) 0.84%(4) 1.05%(3)(6) 0.25%(5)
14. Ratio of net investment income to average net assets 1.24% 1.45% 2.54% 0.58% 2.18% 0.34%
15. Portfolio turnover rate 185% 169% 162% 155% 259% 31%
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</TABLE>
<TABLE>
<CAPTION>
Worldwide Growth Portfolio International Growth Portfolio
1995 1994 1993(1) 1995 1994(2)
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<S> <C> <C> <C> <C> <C>
1. Net asset value, beginning of period $12.07 $11.89 $10.00 $9.72 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
2. Net investment income .11 .04 .02 .09 (.09)
3. Net gains or (losses) on securities
(both realized and unrealized) 3.19 .14 1.89 2.16 (.19)
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4. Total from investment operations 3.30 .18 1.91 2.25 (.28)
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Less distributions:
5. Dividends (from net investment income) (.06) -- (.01) (.02) --
6. Dividends (in excess of net investment income) -- -- (.01) -- --
7. Distributions (from capital gains) -- -- -- -- --
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8. Total distributions (.06) -- (.02) (.02) --
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9. Net asset value, end of period $15.31 $12.07 $11.89 $11.95 $9.72
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10. Total return 27.37% 1.53% 19.10% 23.15% (2.80%)
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11. Net assets, end of period (in thousands) $108,563 $37,728 $4,856 $1,608 $1,353
12. Ratio of gross expenses to average net assets 0.90%(4)(7) N/A N/A 2.69%(4)(7) N/A
13. Ratio of net expenses to average net assets 0.87%(4) 1.18%(3)(6) 0.25%(5) 2.50%(4) 2.50%(6)
14. Ratio of net investment income to average net assets 0.95% 0.50% 0.84% (0.80%) (1.30%)
15. Portfolio turnover rate 113% 217% 57% 211% 275%
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</TABLE>
(1) September 13, 1993 (inception) to December 31, 1993.
(2) May 2, 1994 (inception) to December 31, 1994.
(3) Commissions payable by the Portfolio for transactions effected by a
broker-dealer affiliated with Janus Capital were credited against the
Portfolio's operating expenses. The effect of such directed brokerage
arrangement was de minimis.
(4) The Portfolio's expenses may be reduced through the use of brokerage
commissions and uninvested cash balances earning interest with the
Portfolio's custodian. The gross expense ratio for the fiscal period ended
December 31, 1995, does not reflect expense reductions, while the net
expense ratio does reflect such reductions. For International Growth
Portfolio, the effect of directed brokerage was de minimis.
(5) The ratio was 2.16%, 5.79% and 2.71%, respectively, for the Growth,
Aggressive Growth and Worldwide Growth Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
(6) The ratio was 1.23%, 1.14%, 4.67% and 1.49%, respectively, for the Growth,
Aggressive Growth, International Growth and Worldwide Growth Portfolios,
before waiver of certain fees and/or voluntary reduction of advisor's fees
to the effective rate of the corresponding Janus retail fund.
(7) The ratio was 0.98%, 0.93%, 3.57% and 1.09%, respectively, for the Growth,
Aggressive Growth, International Growth and Worldwide Growth Portfolios,
before waiver of certain fees and/or voluntary reduction of advisor's fees
to the effective rate of the corresponding Janus retail fund.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
3
<PAGE>
<TABLE>
<CAPTION>
Balanced Portfolio Flexible Income Portfolio
1995 1994 1993(1) 1995 1994 1993(1)
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<S> <C> <C> <C> <C> <C> <C>
1. Net asset value, beginning of period $10.63 $10.64 $10.00 $9.48 $9.97 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
2. Net investment income .17 .15 .08 .53 .47 .11
3. Net gains or (losses) on securities
(both realized and unrealized) 2.45 (.06) .64 1.70 (.56) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
4. Total from investment operations 2.62 .09 .72 2.23 (.09) .07
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Less distributions:
5. Dividends (from net investment income) (.22) (.10) (.08) (.60) (.40) (.10)
6. Dividends (in excess of net investment income) -- -- -- -- -- --
7. Distributions (from capital gains) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
8. Total distributions (.22) (.10) (.08) (.60) (.40) (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
9. Net asset value, end of period $13.03 $10.63 $10.64 $11.11 $9.48 $9.97
- ------------------------------------------------------------------------------------------------------------------------------------
10. Total return 24.79% 0.84% 7.20% 23.86% (0.91%) 0.70%
- ------------------------------------------------------------------------------------------------------------------------------------
11. Net assets, end of period (in thousands) $14,021 $3,153 $537 $10,831 $1,924 $538
12. Ratio of gross expenses to average net assets 1.37%(3)(6) N/A N/A 1.07%(3)(6) N/A N/A
13. Ratio of net expenses to average net assets 1.30%(3) 1.57%(2)(5) 0.25%(4) 1.00%(3) 1.00%(5) 1.00%(4)
14. Ratio of net investment income to average net assets 2.41% 1.90% 2.69% 7.46% 5.49% 3.77%
15. Portfolio turnover rate 149% 158% 126% 236% 234% 508%
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</TABLE>
(1) September 13, 1993 (inception) to December 31, 1993.
(2) Commissions payable by the Portfolio for transactions effected by a
broker-dealer affiliated with Janus Capital were credited against the
Portfolio's operating expenses. The effect of such directed brokerage
arrangement was de minimis.
(3) The Portfolio's expenses may be reduced through the use of brokerage
commissions and uninvested cash balances earning interest with the
Portfolio's custodian. The gross expense ratio for the fiscal period ended
December 31, 1995, does not reflect expense reductions, while the net
expense ratio does reflect such reductions.
(4) The ratio was 7.92%, 5.27% and 5.33%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
(5) The ratio was 1.74%, 1.35% and 1.40%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
(6) The ratio was 1.55%, 1.07% and 1.37%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
<TABLE>
<CAPTION>
Short-Term Bond Portfolio
1995 1994 1993(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Net asset value, beginning of period $9.72 $9.93 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
2. Net investment income .60 .35 .11
3. Net gains or (losses) on securities
(both realized and unrealized) .31 (.26) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
4. Total from investment operations .91 .09 .03
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Less distributions:
5. Dividends (from net investment income) (.60) (.30) (.10)
6. Dividends (in excess of net investment income) -- -- --
7. Distributions (from capital gains) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
8. Total distributions (.60) (.30) (.10)
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9. Net asset value, end of period $10.03 $9.72 $9.93
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10. Total return 9.54% 0.92% 0.30%
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11. Net assets, end of period (in thousands) $3,187 $2,902 $502
12. Ratio of gross expenses to average net assets 0.70%(3)(6) N/A N/A
13. Ratio of net expenses to average net assets 0.65%(3) 0.65%(5) 0.65%(4)
14. Ratio of net investment income to average net assets 6.02% 5.00% 3.57%
15. Portfolio turnover rate 417% 256% 91%
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</TABLE>
(1) September 13, 1993 (inception) to December 31, 1993.
(2) Commissions payable by the Portfolio for transactions effected by a
broker-dealer affiliated with Janus Capital were credited against the
Portfolio's operating expenses. The effect of such directed brokerage
arrangement was de minimis.
(3) The Portfolio's expenses may be reduced through the use of brokerage
commissions and uninvested cash balances earning interest with the
Portfolio's custodian. The gross expense ratio for the fiscal period ended
December 31, 1995, does not reflect expense reductions, while the net
expense ratio does reflect such reductions.
(4) The ratio was 7.92%, 5.27% and 5.33%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
(5) The ratio was 1.74%, 1.35% and 1.40%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
(6) The ratio was 1.55%, 1.07% and 1.37%, respectively, for the Balanced,
Flexible Income and Short-Term Bond Portfolios, before waiver of certain
fees and/or voluntary reduction of advisor's fees to the effective rate of
the corresponding Janus retail fund.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
4
<PAGE>
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights tables. The tables contain important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Portfolios'
Annual Report contains additional information about each Portfolio's
performance, including a comparison to an appropriate securities index. To
request a copy of the Annual Report, please call or write your insurance
company.
Net asset value (NAV) is the value of a single share of a Portfolio. It is
computed by adding the value of all of a Portfolio's investments and other
assets, subtracting any liabilities and dividing the result by the number of
shares outstanding. The difference between line 1 and line 9 in the Financial
Highlights tables represents the change in value of a Portfolio's shares over
the fiscal period, but not its total return.
Net investment income is the per share amount of dividends and interest income
earned on securities held by a Portfolio, less Portfolio expenses. Dividends
(from net investment income) is the per share amount that a Portfolio paid from
net investment income.
Net gains or (losses) on securities is the per share increase or decrease in
value of the securities a Portfolio holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. Distributions (from capital gains) is the
per share amount that a Portfolio paid from net realized gains.
Total Return is the percentage increase or decrease in the value of an
investment over a stated period of time. A total return percentage includes both
changes in NAV and income. For the purposes of calculating total return, it is
assumed that dividends and distributions are reinvested at the NAV on the day of
the distribution. A PORTFOLIO'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM
THE FINANCIAL HIGHLIGHTS TABLES.
Ratio of net expenses to average net assets is the total of a Portfolio's
operating expenses divided by its average net assets for the stated period.
Ratio of gross expenses to average net assets does not reflect reductions in
expenses through the use of brokerage commissions and uninvested cash balances
earning interest with the Portfolio's custodian.
Ratio of net investment income to average net assets is a Portfolio's net
investment income divided by its average net assets for the stated period.
Portfolio turnover rate is a measure of the amount of a Portfolio's buying and
selling activity. It is computed by dividing total purchases or sales, whichever
is less, by the average monthly market value of a Portfolio's securities.
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe a Portfolio's performance. You may see references to these terms in our
newsletters or advertisements (or those published by participating insurance
companies) and in media articles. Newsletters and advertisements may include
comparisons of a Portfolio's performance to the performance of other mutual
funds, mutual fund averages or recognized stock market indices. Growth
Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio,
International Growth Portfolio and Balanced Portfolio generally measure
performance in terms of total return, while Flexible Income Portfolio and
Short-Term Bond Portfolio generally use yield.
Cumulative total return represents the actual rate of return on an investment
for a specified period. The Financial Highlights tables show total return for a
single fiscal period. Cumulative total return is generally quoted for more than
one year (e.g., the life of a Portfolio). A cumulative total return does not
show interim fluctuations in the value of an investment.
Average annual total return represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in a Portfolio's return and are not
the same as actual annual results.
Yield shows the rate of income a Portfolio earns on its investments as a
percentage of the Portfolio's share price. It is calculated by dividing a
Portfolio's net investment income for a 30-day period by the average number of
shares entitled to receive dividends and dividing the result by the Portfolio's
NAV per share at the end of the 30-day period. Yield does not include changes in
NAV.
Yields are calculated according to standardized SEC formulas and may not equal
the income on an investor's account. Yield is usually quoted on an annualized
basis. An annualized yield represents the amount you would earn if you remained
in a Portfolio for a year and that Portfolio continued to have the same yield
for the entire year.
THE PORTFOLIOS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN
OR YIELD COMPUTATIONS. YIELD AND TOTAL RETURN FIGURES OF THE PORTFOLIOS INCLUDE
THE EFFECT OF DEDUCTING EACH PORTFOLIO'S EXPENSES, BUT MAY NOT INCLUDE CHARGES
AND EXPENSES ATTRIBUTABLE TO ANY PARTICULAR INSURANCE PRODUCT. PORTFOLIO
PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL
FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
5
<PAGE>
THE PORTFOLIOS IN DETAIL
This section takes a closer look at the Portfolios' investment objectives,
policies and the securities in which they invest. Please carefully review the
"Additional Risk Factors" section of this Prospectus for a more detailed
discussion of the risks associated with certain investment techniques as well as
the risk spectrum on page 1. Appendix A contains a more detailed description of
investment terms used throughout this Prospectus. You should carefully consider
your investment goals, time horizon and risk tolerance before choosing a
Portfolio.
Each Portfolio has an investment objective and policies that are similar to
those of a Janus retail fund, as illustrated in the chart below. Although it is
anticipated that each Portfolio and its corresponding retail fund will hold
similar securities, differences in asset size and cash flow needs as well as the
relative weightings of securities selections may result in differences in
investment performance. Expenses of each Portfolio and its corresponding retail
fund are expected to differ. The variable contract owner will also bear various
insurance-related costs at the insurance company level. You should review the
accompanying separate account prospectus for a summary of contract fees and
expenses.
Policies that are noted as "fundamental" cannot be changed without a shareholder
vote. All other policies, including each Portfolio's investment objective, are
not fundamental and may be changed by the Portfolios' Trustees without a
shareholder vote. You will be notified of any such changes that are material. If
there is a material change in a Portfolio's objective or policies, you should
consider whether that Portfolio remains an appropriate investment for your
variable insurance contract or qualified retirement plan.
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EACH OF THE PORTFOLIOS HAS A SIMILAR INVESTMENT OBJECTIVE AND SIMILAR INVESTMENT
POLICIES TO AN EXISTING JANUS RETAIL FUND.
Growth Portfolio .................................................... Janus Fund
Aggressive Growth Portfolio .............................. Janus Enterprise Fund
Worldwide Growth Portfolio ................................ Janus Worldwide Fund
International Growth Portfolio ............................. Janus Overseas Fund
Balanced Portfolio ......................................... Janus Balanced Fund
Flexible Income Portfolio ........................... Janus Flexible Income Fund
Short-Term Bond Portfolio ........................... Janus Short-Term Bond Fund
GROWTH PORTFOLIO, AGGRESSIVE GROWTH PORTFOLIO, WORLDWIDE GROWTH PORTFOLIO AND
INTERNATIONAL GROWTH PORTFOLIO ARE DESIGNED FOR LONG-TERM INVESTORS WHO SEEK
GROWTH OF CAPITAL ONLY AND WHO CAN TOLERATE THE GREATER RISKS ASSOCIATED WITH
COMMON STOCK INVESTMENTS.
GROWTH PORTFOLIO
The investment objective of this Portfolio is long-term growth of capital in a
manner consistent with the preservation of capital. It is a diversified
portfolio that pursues its objective by investing in common stocks of companies
of any size. This Portfolio generally invests in larger, more established
issuers.
AGGRESSIVE GROWTH PORTFOLIO
The investment objective of this Portfolio is long-term growth of capital. It is
a nondiversified portfolio that pursues its investment objective by normally
investing at least 50% of its equity assets in securities issued by medium-sized
companies. Medium-sized companies are those whose market capitalizations fall
within the range of companies in the S&P MidCap 400 Index (the "MidCap Index").
Companies whose capitalization falls outside this range after the Portfolio's
initial purchase continue to be considered medium-sized companies for the
purpose of this policy. As of December 29, 1995, the MidCap Index included
companies with capitalizations between approximately $118 million to $7.5
billion. The range of the MidCap Index is expected to change on a regular basis.
Subject to the above policy, the Portfolio may also invest in smaller or larger
issuers.
WORLDWIDE GROWTH PORTFOLIO
The investment objective of this Portfolio is long-term growth of capital in a
manner consistent with the preservation of capital. It is a diversified
portfolio that pursues its objective primarily through investments in common
stocks of foreign and domestic issuers. The Portfolio has the flexibility to
invest on a worldwide basis in companies and organizations of any size,
regardless of country of organization or place of principal business activity.
Worldwide Growth Portfolio normally invests in issuers from at least five
different countries, including the United States. The Portfolio may at times
invest in fewer than five countries or even a single country.
INTERNATIONAL GROWTH PORTFOLIO
The investment objective of this Portfolio is long-term growth of capital. It is
a diversified portfolio that pursues its objective primarily through investments
in common stocks of issuers located outside the United States. The Portfolio 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 Portfolio 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 Portfolio 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.
TYPES OF INVESTMENTS
Each of these Portfolios invests primarily in common stocks of foreign and
domestic companies. However, the percentage of each Portfolio's assets invested
in common stocks will vary and each Portfolio may at times hold substantial
positions in cash equivalents or interest bearing securities. See "General
Portfolio Policies" on page 10. Each Portfolio may invest to a lesser degree in
other types of securities including preferred stocks, warrants, convertible
securities and debt securities when its portfolio manager perceives an
opportunity for capital growth from such securities or to receive a return on
idle cash. Debt and other income-producing securities that the Portfolios may
purchase include those described with respect to Flexible Income Portfolio on
page 8, except that Growth Portfolio's, Aggressive Growth
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Portfolio's, Worldwide Growth Portfolio's and International Growth Portfolio's
investments in high-yield/high-risk securities will not exceed 35% of net assets
and investments in mortgage- and asset-backed securities will not exceed 25% of
assets.
Although Worldwide Growth Portfolio and International Growth Portfolio are
committed to foreign investing, Growth Portfolio and Aggressive Growth Portfolio
may also invest without limit in foreign equity and debt securities. The
Portfolios 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 ("PFICs"). These Portfolios may use futures, options and
other derivatives for hedging purposes or as a means of enhancing return. See
"Additional Risk Factors" on page 11 for a discussion of the risks associated
with foreign investing and derivatives. Some securities that the Portfolios
purchase may be issued on a when-issued, delayed delivery or forward commitment
basis.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN GROWTH PORTFOLIO, AGGRESSIVE GROWTH PORTFOLIO, WORLDWIDE GROWTH PORTFOLIO OR
INTERNATIONAL GROWTH PORTFOLIO.
HOW ARE COMMON STOCKS SELECTED?
Each of these Portfolios invests substantially all of its assets in common
stocks to the extent its portfolio manager believes that the relevant market
environment favors profitable investing in those securities. Portfolio managers
generally take a "bottom up" approach to building their portfolios. In other
words, they seek to identify individual companies with earnings growth potential
that may not be recognized by the market at large. Although themes may emerge in
any Portfolio, securities are generally selected without regard to any defined
industry sector or other similarly defined selection procedure. Realization of
income is not a significant investment consideration. Any income realized on
these Portfolios' investments will be incidental to its objective.
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ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES?
Generally, yes. Portfolio managers seek companies with earnings growth
potential, regardless of country of organization or place of principal business
activity. Foreign securities are generally selected on a stock-by-stock basis
without regard to any defined allocation among countries or geographic regions.
However, certain factors such as expected levels of inflation, government
policies influencing business conditions, the outlook for currency
relationships, and prospects for economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign
securities. See "Additional Risk Factors" on page 11.
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WHAT IS THE MAIN RISK OF INVESTING IN A COMMON STOCK FUND?
The fundamental risk associated with any common stock fund is the risk that the
value of the stocks it holds might decrease. Stock values may fluctuate in
response to the activities of an individual company or in response to general
market and economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term risks than other
investment choices. Smaller or newer issuers are more likely to realize more
substantial growth as well as suffer more significant losses than larger or more
established issuers. Investments in such companies can be both more volatile and
more speculative. See "Additional Risk Factors" on page 11.
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WHAT IS MEANT BY "MARKET CAPITALIZATION"?
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
Aggressive Growth Portfolio which may invest in small to medium sized companies
to a greater degree. Although Growth Portfolio, Worldwide Growth Portfolio and
International Growth Portfolio do not emphasize companies of any particular
size, Portfolios with a larger asset base are more likely to invest in larger,
more-established issuers.
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HOW DOES A DIVERSIFIED PORTFOLIO DIFFER FROM A NONDIVERSIFIED PORTFOLIO?
Diversification is a means of reducing risk by investing a Portfolio's assets in
a broad range of stocks or other securities. A "nondiversified" portfolio 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 portfolio, its share price can be expected to fluctuate
more than a comparable diversified portfolio. Aggressive Growth Portfolio is a
nondiversified portfolio.
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HOW DO THESE PORTFOLIOS TRY TO REDUCE RISK?
Diversification of a Portfolio's assets reduces the effect of any single holding
on its overall portfolio value. A Portfolio may also use futures, options and
other derivative instruments to protect its portfolio from movements in
securities' prices and interest rates. The Portfolios may use a variety of
currency hedging techniques, including forward currency contracts, to manage
exchange rate risk when investing directly in foreign markets. See "Additional
Risk Factors" on page 11. In addition, to the extent that a Portfolio holds a
larger cash position, it may not participate in market declines to the same
extent as if the Portfolio remained more fully invested in common stocks.
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BALANCED PORTFOLIO IS DESIGNED FOR INVESTORS WHO PRIMARILY SEEK GROWTH OF
CAPITAL WITH A DEGREE OF EMPHASIS ON INCOME. IT IS NOT DESIGNED FOR INVESTORS
WHO DESIRE A CONSISTENT LEVEL OF INCOME.
BALANCED PORTFOLIO
The investment objective of this Portfolio is long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This Portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
TYPES OF INVESTMENTS
Balanced Portfolio may invest in the types of investments previously described
on pages 5-6. The Portfolio may also invest in the types of income-producing
securities described below for Flexible Income Portfolio except that its
investments in junk bonds will not exceed 35% of net assets and investments in
mortgage- and asset-backed securities will not exceed 25% of assets.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN BALANCED PORTFOLIO.
HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME COMPONENTS OF BALANCED
PORTFOLIO?
Balanced Portfolio may invest in a combination of common stocks, preferred
stocks, convertible securities, debt securities and other fixed-income
securities. Balanced Portfolio may shift assets between the growth and income
components of its portfolio based on its portfolio manager's analysis of
relevant market, financial and economic conditions. If the portfolio manager
believes that growth securities will provide better returns than the yields then
available or expected on income-producing securities, then the Portfolio will
place a greater emphasis on the growth component.
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WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF BALANCED PORTFOLIO?
The growth component of Balanced Portfolio is expected to consist primarily of
common stocks. The selection criteria for common stocks are described on page 7.
Because income is a part of the investment objective of Balanced Portfolio, the
portfolio manager may consider dividend-paying characteristics to a greater
degree in selecting equity securities. Balanced Portfolio may also find
opportunities for capital growth from debt securities because of anticipated
changes in interest rates, credit standing, currency relationships or other
factors.
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WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT OF BALANCED PORTFOLIO?
The income component of Balanced Portfolio may consist of all types of
income-producing securities, including common stocks selected primarily for
their dividend payments, preferred stocks, convertible securities and all types
of debt securities. Income-producing securities are used to produce a more
consistent total return than the portfolio manager may attain through investing
solely in growth stocks. However, Balanced Portfolio is not designed to produce
a consistent level of income.
FLEXIBLE INCOME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO ARE DESIGNED FOR THOSE
INVESTORS WHO PRIMARILY SEEK CURRENT INCOME.
FLEXIBLE INCOME PORTFOLIO
The investment objective of this Portfolio is to obtain maximum total return,
consistent with preservation of capital. The Portfolio pursues its objective
primarily through investments in income-producing securities. Total return is
expected to result from a combination of current income and capital
appreciation, although income will normally be the dominant component of total
return. As a fundamental policy, this Portfolio will invest at least 80% of its
assets in income-producing securities.
Flexible Income Portfolio may invest in a wide variety of income-producing
securities including corporate bonds and notes, government securities, preferred
stock, income-producing common stocks, debt securities that are convertible or
exchangeable into equity securities, and debt securities that carry with them
the right to acquire equity securities as evidenced by warrants attached to or
acquired with the securities. The Portfolio may invest to a lesser degree in
common stocks, other equity securities or debt securities that are not currently
paying dividends or interest. The Portfolio may purchase securities of any
maturity and quality and the average maturity and quality of its portfolio may
vary substantially.
Flexible Income Portfolio may invest without limit in foreign securities,
including those of corporate and government issuers. The Portfolio may invest
without limit in high-yield/high-risk securities and may have substantial
holdings of such securities. The risks of foreign securities and high-yield
securities are described under "Additional Risk Factors" on page 11.
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<PAGE>
SHORT-TERM BOND PORTFOLIO
The investment objective of this Portfolio is to seek as high a level of current
income as is consistent with preservation of capital. The Portfolio pursues its
objective by investing primarily in short- and intermediate-term fixed-income
securities. Under normal circumstances, it is expected that this Portfolio's
dollar-weighted average portfolio maturity will not exceed three years.
Short-Term Bond Portfolio will normally invest at least 65% of its assets in
debt securities. Subject to this policy and subject to its maturity limits, the
Portfolio may invest in the types of securities previously described under
Flexible Income Portfolio except that its investments in high-yield/high-risk
bonds will not exceed 35% of net assets.
TYPES OF INVESTMENTS
Subject to the specific investment policies of each Portfolio discussed above,
Flexible Income Portfolio and Short-Term Bond Portfolio may also invest in
mortgage- and asset-backed securities (unlimited for Flexible Income Portfolio
and up to 25% of assets for Short-Term Bond Portfolio); zero coupon bonds (up to
10% of assets); high-yield/high-risk securities (unlimited for Flexible Income
Portfolio, up to 35% of net assets for Short-Term Bond Portfolio); securities
purchased on a when-issued, delayed delivery or forward commitment basis; and
indexed/structured securities. In addition, each Portfolio may use futures,
options and other derivatives for hedging purposes or for other purposes, such
as enhancing return. See "Additional Risk Factors" on page 11. When its
portfolio manager is unable to locate investment opportunities with favorable
risk/reward characteristics, the cash position of any Portfolio may increase and
the Portfolio may have substantial holdings of cash or cash equivalent
short-term obligations. See "General Portfolio Policies" on page 10.
THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN FLEXIBLE INCOME PORTFOLIO OR SHORT-TERM BOND PORTFOLIO.
HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
A fundamental risk associated with any fund that invests in fixed-income
securities (e.g., a bond fund) is the risk that the value of the securities it
holds will rise or fall as interest rates change. Generally, a fixed-income
security will increase in value when interest rates fall and decrease in value
when interest rates rise. Longer-term securities are generally more sensitive to
interest rate changes than shorter-term securities, but they generally offer
higher yields to compensate investors for the associated risks. A bond fund's
average-weighted maturity and its duration are measures of how the portfolio may
react to interest rate changes.
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WHAT IS MEANT BY A PORTFOLIO'S "AVERAGE-WEIGHTED MATURITY"?
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor, such as a Portfolio. A bond's term to
maturity is the number of years remaining to maturity. A bond fund does not have
a stated maturity, but it does have an average-weighted maturity. This number is
calculated by averaging the terms to maturity of bonds held by a Portfolio with
each maturity "weighted" according to the percentage of net assets that it
represents.
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WHAT IS MEANT BY A PORTFOLIO'S "DURATION"?
A bond's duration indicates the time it will take an investor to recoup his or
her investment. Unlike average maturity, duration reflects both principal and
interest payments. Generally, the higher the coupon rate on a bond, the lower
its duration will be. The duration of a bond fund is calculated by averaging the
duration of bonds held by a Portfolio with each duration "weighted" according to
the percentage of net assets that it represents. Because duration accounts for
interest payments, a Portfolio's duration is usually shorter than its average
maturity.
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HOW DO FLEXIBLE INCOME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO MANAGE INTEREST
RATE RISK?
Each of these Portfolios may vary the average-weighted maturity of its portfolio
to reflect its portfolio manager's analysis of interest rate trends and other
factors. A Portfolio's average-weighted maturity will tend to be shorter when
its portfolio manager expects interest rates to rise and longer when its
portfolio manager expects interest rates to fall. The Portfolios may also use
futures, options and other derivatives to manage interest rate risk. See
"Additional Risk Factors" on page 11.
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WHAT IS MEANT BY "CREDIT QUALITY"?
Credit quality measures the likelihood that the issuer will meet its obligations
on a bond. One of the fundamental risks associated with all fixed-income funds
is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. government securities are
generally considered to be the safest type of investment in terms of credit
risk. Municipal obligations generally rank between U.S. government securities
and corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, present the highest
credit risk.
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HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized rating agencies such as Standard &
Poor's Ratings Services ("Standard & Poor's") and Moody's Investors Service,
Inc. ("Moody's")
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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<PAGE>
are widely accepted measures of credit risk. The lower a bond issue is rated by
an agency, the more credit risk it is considered to represent. Lower rated bonds
generally pay higher yields to compensate investors for the associated risk.
Please refer to Appendix B for a description of rating categories.
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HOW DO THE FLEXIBLE INCOME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO DIFFER FROM
EACH OTHER?
These Portfolios differ in terms of the credit quality and average maturity of
the securities in which they invest. Although both Portfolios invest primarily
in corporate bonds, Flexible Income Portfolio may invest to a greater degree in
securities with relatively higher credit risk and interest rate risk than
Short-Term Bond Portfolio.
GENERAL PORTFOLIO POLICIES
Unless otherwise stated, each of the following policies applies to all of the
Portfolios. The percentage limitations included in these policies and elsewhere
in this Prospectus apply only at the time of purchase of the security. For
example, if a Portfolio 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 Portfolio's manager believes that market conditions are not favorable for
profitable investing or when the portfolio manager is otherwise unable to locate
favorable investment opportunities, a Portfolio's investments may be hedged to a
greater degree and/or its cash or similar investments may increase. In other
words, the Portfolios do not always stay fully invested in stocks and bonds.
Cash or similar investments are a residual - they represent the assets that
remain after a portfolio manager has committed available assets to desirable
investment opportunities. Partly because the portfolio managers act
independently of each other, the cash positions of the Portfolios may vary
significantly. Larger hedged positions and/or larger cash positions may serve as
a means of preserving capital in unfavorable market conditions.
Securities that the Portfolios may invest in as means of receiving a return on
idle cash include high-grade commercial paper, certificates of deposit,
repurchase agreements or other short-term debt obligations. The Portfolios may
also invest in money market funds (including funds managed by Janus Capital).
When a Portfolio's investments in cash or similar investments increase, a
Portfolio may not participate in stock or bond market advances or declines to
the same extent that it would if the Portfolio remained more fully invested in
stocks or bonds.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. All of the Portfolios (except
Aggressive Growth Portfolio) qualify as diversified funds under the 1940 Act.
The Portfolios are subject to the following diversification requirements:
o As a fundamental policy, no Portfolio may own more than 10% of the
outstanding voting shares of any issuer.
o As a fundamental policy, with respect to 50% of the total assets of
Aggressive Growth Portfolio and 75% of the total assets of the other
Portfolios, no Portfolio will purchase a security of any issuer (other than
cash items and U.S. government securities, as defined in the 1940 Act) if
such purchase would cause a Portfolio's holdings of that issuer to amount
to more than 5% of that Portfolio's total assets.
o No Portfolio will invest more than 25% of its assets in a single issuer.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS
In addition to the diversification requirements stated above, each Portfolio
intends to comply with the diversification requirements currently imposed by the
IRS on separate accounts of insurance companies as a condition of maintaining
the tax-deferred status of variable contracts. More specific information may be
contained in the participating insurance company's separate account prospectus.
INDUSTRY CONCENTRATION
As a fundamental policy, no Portfolio will invest more than 25% of its total
assets in any particular industry. This policy does not apply to U.S. government
securities.
PORTFOLIO TURNOVER
Each Portfolio generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective, changes
in interest rates or the credit standing of an issuer, or by reason of economic
or other developments not foreseen at the time of the initial investment
decision. Changes are made in a Portfolio whenever its portfolio manager
believes such changes are desirable. Portfolio turnover rates are generally not
a factor in making buy and sell decisions.
To a limited extent, a Portfolio may purchase securities in anticipation of
relatively short-term price gains. A Portfolio may also sell one security and
simultaneously purchase the same or comparable security to take advantage of
short-term differentials in bond yields or securities prices. Increased
portfolio turnover may result in higher costs for brokerage commissions, dealer
mark-ups and other transaction costs and may also result in taxable capital
gains. Certain tax rules may restrict the Portfolios' ability to engage in
short-term trading if a security has been held for less than three months.
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ILLIQUID INVESTMENTS
Each Portfolio may invest up to 15% of its net assets in illiquid investments,
including restricted securities or private placements that are not deemed to be
liquid by Janus Capital. An illiquid investment is a security or other position
that cannot be disposed of quickly in the normal course of business. Some
securities cannot be sold to the U.S. public because of their terms or because
of SEC regulations. Janus Capital may determine that securities that cannot be
sold to the U.S. public but that can be sold to institutional investors (for
example, Rule 144A securities) are liquid. Janus Capital will follow guidelines
established by the Trustees of the Trust ("Trustees") in making liquidity
determinations for Rule 144A securities and other securities, including
privately placed commercial paper.
BORROWING AND LENDING
Each Portfolio may borrow money and lend securities or other assets, as follows:
o Each Portfolio may borrow money for temporary or emergency purposes in
amounts up to 25% of its total assets.
o Each Portfolio may mortgage or pledge securities as security for borrowings
in amounts up to 15% of its net assets.
o As a fundamental policy, each Portfolio may lend securities or other assets
if, as a result, no more than 25% of its total assets would be lent to
other parties.
Each Portfolio intends to seek permission from the SEC to borrow money from or
lend money to each other and other funds that permit such transactions and for
which Janus Capital serves as investment adviser. All such borrowing and lending
will be subject to the above percentage limits. There is no assurance that such
permission will be granted.
ADDITIONAL RISK FACTORS
FOREIGN SECURITIES
INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS,
INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES.
Securities of some foreign companies and governments may be traded in the United
States, but many foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
o Currency Risk. A Portfolio may buy the local currency when it buys a
foreign currency denominated security and sell the local currency when it
sells the security. As long as a Portfolio holds a foreign security, its
value will be affected by the value of the local currency relative to the
U.S. dollar. When a Portfolio sells a foreign security, its value may be
worth less in U.S. dollars even though the security increases in value in
its home country. U.S. dollar denominated securities of foreign issuers may
also be affected by currency risk.
o Political and Economic Risk. Foreign investments may be subject to
heightened political and economic risks, particularly in underdeveloped or
developing countries which may have relatively unstable governments and
economies based on only a few industries. In some countries, there is the
risk that the government may take over the assets or operations of a
company or that the government may impose taxes or limits on the removal of
a Portfolio's assets from that country.
o Regulatory Risk. There may be less government supervision of foreign
markets. Foreign issuers may not be subject to the uniform accounting,
auditing and financial reporting standards and practices applicable to
domestic issuers. There may be less publicly available information about
foreign issuers than domestic issuers.
o Market Risk. Foreign securities markets, particularly those of
underdeveloped or developing countries, may be less liquid and more
volatile than domestic markets. Certain markets may require payment for
securities before delivery and delays may be encountered in settling
securities transactions. In some foreign markets, there may not be
protection against failure by other parties to complete transactions. There
may be limited legal recourse against an issuer in the event of a default
on a debt instrument.
o Transaction Costs. Transaction costs of buying and selling foreign
securities, including brokerage, tax and custody costs, are generally
higher than those involved in domestic transactions.
INVESTMENTS IN SMALLER COMPANIES
SMALLER OR NEWER COMPANIES MAY SUFFER MORE SIGNIFICANT LOSSES AS WELL AS REALIZE
MORE SUBSTANTIAL GROWTH THAN LARGER OR MORE ESTABLISHED ISSUERS.
Smaller or newer companies may lack depth of management, they may be unable to
generate funds necessary for growth or potential development, or they may be
developing or marketing new products or services for which markets are not yet
established and may never become established. In addition, such companies may be
insignificant factors in their industries and may be subject to intense
competition from larger or more established companies. Securities of smaller or
newer companies may have more limited trading markets than the markets for
securities of larger or more established issuers, and may be subject to wider
price fluctuations. Investments in such companies tend to be more volatile and
somewhat more speculative.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Each Portfolio may enter into futures contracts on securities, financial indices
and foreign currencies and options on such contracts ("futures contracts") and
may invest in options on securities, financial indices and foreign
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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<PAGE>
currencies ("options"), forward contracts and interest rate swaps and
swap-related products (collectively "derivative instruments"). The Portfolios
intend to use most derivative instruments primarily to hedge against potential
adverse movements in securities prices, foreign currency markets or interest
rates. To a limited extent, the Portfolios may also use derivative instruments
for non-hedging purposes such as seeking to increase a Portfolio's income or
otherwise seeking to enhance return. Please refer to Appendix A to this
Prospectus and the SAI for a more detailed discussion of these instruments.
The use of derivative instruments exposes the Portfolios to additional
investment risks and transaction costs. Risks inherent in the use of derivative
instruments include:
o the risk that interest rates, securities prices and currency markets will
not move in the direction that a portfolio manager anticipates;
o imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies
being hedged;
o the fact that skills needed to use these strategies are different from
those needed to select portfolio securities;
o inability to close out certain hedged positions to avoid adverse tax
consequences;
o the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired;
o leverage risk, that is, the risk that adverse price movements in an
instrument can result in a loss substantially greater than a Portfolio's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and
o particularly in the case of privately-negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave a
Portfolio worse off than if it had not entered into the position.
Although the Portfolios believe the use of derivative instruments will benefit
the Portfolios, a Portfolio's performance could be worse than if the Portfolio
had not used such instruments if the portfolio manager's judgement proves
incorrect.
When a Portfolio invests in a derivative instrument, it may be required to
segregate cash and other high-grade liquid assets or certain portfolio
securities with its custodian to "cover" the Portfolio's position. Assets
segregated or set aside generally may not be disposed of so long as the
Portfolio maintains the positions requiring segregation or cover. Segregating
assets could diminish the Portfolio's return due to the opportunity losses of
foregoing other potential investments with the segregated assets.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are debt securities rated
below investment grade by the primary rating agencies (such as Standard & Poor's
and Moody's). Please refer to Appendix B for a description of bond rating
categories. The Portfolios expect that holdings of lower quality securities, if
any, will consist primarily of bonds rated in the highest two tiers of
noninvestment grade securities.
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
rated securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.
Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged. In the event of a default, a Portfolio would
experience a reduction of its income and could expect a decline in the market
value of the defaulted securities.
The market for lower quality securities is generally less liquid than the market
for higher quality bonds. Adverse publicity and investor perceptions as well as
new or proposed laws may also have a greater negative impact on the market for
lower quality securities. Unrated debt, while not necessarily of lower quality
than rated securities, may not have as broad a market as higher quality
securities.
The market prices of high-yield securities structured as zero coupon or
pay-in-kind securities are generally affected to a greater extent by interest
rate changes and tend to be more volatile than securities which pay interest
periodically. In addition, zero coupon, pay-in-kind and delayed interest bonds
often do not pay interest until maturity. However, the Portfolios must recognize
a computed amount of interest income and pay dividends to shareholders even
though it has received no cash. In some instances, the Portfolios may have to
sell securities to have sufficient cash to pay the dividends.
SPECIAL SITUATIONS
Each Portfolio may invest in "special situations" from time to time. A special
situation arises when, in the opinion of a Portfolio's manager, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
See Appendix A for risks associated with certain other investments.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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MANAGEMENT OF THE PORTFOLIOS
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to each Portfolio's investment objective and policies.
The Trustees delegate the day-to-day management of the Portfolios to the
officers of the Trust and meet at least quarterly to review the Portfolios'
investment policies, performance, expenses and other business affairs.
INVESTMENT ADVISER
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923, is the
investment adviser to each of the Portfolios and is responsible for the
day-to-day management of the investment portfolios and other business affairs of
the Portfolios.
Janus Capital has served as investment adviser to Janus Fund since its inception
in 1970 and currently serves as investment adviser to all of the Janus retail
funds, as well as adviser or subadviser to other mutual funds and individual,
corporate, charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning each
Portfolio's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Portfolios, and may be reimbursed by
the Portfolios 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 Portfolios and pays the salaries, fees and expenses of all
Portfolio officers and those Trustees who are affiliated with Janus Capital.
Participating insurance companies that purchase the Portfolios' shares may
perform certain administrative services relating to the Portfolios and Janus
Capital or the Portfolios may pay those companies for such services.
INVESTMENT PERSONNEL
James P. Craig, III is Chief Investment Officer of Janus Capital. He is also
Executive Vice President and portfolio manager of Growth Portfolio, which he has
managed since 1994. Mr. Craig previously managed Balanced Portfolio from
September 1993 through April 1996. He has managed Janus Fund since 1986, Janus
Venture Fund from its inception to December 1993 and Janus Balanced Fund from
December 1993 through 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.
- --------------------------------------------------------------------------------
James P. Goff is Executive Vice President and portfolio manager of Aggressive
Growth Portfolio. Mr. Goff joined Janus Capital in 1988 and has managed Janus
Enterprise Fund since its inception and has co-managed Janus Venture Fund since
December 1993. He holds a Bachelor of Arts in Economics from Yale University and
is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
Helen Young Hayes is Executive Vice President and portfolio manager of Worldwide
Growth Portfolio and International Growth Portfolio. Ms. Hayes joined Janus
Capital in 1987 and has managed or co-managed Janus Worldwide Fund and Janus
Overseas Fund since their inceptions. She holds a Bachelor of Arts in Economics
from Yale University and is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
Blaine P. Rollins is Executive Vice President and portfolio manager of Balanced
Portfolio, which he has managed since May 1996. Mr. Rollins joined Janus Capital
in 1990 and has managed Janus Balanced Fund since January 1996. He gained
experience as a fixed-income trader and equity research analyst prior to
assuming management responsibility for the Portfolio. He holds a Bachelor of
Science in Finance from the University of Colorado and is a Chartered Financial
Analyst.
- --------------------------------------------------------------------------------
Sandy R. Rufenacht is Executive Vice President and portfolio manager of
Short-Term Bond Portfolio, which he has managed since May 1996. Mr. Rufenacht
joined Janus Capital in 1990 and has managed Janus Intermediate Government
Securities Fund and Janus Short-Term Bond Fund since January 1996. 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 Flexible
Income Portfolio, which he has managed since its inception. He managed
Short-Term Bond Portfolio from its inception through April 1996 and also manages
Janus High-Yield Fund and the High-Yield Portfolio of the Trust. Mr. Speaker
joined Janus Capital in 1986. He has managed Janus Flexible Income Fund since
December 1991 and previously managed each of Janus Intermediate Government
Securities Fund, Janus Short-Term Bond Fund and Janus Federal Tax-Exempt Fund
from inception through December 1995. He holds a Bachelor of Arts in Finance
from the University of Colorado and is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
PERSONAL INVESTING
Janus Capital permits investment and other personnel to purchase and sell
securities for their own accounts, subject to Janus Capital's policy governing
personal investing. Janus Capital's policy requires investment and other
personnel to conduct their personal investment activities in a manner that Janus
Capital believes is not detrimental to the Portfolios or Janus Capital's other
advisory clients. See the SAI for more detailed information.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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BREAKDOWN OF MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Portfolio pays Janus Capital a management fee which is accrued daily. The
advisory agreement with each Portfolio spells out the management fee and other
expenses that the Portfolios must pay. Each of the Portfolios is subject to the
following management fee schedule (expressed as an annual rate):
<TABLE>
<CAPTION>
Average Daily Net Annual Rate Expense Limit
Fee Schedule Assets of Portfolio Percentage (%) Percentage (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio First $ 30 Million 1.00* 2.50**
Aggressive Growth Portfolio Next $270 Million .75
Worldwide Growth Portfolio Next $200 Million .70
International Growth Portfolio and Over $500 Million .65
Balanced Portfolio
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Flexible Income Portfolio First $300 Million .65 1.00
Over $300 Million .55
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio First $300 Million .65 .65
Over $300 Million .55
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Janus Capital has agreed to reduce each Portfolio's advisory fee to the
extent that such fee exceeds the effective rate of the Janus retail fund
corresponding to such Portfolio. Janus Capital may terminate this fee
reduction or any of the expense limitations set forth above at any time
upon 90 days' notice to the Trustees. The effective rate is the advisory
fee calculated by the corresponding retail fund as of the last day of each
calendar quarter (expressed as an annual rate). The effective rate of Janus
Fund, Janus Enterprise Fund, Janus Worldwide Fund, Janus Overseas Fund and
Janus Balanced Fund were 0.65%, 0.73%, 0.67%, 0.78%, and 0.80%,
respectively, for the quarter ended March 31, 1996.
** The expense limit percentage will decrease as a Portfolio's assets
increase. Please see the SAI for more information.
Differences in the actual management fees incurred by the Portfolios are due
primarily to variances in the asset sizes of the corresponding retail funds. As
asset size increases, the annual rate of the management fee rate declines in
accordance with the above schedule. In addition, each Portfolio incurs expenses
not assumed by Janus Capital, including transfer agent and custodian fees and
expenses, legal and auditing fees, printing and mailing costs of sending reports
and other information to existing shareholders, and independent Trustees' fees
and expenses.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Portfolio are executed by
broker-dealers selected by Janus Capital. Broker-dealers are selected on the
basis of their ability to obtain best price and execution for a Portfolio's
transactions and recognizing brokerage, research and other services provided to
the Portfolio and to Janus Capital. Janus Capital may also consider payments
made by brokers effecting transactions for a Portfolio i) to the Portfolio or
ii) to other persons on behalf of the Portfolio for services provided to the
Portfolio for which it would be obligated to pay. The Trustees have authorized
Janus Capital to place portfolio transactions on an agency basis with a
broker-dealer affiliated with Janus Capital. When transactions for a Portfolio
are effected with that broker-dealer, the commissions payable by the Portfolio
are credited against certain Portfolio operating expenses. The SAI further
explains the selection of broker-dealers.
OTHER SERVICE PROVIDERS
The following parties provide the Portfolios with administrative and other
services.
Domestic Custodian
Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, Missouri 64105
Foreign Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217
Janus Service Corporation is a wholly-owned subsidiary of Janus Capital.
Investors Fiduciary Trust Company is a wholly-owned subsidiary of State Street
Bank and Trust Company.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
14
<PAGE>
OTHER INFORMATION
ORGANIZATION
The Trust is a "mutual fund" that was organized as a Delaware business trust on
May 20, 1993. A mutual fund is an investment vehicle that pools money from
numerous investors and invests the money to achieve a specified objective. The
Trust consists of nine separate series, seven of which are offered by this
Prospectus.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called for a specific Portfolio 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 Portfolio
only if a matter affects or requires the vote of only that Portfolio or that
Portfolio'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.
An insurance company issuing a variable contract invested in shares of a
Portfolio will request voting instructions from variable contract holders. Under
current law, the insurance company must vote all shares held by the separate
account in proportion to the voting instructions received.
CONFLICTS OF INTEREST
Each Portfolio's shares are available only to variable annuity and variable life
separate accounts of insurance companies that are unaffiliated with Janus
Capital and to certain qualified retirement plans. The Portfolios currently do
not foresee any disadvantages to policy owners arising out of the fact that each
Portfolio offers its shares to such entities. Nevertheless, the Trustees monitor
events in order to identify any material irreconcilable conflicts that may arise
and to determine what action, if any, should be taken in response to such
conflicts. If a conflict occurs, the Trustees may require one or more insurance
company separate accounts or plans to withdraw its investments in one or more
Portfolios and to substitute shares of another Portfolio. If this occurs, a
Portfolio may be forced to sell securities at disadvantageous prices. In
addition, the Trustees may refuse to sell shares of any Portfolio to any
separate account or may suspend or terminate the offering of a Portfolio's
shares if such action is required by law or regulatory authority or is in the
best interests of that Portfolio's shareholders.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve any Portfolio's investment objective
by investing all of that Portfolio's assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to that Portfolio. It is expected that any such
investment company would be managed by Janus Capital in substantially the same
manner as the existing Portfolio. The initial shareholder(s) of each Portfolio
voted to vest the authority to convert to a master/feeder structure in the sole
discretion of the Trustees. No further approval of the shareholders of the
Portfolios is required. You will receive at least 30 days' prior notice of any
such investment. Such investment would be made only if the Trustees determine it
to be in the best interests of a Portfolio and its shareholders. In making that
determination, the Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. Although management of the Portfolios believes the Trustees will
not approve an arrangement that is likely to result in higher costs, no
assurance is given that costs will be materially reduced if this option is
implemented.
THE VALUATION OF SHARES
The NAV of the shares of a Portfolio is determined at the close of the regular
trading session of the New York Stock Exchange (the "NYSE") (normally 4:00 p.m.,
New York time) each day that the NYSE is open. 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. Securities are valued at market value
or, if market information 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.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
THE INTERNAL REVENUE CODE REQUIRES EACH PORTFOLIO TO DISTRIBUTE NET INCOME AND
ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. A PORTFOLIO'S INCOME FROM
DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM CAPITAL GAINS ARE PAID TO
SHAREHOLDERS AS DIVIDENDS. NET REALIZED LONG-TERM GAINS ARE PAID TO SHAREHOLDERS
AS CAPITAL GAINS DISTRIBUTIONS. EACH PORTFOLIO MAKES SEMIANNUAL DISTRIBUTIONS IN
JUNE AND DECEMBER OF SUBSTANTIALLY ALL OF ITS INVESTMENT INCOME AND AN ANNUAL
DISTRIBUTION IN JUNE OF ITS NET REALIZED CAPITAL GAINS, IF ANY. ALL DIVIDENDS
AND CAPITAL GAINS DISTRIBUTIONS FROM A PORTFOLIO WILL BE AUTOMATICALLY
REINVESTED INTO ADDITIONAL SHARES OF THAT PORTFOLIO.
HOW DISTRIBUTIONS AFFECT A PORTFOLIO'S NAV
Distributions are paid to shareholders as of the record date of the distribution
of a Portfolio, regardless of how long the shares have been held. Dividends and
capital gains awaiting distribution are included in each Portfolio's daily NAV.
The share price of a Portfolio drops by the amount of the distribution, net of
any subsequent market fluctuations. As an example, assume that on December 31,
Growth Portfolio declared a dividend in the amount of $0.25 per share. If Growth
Portfolio's share price was $10.00 on December 30, the Portfolio's share price
on December 31 would be $9.75, barring market fluctuations.
TAXES
TAXES ON DISTRIBUTIONS
Because shares of the Portfolios may be purchased only through variable
insurance contracts and qualified plans, it is anticipated that any income
dividends or capital gains distributions made by a Portfolio will be exempt from
current taxation if left to accumulate within the variable insurance contract or
qualified plan. Generally, withdrawals from such contracts may be subject to
ordinary income tax and, if made before age 591/2, a 10% penalty tax. The tax
status of your investment in the Portfolios depends on the features of the
variable insurance contracts purchased from a participating insurance company.
Further information may be found in the prospectus of the separate account
offering such contract.
TAXATION OF THE PORTFOLIOS
Dividends, interest and some capital gains received by the Portfolios on foreign
securities may give rise to withholding and other taxes imposed by foreign
countries. It is expected that foreign taxes paid by the Portfolios will be
treated as expenses of the Portfolios. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes.
The Portfolios do not expect to pay any federal income or excise taxes because
they intend to meet certain requirements of the Internal Revenue Code. In
addition, each Portfolio intends to qualify under the Internal Revenue Code with
respect to the diversification requirements related to the tax-deferred status
of insurance company separate accounts.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
16
<PAGE>
SHAREHOLDER'S GUIDE
INVESTORS MAY NOT PURCHASE OR REDEEM SHARES OF THE PORTFOLIOS DIRECTLY. SHARES
MAY BE PURCHASED OR REDEEMED ONLY THROUGH VARIABLE INSURANCE CONTRACTS OFFERED
BY THE SEPARATE ACCOUNTS OF PARTICIPATING INSURANCE COMPANIES OR THROUGH
QUALIFIED RETIREMENT PLANS. REFER TO THE PROSPECTUS FOR THE PARTICIPATING
INSURANCE COMPANY'S SEPARATE ACCOUNT OR YOUR PLAN DOCUMENTS FOR INSTRUCTIONS ON
PURCHASING OR SELLING OF VARIABLE INSURANCE CONTRACTS AND ON HOW TO SELECT
SPECIFIC PORTFOLIOS AS INVESTMENT OPTIONS FOR A CONTRACT OR A QUALIFIED PLAN.
PURCHASES
Purchases of Portfolio shares may be made only by the separate accounts of
insurance companies for the purpose of funding variable insurance contracts or
by qualified plans. Refer to the prospectus of the appropriate insurance company
separate account or your plan documents for information on how to invest in each
Portfolio.
All investments in the Portfolios are credited to a participating insurance
company's separate account or a qualified plan immediately upon acceptance of
the investment by a Portfolio. Investments will be processed at the NAV next
determined after an order is received and accepted by a Portfolio.
Each Portfolio 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 Portfolio. Any Portfolio may
discontinue sales of its shares if management believes that a substantial
further increase may adversely affect that Portfolio's ability to achieve its
investment objective. In such event, however, it is anticipated that existing
policy owners and plan participants invested in that Portfolio would be
permitted to continue to authorize investment in such Portfolio and to reinvest
any dividends or capital gains distributions.
REDEMPTIONS
Redemptions, like purchases, may be effected only through the separate accounts
of participating insurance companies or through qualified plans. Please refer to
the appropriate separate account prospectus or plan documents for details.
Shares of any Portfolio may be redeemed on any business day. Redemptions are
processed at the NAV next calculated after receipt and acceptance of the
redemption order by the Portfolio. Redemption proceeds will normally be wired to
the participating insurance company the business day following receipt of the
redemption order, but in no event later than seven days after receipt of such
order.
SHAREHOLDER COMMUNICATIONS
Owners of variable insurance contracts and plan participants will receive annual
and semiannual reports including the financial statements of the Portfolios that
they have authorized for investment. Each report will show the investments owned
by each Portfolio and the market values thereof, as well as other information
about the Portfolios and their operations. The Trust's fiscal year ends December
31.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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<PAGE>
APPENDIX A
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types of
securities and other instruments in which the Portfolios may invest. The
Portfolios may invest in these instruments to the extent permitted by their
investment objective and policies. The Portfolios are not limited by this
discussion and may invest in any other types of instruments not precluded by the
policies discussed elsewhere in this Prospectus. Please refer to the SAI for a
more detailed discussion of certain instruments.
I. EQUITY AND DEBT SECURITIES
Bonds are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value) at a specified maturity and to make scheduled
interest payments.
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 Portfolios may purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933.
Common stock represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stock are not fixed but are declared at the discretion of the issuer's board of
directors.
Convertible securities are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
Depositary receipts are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
Fixed-income securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
High-yield/High-risk securities are securities that are rated below investment
grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and
Ba or lower by Moody's). Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and "junk bonds."
Mortgage- and asset-backed securities are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, 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. Income tax regulations may require the
Portfolios to recognize income associated with the PFIC prior to the actual
receipt of any such income.
Preferred stock is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights.
Repurchase agreements involve the purchase of a security by a Portfolio and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Portfolio 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 Portfolio 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 Portfolio to
another party (generally a bank or dealer) in return for cash and an agreement
by the Portfolio to buy the security back at a specified price and time. This
technique may be used to provide cash to satisfy unusually high redemption
requests or for other temporary or emergency purposes.
Rule 144A securities are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
Standby commitments are obligations purchased by a Portfolio from a dealer that
give the Portfolio the option to sell a security to the dealer at a specified
price.
Tender option bonds are generally long-term securities that are coupled with an
option to tender the securities to a bank, broker-dealer or other financial
institution at periodic intervals and receive the face value of the bond. This
type of security is commonly used as a means of enhancing the security's
liquidity.
U.S. government securities include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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<PAGE>
year, Treasury notes have initial maturities of one to ten years and Treasury
bonds may be issued with any maturity but generally have maturities of at least
ten years. U.S. government securities also include indirect obligations of the
U.S. government that are issued by federal agencies and government sponsored
entities. Unlike Treasury securities, agency securities generally are not backed
by the full faith and credit of the U.S. government. Some agency securities are
supported by the right of the issuer to borrow from the Treasury, others are
supported by the discretionary authority of the U.S. government to purchase the
agency's obligations and others are supported only by the credit of the
sponsoring agency.
Variable and floating rate securities have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
Warrants are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
When-issued, delayed delivery and forward transactions generally involve the
purchase of a security with payment and delivery at some time in the future -
i.e., beyond normal settlement. The Portfolios do not earn interest on such
securities until settlement and bear the risk of market value fluctuations
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
Zero coupon bonds are debt securities that do not pay interest at regular
intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. Strips are debt securities that are stripped of their
interest (usually by a financial intermediary) after the securities are issued.
The market value of these securities generally fluctuates more in response to
changes in interest rates than interest-paying securities of comparable
maturity.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
Forward contracts are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are not
currently exchange traded and are typically negotiated on an individual basis.
The Portfolios may enter into forward currency contracts to hedge against
declines in the value of non-dollar denominated securities or to reduce the
impact of currency appreciation on purchases of nondollar denominated
securities. They may also enter into forward contracts to purchase or sell
securities or other financial indices.
Futures contracts are contracts that obligate the buyer to receive and the
seller to deliver an instrument or money at a specified price on a specified
date. The Portfolios 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
Portfolios 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 Portfolio bears the market risk of
an investment in the underlying instruments, as well as the credit risk of the
issuer.
Interest rate swaps involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
Inverse floaters are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. Certain inverse floaters may have an interest rate
reset mechanism that multiplies the effects of change in the underlying index.
Such mechanism may increase the volatility of the security's market value.
Options are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Portfolios may purchase and write put and call options on securities,
securities indices and foreign currencies.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
19
<PAGE>
APPENDIX B
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although the adviser considers security ratings when
making investment decisions, it also performs its own investment analysis and
does not rely solely on the ratings assigned by credit agencies.
STANDARD & POOR'S RATINGS SERVICES
BOND RATING EXPLANATION
- --------------------------------------------------------------------------------
Investment Grade
AAA Highest rating; extremely strong capacity to pay
principal and interest.
AA High quality; very strong capacity to pay
principal and interest.
A Strong capacity to pay principal and interest;
somewhat more susceptible to the adverse effects
of changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters,
but adverse economic conditions or changing
circumstances more likely to lead to a weakened
capacity to pay principal and interest than for
higher rated bonds.
Non-Investment Grade
BB, B, Predominantly speculative with respect to the
issuer's capacity to meet required interest and
principal payments.
CCC, CC, C BB - lowest degree of speculation; C - the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties
or major risk exposure to adverse conditions.
D In default.
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.
Investment Grade
Aaa Highest quality, smallest degree of investment
risk.
Aa High quality; together with Aaa bonds, they
compose the high-grade bond group.
A Upper-medium grade obligations; many favorable
investment attributes.
Baa Medium-grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present but certain protective
elements may be lacking or may be unreliable over
any great length of time.
Non-Investment Grade
Ba More uncertain, with speculative elements.
Protection of interest and principal payments not
well safeguarded during good and bad times.
B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other
contract terms over time.
Caa Poor standing, may be in default; elements of
danger with respect to principal or interest
payments.
Ca Speculative in a high degree; could be in default
or have other marked shortcomings.
C Lowest-rated; extremely poor prospects of ever
attaining investment standing.
- --------------------------------------------------------------------------------
Unrated securities will be treated as noninvestment grade securities unless the
portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal year ended December 31, 1995, the percentage of securities
holdings for the Flexible Income Portfolio by rating category based upon a
weighted monthly average was:
Bonds - S&P Rating Flexible Income Portfolio
AAA 16%
AA 2%
A 15%
BBB 22%
BB 14%
B 21%
CCC 0%
CC 0%
C 0%
Preferred Stock 0%
Cash and Options 10%
- --------------------------------------------------------------------------------
TOTAL 100%
- --------------------------------------------------------------------------------
No other Portfolio held 5% or more of its assets in bonds rated below investment
grade for the fiscal year ended December 31, 1995.
JANUS ASPEN SERIES PROSPECTUS May 1, 1996
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JANUS ASPEN SERIES
[LOGO]
MONEY MARKET PORTFOLIO
PROSPECTUS
[LOGO]
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
EXPENSE INFORMATION ......................................................... 1
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS ........................................................ 2
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE,
POLICIES AND TECHNIQUES ..................................................... 3
- --------------------------------------------------------------------------------
INVESTMENT ADVISER .......................................................... 5
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES ..................................................... 7
- --------------------------------------------------------------------------------
PERFORMANCE ................................................................. 7
- --------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION ................................................... 8
- --------------------------------------------------------------------------------
SHAREHOLDER'S GUIDE ......................................................... 9
[LOGO]
JANUS ASPEN SERIES
MONEY MARKET PORTFOLIO
Prospectus
May 1, 1996
Money Market Portfolio (the "Portfolio") is designed for investors who seek
maximum current income consistent with stability of capital. The Portfolio is a
series of Janus Aspen Series (the "Trust"), an open-end management investment
company. The Portfolio invests exclusively in high quality money market
instruments. AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Shares of the Trust are issued and redeemed only in connection with investment
in and payments under variable annuity contracts and variable life insurance
contracts (collectively, "variable insurance contracts"), as well as certain
qualified retirement plans. The Trust sells and redeems its shares at net asset
value without any sales charges, commissions or redemption fees. Each variable
insurance contract involves fees and expenses not described in this Prospectus.
The Portfolio may not be available in connection with a particular contract. See
the accompanying contract prospectus for information regarding contract fees and
expenses and any restrictions on purchases or allocations.
This Prospectus contains information about the Portfolio that a prospective
purchaser of a variable insurance contract should consider before allocating
purchase payments or premiums to the Portfolio. It should be read carefully in
conjunction with the separate account prospectus of the specific insurance
product that accompanies this Prospectus and retained for future reference.
Additional information about the Portfolio is contained in the Statement of
Additional Information ("SAI") dated May 1, 1996, which is filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI is available upon request and without charge by writing
or calling your insurance company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
<PAGE>
EXPENSE INFORMATION
The tables and example below are designed to assist participants in qualified
plans that invest in the Portfolio in understanding the various costs and
expenses that you will bear directly or indirectly as an investor in the
Portfolio. OWNERS OF VARIABLE INSURANCE CONTRACTS THAT INVEST IN THE PORTFOLIO
SHOULD REFER TO THE VARIABLE INSURANCE CONTRACT PROSPECTUS FOR A DESCRIPTION OF
COSTS AND EXPENSES, AS THE TABLES AND EXAMPLE DO NOT REFLECT DEDUCTIONS AT THE
SEPARATE ACCOUNT LEVEL OR CONTRACT LEVEL FOR ANY CHARGES THAT MAY BE INCURRED
UNDER A CONTRACT.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fee None
Exchange fee None
ANNUAL PORTFOLIO OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
- --------------------------------------------------------------------------------
Management Fee 0%
Other Expenses .50%
- --------------------------------------------------------------------------------
Total Portfolio Operating Expenses .50%
- --------------------------------------------------------------------------------
(1) The fees and expenses in the table above are based on expenses for the
fiscal period ended December 31, 1995, net of fee waivers from Janus
Capital. Waivers are first applied against the management fee and then
against other expenses. Without such waivers, the Management Fee, Other
Expenses and Total Portfolio Operating Expenses would have been .25%, .82%
and 1.07%, respectively. Janus Capital may modify or terminate the waivers
at any time upon 90 days' notice to the Trustees.
EXAMPLE
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Assume you invest $1,000, the Portfolio
returns 5% annually and its expense
ratio remains as listed above. The
example below shows the operating
expenses that you would indirectly
bear as an investor in the Portfolio. $5 $16 $28 $63
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
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<PAGE>
FINANCIAL HIGHLIGHTS
The information below is for the period from May 1, 1995 (inception) to December
31, 1995. The accounting firm of Price Waterhouse LLPhas audited the Portfolio's
financial statements and their report is included in the Portfolio's Annual
Report, which is incorporated by reference into the SAI. Expense and income
ratios have been annualized while total returns have not been annualized.
Money Market
Portfolio
- --------------------------------------------------------------------------------
1. Net asset value, beginning of period $1.00
- --------------------------------------------------------------------------------
Income from investment operations:
2. Net investment income .04
3. Net gains or (losses) on securities
(both realized and unrealized) --
- --------------------------------------------------------------------------------
4. Total from investment operations .04
- --------------------------------------------------------------------------------
Less distributions:
5. Dividends (from net investment income) (.04)
6. Distributions (from capital gains) --
- --------------------------------------------------------------------------------
7. Total distributions (.04)
- --------------------------------------------------------------------------------
8. Net asset value, end of period $1.00
- --------------------------------------------------------------------------------
9. Total return 3.63%
- --------------------------------------------------------------------------------
10. Net assets, end of period (in thousands) $1,735
11. Ratio of expenses to average net assets 0.50%(1)
12. Ratio of net investment income to average net assets 5.30%
- --------------------------------------------------------------------------------
(1 The ratio was 1.07% before voluntary waiver of certain fees incurred by the
Portfolio.
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
This section is designed to help you better understand the information
summarized in the Financial Highlights table. The table contains important
historical operating information that may be useful in making your investment
decision or understanding how your investment has performed. The Portfolio's
Annual Report contains additional information about the Portfolio's performance.
To request a copy of the Annual Report, please call or write your insurance
company.
Net asset value ("NAV") is the value of a single share of the Portfolio. It is
computed by adding the value of all of the Portfolio's investments and other
assets, subtracting any liabilities and dividing the result by the number of
shares outstanding. The Portfolio's NAV is expected to be $1.00.
Net investment income is the per share amount of dividends and interest income
earned on securities held by the Portfolio, less Portfolio expenses. Dividends
(from net investment income) is the per share amount that the Portfolio paid
from net investment income.
Net gains or (losses) on securities is the per share increase or decrease in
value of the securities the Portfolio holds. A gain (or loss) is realized when
securities are sold. A gain (or loss) is unrealized when securities increase or
decrease in value but are not sold. Distributions (from capital gains) is the
per share amount that the Portfolio paid from net realized gains.
Total return is the percentage increase or decrease in the value of an
investment over a stated period of time. For the purposes of calculating total
return, it is assumed that dividends and distributions are reinvested at the NAV
on the day of the distribution. THE PORTFOLIO'S TOTAL RETURN CANNOT BE COMPUTED
DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLES.
Ratio of expenses to average net assets is the total of the Portfolio's
operating expenses divided by its average net assets for the stated period.
Ratio of net investment income to average net assets is the Portfolio's net
investment income divided by its average net assets for the stated period.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
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<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND TECHNIQUES
Unless otherwise stated, the Portfolio's investment objective and policies are
not fundamental and may be changed by the Trustees of the Trust (the "Trustees")
without shareholder approval. The Portfolio is subject to additional investment
policies and restrictions described in the SAI, some of which are fundamental
and may not be changed without shareholder approval.
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek maximum current income to the
extent consistent with stability of capital. There can be no assurance that the
Portfolio will achieve its investment objective or be able to maintain a stable
net asset value of $1.00 per share.
INVESTMENT POLICIES
The Portfolio will invest only in eligible high quality, short-term money market
instruments that present minimal credit risks, as determined by Janus Capital,
the Portfolio's investment adviser, pursuant to procedures adopted by the
Trustees. The Portfolio may invest only in U.S. dollar-denominated instruments
that have a remaining maturity of 397 days or less (as calculated pursuant to
Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act")) and will
maintain a dollar-weighted average portfolio maturity of 90 days or less.
Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities (as defined below), the Portfolio will not invest more
than 5% of its total assets in the securities of any one issuer. A guarantor is
not considered an issuer for the purpose of this limit, provided that the value
of all securities held by the Portfolio that are issued or guaranteed by that
institution shall not exceed 10% of the Portfolio's total assets. To ensure
adequate liquidity, the Portfolio may not invest more than 10% of its net assets
in illiquid securities, including repurchase agreements maturing in more than
seven days and certain time deposits that are subject to early withdrawal
penalties and mature in more than seven days. Janus Capital determines and
monitors the liquidity of portfolio securities under the supervision of the
Trustees.
Ratings. High quality money market instruments include those that (i) are rated
(or, if unrated, are issued by an issuer with comparable outstanding short-term
debt that is rated) in one of the two highest rating categories for short-term
debt by any two nationally recognized statistical rating organizations
("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (ii) are
otherwise unrated and determined by Janus Capital to be of comparable quality.
The Portfolio will invest at least 95% of its total assets in securities in the
highest rating category (as determined pursuant to Rule 2a-7). Descriptions of
the rating categories of Standard & Poor's Ratings Services, Moody's Investors
Service, Inc., and certain other NRSROs are contained in the SAI, as is a
further description of the Portfolio's investment policies.
Although the Portfolio only invests in high quality money market instruments, an
investment in the Portfolio is subject to risk even if all securities in its
portfolio are paid in full at maturity. All money market instruments, including
U.S. Government Securities, can change in value as a result of changes in
interest rates, the issuer's actual or perceived creditworthiness or the
issuer's ability to meet its obligations.
TYPES OF INVESTMENTS
The Portfolio pursues its objective by investing primarily in high quality
commercial paper and obligations of financial institutions. It may invest to a
lesser degree in U.S. Government Securities and municipal securities.
Debt Obligations. The Portfolio may invest in debt obligations of domestic
issuers, including commercial paper (short-term promissory notes issued by
companies to finance their, or their affiliates', current obligations), notes
and bonds, and variable amount master demand notes. The payment obligations on
these instruments may be backed by securities, swap agreements or other assets,
by a guarantee of a third party or solely by the unsecured promise of the issuer
to make payments when due. The Portfolio may invest in privately issued
commercial paper or other securities that are restricted as to disposition under
the federal securities laws. In general, sales of these securities may not be
made absent registration under the Securities Act of 1933 (the "1933 Act") or
the availability of an appropriate exemption therefrom. Pursuant to Section 4(2)
of the 1933 Act or Rule 144A adopted under the 1933 Act, however, some of these
securities are eligible for resale to institutional investors, and accordingly,
Janus Capital may determine that a liquid market exists for such a security
pursuant to guidelines adopted by the Trustees.
Obligations of Financial Institutions. The Portfolio may invest in obligations
of financial institutions. Examples of obligations in which it may invest
include negotiable certificates of deposit, bankers' acceptances and time
deposits 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 Portfolio may also
invest in Eurodollar and Yankee bank obligations as discussed below.
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
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
3
<PAGE>
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 the stated maturity date
and bear a fixed rate of interest, generally may be withdrawn on demand by the
Portfolio but may be subject to early withdrawal penalties that could reduce the
Portfolio'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 OR YANKEE OBLIGATIONS.
The Portfolio may invest in 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.
Eurodollar (and to a limited extent, Yankee) bank obligations are subject to
certain sovereign risks. One such risk is the possibility that a foreign
government might prevent dollar-denominated funds from flowing across its
borders. Other risks include: adverse political and economic developments in a
foreign country; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
U.S. Government Securities. The Portfolio may invest without limit 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
Portfolio 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 Portfolio 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.
Municipal Securities. The municipal securities in which the Portfolio 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. The Portfolio may also invest in
high quality participation interests in municipal securities. A more detailed
description of various types of municipal securities is contained in Appendix B
in the SAI.
Yields on municipal securities are dependent on a variety of factors, including
the general conditions of the money market and of the municipal bond and
municipal note markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. Obligations of issuers of municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the Bankruptcy
Reform Act of 1978, as amended. Therefore, the possibility exists that, as a
result of litigation or other conditions, the ability of any issuer to pay, when
due, the principal of and interest on its municipal securities may be materially
affected.
Participation Interests. The Portfolio may invest in participation interests in
any type of security in which the Portfolio may invest. A participation interest
gives a Portfolio an undivided interest in the underlying securities in the
proportion that the Portfolio's participation interest bears to the total
principal amount of the underlying securities. Participation interests usually
carry a demand feature, as described below, backed by a letter of credit or
guarantee of the institution that issued the interests permitting the holder to
tender them back to the institution.
Demand Features. The Portfolio may invest in securities that are subject to puts
and stand-by commitments ("demand features"). Demand features give the Portfolio
the right to resell securities at specified periods prior to their maturity
dates to the seller or to some third party at an agreed-upon price or yield.
Securities with demand features may involve certain expenses and risks,
including the inability of the issuer of the instrument to pay for the
securities at the time the instrument is exercised, non-marketability of the
instrument and differences between the maturity of the underlying security and
the maturity of the instrument. Securities may cost more with demand features
than without them. Demand features can serve three purposes: to shorten the
maturity of a variable or floating rate security, to enhance the instrument's
credit quality and to provide a source of liquidity. Demand features are often
issued by third party financial institutions, generally domestic and foreign
banks. Accordingly, the credit quality and liquidity of the Portfolio's
investments may be dependent in part on the credit quality of the banks
supporting its investments. This
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
4
<PAGE>
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.
Variable and Floating Rate Securities. The securities in which the Portfolio
invests may have variable or floating rates of interest. These securities pay
interest at rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index or market interest
rate. Securities with ultimate maturities of greater than 397 days may be
purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term
instruments that have demand features which comply with certain requirements and
certain variable rate U.S. Government Securities may be purchased. Similar to
fixed rate debt instruments, variable and floating rate instruments are subject
to changes in value based on changes in market interest rates or changes in the
issuer's or guarantor's creditworthiness. The rate of interest on securities
purchased by the Portfolio may be tied to short-term Treasury or other
government securities or indices on securities that are permissible investments
of the Portfolio, as well as other money market rates of interest. The Portfolio
will not purchase securities whose values are tied to interest rates or indices
that are not appropriate for the duration and volatility standards of a money
market fund.
MORTGAGE- AND ASSET-BACKED SECURITIES.
The Portfolio may purchase fixed or adjustable rate mortgage-backed securities
issued by the Government National Mortgage Association, Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation, or other
governmental or government-related entities. In addition, the Portfolio may
purchase other asset-backed securities, including securities backed by
automobile loans, equipment leases or credit card receivables. These securities
directly or indirectly represent a participation in, or are secured by and
payable from, fixed or adjustable rate mortgage or other loans which may be
secured by real estate or other assets. Unlike traditional debt instruments,
payments on these securities include both interest and a partial payment of
principal. Prepayments of the principal of underlying loans may shorten the
effective maturities of these securities and may result in the Portfolio having
to reinvest proceeds at a lower interest rate.
Repurchase Agreements. The Portfolio may seek additional income by entering into
collateralized repurchase agreements with respect to obligations that it could
otherwise purchase. Repurchase agreements are transactions in which the
Portfolio purchases securities and simultaneously commits to resell those
securities to the seller at an agreed-upon price on an agreed-upon future date.
The resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased securities.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. Reverse repurchase agreements are transactions in which the
Portfolio sells a security and simultaneously commits to repurchase that
security from the buyer at an agreed upon price on an agreed upon future date.
This technique will be used only for temporary or emergency purposes, such as
meeting redemption requests or to earn additional income on portfolio
securities.
Delayed Delivery Securities. The Portfolio may purchase securities on a
when-issued or delayed delivery basis. Securities so purchased are subject to
market price fluctuation from the time of purchase but no interest on the
securities accrues to the Portfolio until delivery and payment for the
securities take place. Accordingly, the value of the securities on the delivery
date may be more or less than the purchase price. Forward commitments will be
entered into only when the Portfolio has the intention of taking possession of
the securities, but it may sell the securities before the settlement date if
deemed advisable.
Borrowing and Lending. The Portfolio may borrow money for temporary or emergency
purposes in amounts up to 25% of its total assets. It may not mortgage or pledge
securities except to secure permitted borrowings. As a fundamental policy, the
Portfolio will not lend securities or other assets if, as a result, more than
25% of its total assets would be lent to other parties; however, it does not
currently intend to engage in securities lending. The Portfolio intends to seek
permission from the SEC to borrow money from or lend money to other funds that
permit such transactions and are advised by Janus Capital. There is no assurance
that such permission will be granted.
INVESTMENT ADVISER
The Portfolio has an 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 retail funds, as well as adviser or subadviser to
other mutual funds and individual, corporate, charitable and retirement
accounts. Kansas City Southern Industries, Inc., a publicly traded holding
company whose primary subsidiaries are engaged in transportation, information
processing and financial services ("KCSI"), owns approximately 83% of the
outstanding voting stock of Janus Capital. Thomas H. Bailey, the President and
Chairman of the Board of Janus Capital, owns approximately 12% of its voting
stock and, by agreement with KCSI, selects a majority of Janus Capital's Board.
Pursuant to the Investment Advisory Agreement, Janus Capital furnishes
continuous advice and recommendations concerning the Portfolio's investments.
Janus Capital also furnishes certain administrative, compliance and accounting
services for the Portfolio,
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
5
<PAGE>
and Janus Capital may be reimbursed by the Portfolio for its costs in providing
those services. In addition, Janus Capital provides office space for the
Portfolio and pays the salaries, fees and expenses of all Portfolio officers and
those Trustees who are affiliated with Janus Capital. The Portfolio pays all of
its expenses not assumed by Janus Capital, including transfer agent and
custodian fees and expenses, legal and auditing fees, registration fees and
expenses, independent Trustees' fees and expenses and certain other expenses.
Participating insurance companies that purchase the Portfolio's shares may
perform certain administrative services relating to the Portfolio and Janus
Capital or the Portfolio may pay those companies for such services.
Pursuant to the Investment Advisory Agreement, the Portfolio has agreed to
compensate Janus Capital for its advisory services by the monthly payment of a
fee at the annual rate of 0.25% of the value of the Portfolio's average daily
net assets. In addition, Janus Capital will voluntarily waive its advisory fee
to the extent the advisory fees and other expenses exceed 0.50% of the average
daily closing net asset value of the Portfolio. Janus Capital may terminate this
fee waiver at any time upon 90 days' notice to the Trustees.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of the Portfolio are executed by
brokers and dealers selected by Janus Capital. Broker-dealers are selected on
the basis of their ability to obtain best price and execution for the
Portfolio's transactions and recognizing brokerage, research and other services
provided to the Portfolio and to Janus Capital. Janus Capital may also consider
payments made by brokers effecting transactions for the Portfolio i) to the
Portfolio or ii) to other persons on behalf of the Portfolio for services
provided to the Portfolio for which it would be obligated to pay. The Trustees
have also authorized the Portfolio to place transactions on an agency basis with
a broker-dealer that is affiliated with Janus Capital. Agency trades, if any,
that are placed with such affiliated party serve to reduce certain expenses of
the Portfolio. The SAI further explains the selection of broker-dealers.
PERSONAL INVESTING
Janus Capital permits investment personnel to purchase and sell securities for
their own accounts subject to Janus Capital's policy governing personal
investing. Janus Capital's policy requires investment and other personnel to
conduct their personal investment activities in a manner that Janus Capital
believes is not detrimental to the Portfolio and Janus Capital's other advisory
clients. See the SAI for more detailed information.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
6
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DISTRIBUTIONS AND TAXES
Dividends representing substantially all of the net investment income and any
net realized gains on sales of securities are declared daily, Saturdays, Sundays
and holidays included, and distributed on the last business day of each month.
If a month begins on a Saturday, Sunday or holiday, dividends for those days are
declared at the end of the preceding month and distributed on the first business
day of the month. All distributions will be automatically reinvested in shares
of the Portfolio.
Because shares of the Portfolio may be purchased only through variable insurance
contracts and qualified plans, it is anticipated that any distributions made by
the Portfolio will be exempt from current taxation if left to accumulate within
the variable insurance contract or qualified plan. Generally, withdrawals from
such contracts may be subject to ordinary income tax and, if made before age
591/2, a 10% penalty tax. The tax status of an investment in the Portfolio
depends on the features of the variable insurance contracts offered by
participating insurance companies. Further information may be found in the
prospectus of the separate account offering such contract.
The Portfolio intends to comply with provisions of the Internal Revenue Code
applicable to investment companies, and thus it is not expected that the
Portfolio will be required to pay any federal income taxes. The SAI further
explains the Portfolio's tax status.
PERFORMANCE
The Portfolio may measure performance in several ways, including "yield" and
"effective yield." The Portfolio's yield is a way of showing the rate of income
the Portfolio earns on its investments as a percentage of its share price. Yield
represents the income, less expenses generated by an investment, in the
Portfolio over a seven-day period expressed as an annual percentage rate.
Effective yield is similar in that it is calculated over the same time frame,
but instead the net investment income is compounded and then annualized. Due to
the compounding effect, the effective yield will normally be higher than the
yield.
Performance figures are based upon historical results and are not intended to
indicate future performance.
Yields quoted by the Portfolio include the effect of deducting the Portfolio's
expenses, but may not include charges and expenses attributable to any
particular insurance product. Because shares of the Portfolio may only be
purchased through variable insurance contracts, the prospectus of the
participating insurance company sponsoring such contract should be carefully
reviewed for information on relevant charges and expenses. Excluding these
charges from quotations of the Portfolio's performance has the effect of
increasing the performance quoted. The effect of these charges should be
considered when comparing the Portfolio's performance to that of other mutual
funds.
From time to time in advertisements or sales material, the Portfolio may discuss
its performance ratings or other information as published by recognized
statistical or rating services, such as Lipper Analytical Services, Inc.,
IBC/Donoghue's Money Fund Report, Morningstar or by publications of general
interest, such as Forbes or Money. In addition, the Portfolio may compare its
yield to those of certain U.S. Treasury obligations or other money market
instruments.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
7
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MISCELLANEOUS INFORMATION
THE TRUST
The Trust is an open-end management investment company organized as a Delaware
business trust on May 20, 1993. The Portfolio has been established as a separate
series of the Trust.
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to the Portfolio's investment objective and policies.
The Trustees delegate the day-to-day management of the Portfolio to the officers
of the Trust and meet at least quarterly to review the Portfolio's investment
policies, performance, expenses and other business affairs.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called for a specific portfolio, or for the Trust as a whole,
for purposes such as electing or removing Trustees, terminating or reorganizing
the Trust, changing fundamental policies or voting on matters when required by
the 1940 Act. Separate votes are taken by a separate Portfolio only if a matter
affects or requires the vote of just that Portfolio. Shareholders are entitled
to cast one vote for each share they own.
An insurance company issuing a variable contract invested in shares of the
Portfolio will request voting instructions from variable contract holders. Under
current law, the insurance company must vote all shares held by the separate
account in proportion to the voting instructions received.
CONFLICTS OF INTEREST
Portfolio shares are available only to variable annuity and variable life
separate accounts of insurance companies that are unaffiliated with Janus
Capital and to certain qualified retirement plans. The Portfolio does not
foresee any disadvantages to policy owners arising out of the fact that the
Portfolio offers its shares to such entities. Nevertheless, the Trustees intend
to monitor events in order to identify any material irreconcilable conflicts
that may arise and to determine what action, if any, should be taken in response
to such conflicts. If a conflict occurs, the Trustees may require one or more
insurance company separate accounts or plans to withdraw its investments in the
Portfolio and to substitute shares of another portfolio of the Trust. As a
result, the Portfolio may be forced to sell securities at disadvantageous
prices. In addition, the Trustees may refuse to sell shares of the Portfolio to
any separate account or may suspend or terminate the offering of shares of the
Portfolio if such action is required by law or regulatory authority or is in the
best interests of the shareholders of the Portfolio.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve the Portfolio's investment objective
by investing all of the Portfolio's assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to the Portfolio. It is expected that any such
investment company would be managed by Janus Capital in substantially the same
manner as the existing Portfolio. The initial shareholder of the Portfolio has
voted to vest the authority to convert to a master/feeder structure in the sole
discretion of the Trustees. No further approval of the shareholders of the
Portfolio is required. You will receive at least 30 days' prior notice of any
such investment. Such investment would be made only if the Trustees determine it
to be in the best interests of the Portfolio and its shareholders. In making
that determination, the Trustees will consider, among other things, the benefits
to shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. Although management of the Portfolio believes the Trustees will
not approve an arrangement that is likely to result in higher costs, no
assurance is given that costs will be materially reduced if this option is
implemented.
THE VALUATION OF SHARES
The net asset value ("NAV") of the shares of the Portfolio 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 the Exchange is open. 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 the 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 Portfolio's NAV to reflect current market conditions, should be initiated to
prevent any material dilutive effect on shareholders.
CUSTODIAN AND TRANSFER AGENT
United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226,
is the custodian of the Portfolio's assets. The custodian holds the Portfolio's
assets in safekeeping and collects and remits the income thereon subject to the
instructions of the Portfolio.
Janus Service Corporation, P.O. Box 173375, Denver, Colorado 80217-3375, a
wholly-owned subsidiary of Janus Capital, provides transfer agency and
shareholder services for the Portfolio.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
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<PAGE>
SHAREHOLDER'S GUIDE
INVESTORS MAY NOT PURCHASE OR REDEEM SHARES OF THE PORTFOLIO DIRECTLY. SHARES
MAY BE PURCHASED OR REDEEMED ONLY THROUGH VARIABLE INSURANCE CONTRACTS OFFERED
BY THE SEPARATE ACCOUNTS OF PARTICIPATING INSURANCE COMPANIES OR THROUGH
QUALIFIED RETIREMENT PLANS. REFER TO THE PROSPECTUS FOR THE PARTICIPATING
INSURANCE COMPANY'S SEPARATE ACCOUNT OR YOUR PLAN DOCUMENTS FOR INSTRUCTIONS ON
PURCHASING OR SELLING A VARIABLE INSURANCE CONTRACT AND ON HOW TO SELECT THE
PORTFOLIO AS AN INVESTMENT OPTION FOR A CONTRACT OR A QUALIFIED PLAN.
PURCHASES
Purchases of Portfolio shares may be made only by the separate accounts of
insurance companies for the purpose of funding variable insurance contracts or
by qualified plans. Refer to the prospectus of the appropriate insurance
company's separate account or to your plan documents for information on how to
invest in the Portfolio.
All investments in the Portfolio are credited to a participating insurance
company's separate account or a qualified plan immediately upon acceptance of
the investment by the Portfolio. Investments will be processed at the NAV next
calculated after an order is received and accepted by the Portfolio.
The Portfolio reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in Janus Capital's opinion, they are of the size that
would disrupt the management of the Portfolio. The Portfolio may discontinue
sales of its shares if management believes that a substantial further increase
may adversely affect the Portfolio's ability to achieve its investment
objective. In such event, however, it is anticipated that existing policy owners
and plan participants invested in the Portfolio would be permitted to continue
to authorize investment in the Portfolio and to reinvest any dividends or
capital gains distribution.
REDEMPTIONS
Redemptions, like purchases, may be effected only through the separate accounts
of participating insurance companies or through qualified plans. Please refer to
the appropriate separate account prospectus or plan documents for details.
Shares of the Portfolio may be redeemed on any business day. Redemptions are
processed at the NAV next calculated after receipt and acceptance of the
redemption order by the Portfolio. Redemption proceeds will normally be wired to
the participating insurance company the business day following receipt of the
redemption order, but in no event later than seven days after receipt of such
order.
SHAREHOLDER COMMUNICATIONS
Owners of variable insurance contracts and plan participants will receive annual
and semiannual reports including the financial statements of the Portfolio. Each
report will show the investments owned by the Portfolio and market values
thereof, as well as other information about the Portfolio and its operations.
The Trust's fiscal year ends December 31.
JANUS ASPEN SERIES MONEY MARKET PORTFOLIO PROSPECTUS May 1, 1996
9
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[LOGO]
JANUS FUNDS
100 Fillmore Street
Denver, CO 80206-4923
1-800-525-3713
<PAGE>
JANUS ASPEN SERIES
[LOGO]
High-Yield Portfolio
Prospectus
[LOGO]
<PAGE>
CONTENTS
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THE PORTFOLIO AT A GLANCE
Brief description of the Portfolio .......................................... 1
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EXPENSE INFORMATION ......................................................... 1
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THE PORTFOLIO IN DETAIL
The Portfolio's Investment Objective and Policies ........................... 2
General Portfolio Policies .................................................. 4
Additional Risk Factors ..................................................... 5
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MANAGEMENT OF THE PORTFOLIO
Investment Adviser and Portfolio Manager .................................... 7
Portfolio Transactions ...................................................... 7
Management Expenses ......................................................... 7
Other Service Providers ..................................................... 8
Other Information ........................................................... 8
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DISTRIBUTIONS AND TAXES
Distributions ............................................................... 9
Taxes ....................................................................... 9
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PERFORMANCE TERMS
An Explanation of Performance Terms ......................................... 9
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SHAREHOLDER'S GUIDE
Purchases ................................................................... 10
Redemptions ................................................................. 10
Shareholder Communications .................................................. 10
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APPENDIX A
Glossary of Investment Terms ................................................ 11
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APPENDIX B
Explanation of Rating Categories ............................................ 13
[LOGO]
JANUS ASPEN SERIES
HIGH-YIELD PORTFOLIO
Prospectus
May 1, 1996
High-Yield Portfolio (the "Portfolio") is a no-load, diversified mutual fund
that seeks to obtain high current income as its primary objective. Capital
appreciation is a secondary objective when consistent with the primary
objective. The Portfolio seeks to achieve these objectives by investing
primarily in high-yield/high-risk fixed-income securities. The Portfolio is a
series of Janus Aspen Series (the "Trust"), an open-end management investment
company. The Portfolio is recently organized and has a limited operating
history.
THE PORTFOLIO MAY INVEST ALL OF ITS ASSETS IN HIGH-YIELD CORPORATE DEBT
SECURITIES, COMMONLY KNOWN AS "JUNK BONDS." THESE SECURITIES ENTAIL GREATER
RISKS, INCLUDING A GREATER RISK OF DEFAULT, THAN HIGHER QUALITY SECURITIES. YOU
SHOULD CAREFULLY CONSIDER THE GREATER RISKS OF JUNK BONDS BEFORE INVESTING. SEE
"TYPES OF INVESTMENTS" ON PAGE 2 AND "ADDITIONAL RISK FACTORS" ON PAGE 5. SEE
APPENDIX B AT PAGE 13 FOR A DESCRIPTION OF BOND RATING CATEGORIES.
Shares of the Trust are issued and redeemed only in connection with investment
in and payments under variable annuity contracts and variable life insurance
contracts (collectively, "variable insurance contracts"), as well as certain
qualified retirement plans. The Trust sells and redeems its shares at net asset
value without any sales charges, commissions or redemption fees. Each variable
insurance contract involves fees and expenses not described in this Prospectus.
The Portfolio may not be available in connection with a particular contract. See
the accompanying contract prospectus for information regarding contract fees and
expenses and any restrictions on purchases or allocations.
This Prospectus contains information about the Portfolio that a prospective
purchaser of a variable insurance contract should consider before allocating
purchase payments or premiums to the Portfolio. It should be read carefully in
conjunction with the separate account prospectus of the specific insurance
product that accompanies this Prospectus and retained for future reference.
Additional information about the Portfolio is contained in the Statement of
Additional Information ("SAI") dated May 1, 1996, which is filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI is available upon request and without charge by writing
or calling your insurance company.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN
SUCH STATE OR OTHER JURISDICTION.
May 1, 1996
<PAGE>
PORTFOLIO AT A GLANCE
This section is designed to provide you with a brief overview of the Portfolio
and its investment emphasis. A more detailed discussion of the Portfolio's
investment objectives and policies begins on page 2.
INVESTMENT OBJECTIVES:
The primary investment objective of the Portfolio is to obtain high current
income. Capital appreciation is a secondary objective when consistent with the
primary objective.
PRIMARY HOLDINGS:
The Portfolio is a diversified portfolio that pursues its objectives primarily
through investments in high-yield/high-risk fixed-income securities. The
Portfolio emphasizes investments in high-yield corporate debt securities ("junk
bonds") and may invest all of its assets in such securities.
SHAREHOLDER'S INVESTMENT HORIZON:
The Portfolio is designed for long-term aggressive investors who primarily seek
high current income with some potential for capital growth, and who are willing
to accept greater price movements and credit and other risks associated with
investments in high-yield securities.
PORTFOLIO ADVISER:
Janus Capital Corporation ("Janus Capital") serves as the Portfolio's investment
adviser. Janus Capital has been in the investment advisory business for over 25
years and currently manages more than $35 billion in assets.
PORTFOLIO MANAGER:
Ronald V. Speaker
PORTFOLIO INCEPTION:
May 1996
EXPENSE INFORMATION
The tables and example below are designed to assist participants in qualified
plans that invest in the Portfolio in understanding the various costs and
expenses that you will bear directly or indirectly as an investor in the
Portfolio. OWNERS OF VARIABLE INSURANCE CONTRACTS THAT INVEST IN THE PORTFOLIO
SHOULD REFER TO THE VARIABLE INSURANCE CONTRACT PROSPECTUS FOR A DESCRIPTION OF
COSTS AND EXPENSES, AS THE TABLES AND EXAMPLE DO NOT REFLECT DEDUCTIONS AT THE
SEPARATE ACCOUNT LEVEL OR CONTRACT LEVEL FOR ANY CHARGES THAT MAY BE INCURRED
UNDER A CONTRACT.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption fees None
Exchange fee None
ANNUAL PORTFOLIO OPERATING EXPENSES(1)
(expressed as a percentage of average net assets)
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Management Fee .45%
Other Expenses .60%
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Total Portfolio Operating Expenses 1.05%
- --------------------------------------------------------------------------------
(1) The fees and expenses in the table above are based on the estimated gross
expenses before estimated expense offset arrangements that the Portfolio
expects to incur in its initial fiscal year, net of fee waivers from Janus
Capital. Waivers are first applied against the management fee and then
against other expenses. Without such waivers, the Management Fee, Other
Expenses and Total Portfolio Operating Expenses are estimated to be .75%,
.60% and 1.35%, respectively. Janus Capital may modify or terminate the
waivers at any time upon 90 days' notice to the Trustees.
EXAMPLE
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1 Year 3 Years
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Assume you invest $1,000, the Portfolio returns 5% annually
and its expense ratio remains as listed above. The example
shows the operating expenses that you would indirectly bear
as an investor in the Portfolio. $11 $33
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS
OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
JANUS ASPEN SERIES HIGH-YIELD PORTFOLIO PROSPECTUS May 1, 1996
1
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THE PORTFOLIO IN DETAIL
This section takes a closer look at the Portfolio's investment objectives,
policies and the securities in which it invests. Please carefully review the
"Additional Risk Factors" section of this Prospectus for a more detailed
discussion of the risks associated with certain investment techniques and refer
to Appendix A for a more detailed description of the Portfolio's investments
(and certain of the risks associated with those investments). You should
carefully consider your own investment goals, time horizon and risk tolerance
before investing in the Portfolio.
The Portfolio's investment objectives and policies are similar to those of Janus
High-Yield Fund, a Janus retail fund. Although it is anticipated that the
Portfolio and its corresponding retail fund will hold similar securities,
differences in asset size and cash flow needs as well as the relative weightings
of securities selections may result in differences in investment performance.
Expenses of the Portfolio and its corresponding retail fund are expected to
differ. The variable contract owner will also bear various insurance-related
costs at the insurance company level. You should review the accompanying
separate account prospectus for a summary of contract fees and expenses.
Policies that are noted as "fundamental" cannot be changed without a shareholder
vote. All other policies, including the Portfolio's investment objectives, are
not fundamental and may be changed by the Portfolio's Trustees without a
shareholder vote. You will be notified of any such changes that are material. If
there is a material change in the Portfolio's objectives or policies, you should
consider whether the Portfolio remains an appropriate investment for your
variable insurance contract or qualified retirement plan.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The primary investment objective of the Portfolio is to obtain high current
income. Capital appreciation is a secondary objective when consistent with its
primary objective. Capital appreciation may result, for example, from an
improvement in the credit standing of an issuer whose securities are held by the
Portfolio or from a general lowering of interest rates, or both. The Portfolio
pursues its objectives by investing primarily in high-yield/high-risk
fixed-income securities. The Portfolio will normally invest at least 65% of its
total assets in those securities.
TYPES OF INVESTMENTS
The Portfolio may invest in a variety of income-producing securities including
corporate bonds and notes, government securities, preferred stock, debt
securities that are convertible or exchangeable into equity securities, and debt
securities that carry with them the right to acquire equity securities as
evidenced by warrants attached to or acquired with the securities. The Portfolio
may invest to a lesser degree in common stocks, other equity securities or debt
securities that are not currently paying interest.
The high yields sought by the Portfolio are expected to result primarily from
investments in longer-term, lower quality corporate bonds, commonly referred to
as "junk" bonds. The Portfolio considers lower quality securities to be
securities rated below investment grade by established rating agencies or
unrated securities of comparable quality. Securities rated BB or lower by
Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower by
Moody's Investors Service, Inc. ("Moody's") are below investment grade. Lower
quality securities are often considered to be speculative and involve greater
risk of default or price changes due to changes in interest rates, economic
conditions and the issuer's creditworthiness. As a result, their market prices
tend to fluctuate more than higher quality securities of comparable maturity.
Additional risks of lower quality securities are described under "Additional
Risk Factors" on page 5.
The Portfolio may purchase defaulted debt securities if, in the opinion of Janus
Capital, it appears likely that the issuer may resume interest payments or other
advantageous developments appear likely in the near term. Defaulted debt
securities may be illiquid and subject to the Portfolio's limit on illiquid
investments.
The Portfolio may invest without limit in foreign securities, including those of
corporate and government issuers. The risks of foreign securities are described
under "Additional Risk Factors" on page 5.
The Portfolio may also invest in mortgage and asset-backed securities; zero
coupon, pay-in-kind and step coupon securities; securities purchased on a
when-issued, delayed delivery or forward commitment basis; and
indexed/structured securities. The Portfolio may use futures, options, swaps,
forward contracts and other derivatives for hedging purposes or for other
purposes, such as enhancing return. See "Additional Risk Factors" on page 5 and
Appendix A.
When the Portfolio's manager believes that market conditions are not favorable
for profitable investing or when the portfolio manager is otherwise unable to
locate favorable investment opportunities, the Portfolio's investments may be
hedged to a greater degree and/or its cash or similar investments may increase.
In other words, the Portfolio does not always stay fully invested in stocks and
bonds. Cash and similar investments are a residual - they represent the assets
that remain after the portfolio manager has committed available assets to
desirable investment opportunities.
Securities that the Portfolio may purchase as a means of receiving a return on
idle cash include commercial paper, certificates of deposit, repurchase
agreements and other short-term debt instruments. The Portfolio may also invest
in money market funds (including money market funds managed by Janus Capital).
When the Portfolio's investments in cash or similar investments increase, the
Portfolio might not participate in the high-yield security market advances or
declines to the same extent that it would if the Portfolio remained more fully
invested in high-yield securities.
See Appendix A for a further description of the Portfolio's investments.
JANUS ASPEN SERIES HIGH-YIELD PORTFOLIO PROSPECTUS May 1, 1996
2
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THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT
IN THE PORTFOLIO.
WHAT IS MEANT BY "CREDIT QUALITY"?
Credit quality measures the likelihood that the issuer will meet its obligations
on a bond. One of the fundamental risks associated with all fixed-income funds
is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. government securities are
generally considered to be the safest type of investment in terms of credit
risk. Corporate debt securities, particularly those rated below investment
grade, present the highest credit risk.
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HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized statistical rating agencies such as
Standard & Poor's and Moody's are widely accepted measures of credit risk. The
lower a bond issue is rated by an agency, the more credit risk it is considered
to represent. Lower rated bonds generally pay higher yields to compensate
investors for the associated risk. Please refer to Appendix B for a description
of rating categories.
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WHAT IS A HIGH-YIELD/HIGH-RISK SECURITY?
A high-yield security (also called a "junk" bond) is a debt security rated below
investment grade by major rating agencies (i.e., BB or lower by Standard &
Poor's or Ba or lower by Moody's) or an unrated bond of similar quality. It
presents greater risk of default (the failure to make timely interest and
principal payments) than higher quality bonds.
WHAT RISKS DO HIGH-YIELD/HIGH-RISK SECURITIES PRESENT?
High-yield securities are often considered to be speculative and involve greater
risk of default or price changes due to changes in economic and industry
conditions and the issuer's creditworthiness. Their market prices tend to
fluctuate more than higher quality securities as a result of changes in these
factors.
The default rate of lower quality debt securities is likely to be higher when
issuers have difficulty meeting projected goals or obtaining additional
financing. This could occur during economic recessions or periods of high
interest rates. In addition, there may be a smaller market for lower quality
securities than for higher quality securities, making lower quality securities
more difficult to sell promptly at an acceptable price.
The junk bond market can experience sudden and sharp price swings and thus,
investors in the Portfolio should be willing to tolerate significant and sudden
changes in the Portfolio's net asset value.
- --------------------------------------------------------------------------------
HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
Another fundamental risk associated with any portfolio that invests in
fixed-income securities (e.g., a bond fund) is the risk that the value of the
securities it holds will rise or fall as interest rates change. Generally, a
fixed-income security will increase in value when interest rates fall and
decrease in value when interest rates rise. Longer-term securities are generally
more sensitive to interest rate changes than shorter-term securities, but they
generally offer higher yields to compensate investors for the associated risks.
A bond portfolio's average-weighted maturity and its duration are measures of
how the portfolio may react to interest rate changes. High-yield bond prices are
generally less directly responsive to interest rate changes than investment
grade issues and may not always follow this pattern.
- --------------------------------------------------------------------------------
WHAT IS MEANT BY THE PORTFOLIO'S "AVERAGE-WEIGHTED MATURITY"?
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor, such as the Portfolio. A bond's term to
maturity is the number of years remaining to maturity. A bond portfolio does not
have a stated maturity, but it does have an average-weighted maturity. This
number is calculated by averaging the terms to maturity of bonds held by the
Portfolio with each maturity "weighted" according to the percentage of net
assets that it represents.
- --------------------------------------------------------------------------------
WHAT IS MEANT BY THE PORTFOLIO'S "DURATION"?
A bond's duration indicates the time it will take an investor to recoup his or
her investment. Unlike average maturity, duration reflects both principal and
interest payments. Generally, the higher the coupon rate on a bond, the lower
its duration will be. The duration of a bond portfolio is calculated by
averaging the duration of bonds held by a portfolio with each duration
"weighted" according to the percentage of net assets that it represents. Because
duration accounts for interest payments, the Portfolio's duration is usually
shorter than its average maturity.
- --------------------------------------------------------------------------------
HOW DOES THE PORTFOLIO MANAGE INTEREST RATE RISK?
The Portfolio may vary the average-weighted maturity of its portfolio to reflect
its portfolio manager's analysis of interest rate trends and other factors. The
Portfolio's average-weighted maturity will tend to be shorter when its portfolio
JANUS ASPEN SERIES HIGH-YIELD PORTFOLIO PROSPECTUS May 1, 1996
3
<PAGE>
manager expects interest rates to rise and longer when its portfolio manager
expects interest rates to fall. The Portfolio may also use futures, options and
other derivatives to manage interest rate risk. See "Additional Risk Factors" on
page 5.
GENERAL PORTFOLIO POLICIES
The Portfolio will follow the general policies listed below in investing its
portfolio assets. The percentage limitations included in these policies and
elsewhere in this Prospectus apply at the time of purchase of the security. For
example, if the Portfolio exceeds a limit as a result of market fluctuations or
the sale of other securities, it will not be required to dispose of any
securities.
DIVERSIFICATION
The Investment Company Act of 1940 (the "1940 Act") classifies investment
companies as either diversified or nondiversified. The Portfolio qualifies as a
diversified fund under the 1940 Act and is subject to the following
requirements:
o As a fundamental policy, the Portfolio may not own more than 10% of the
outstanding voting shares of any issuer.
o As a fundamental policy, with respect to 75% of its total assets, the
Portfolio will not purchase a security of any issuer (other than cash items
and U.S. government securities, as defined in the 1940 Act) if such
purchase would cause the Portfolio's holdings of that issuer to amount to
more than 5% of the Portfolio's total assets.
o The Portfolio will invest no more than 25% of its assets in a single
issuer.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS
In addition to the diversification requirements stated above, each Portfolio
intends to comply with the diversification requirements currently imposed by the
IRS on separate accounts of insurance companies as a condition of maintaining
the tax-deferred status of variable contracts. More specific information may be
contained in the participating insurance company's separate account prospectus.
INDUSTRY CONCENTRATION
As a fundamental policy, the Portfolio will not invest more than 25% of its
total assets in any particular industry. This policy does not apply to U.S.
government securities.
PORTFOLIO TURNOVER
The Portfolio generally intends to purchase securities for long-term investment
rather than short-term gains. However, short-term transactions may result from
liquidity needs, securities having reached a price or yield objective,
anticipated changes in interest rates or the credit standing of an issuer, or by
reason of economic or other developments not foreseen at the time of the
investment decision. Changes are made in the Portfolio whenever its portfolio
manager believes such changes are desirable. The portfolio turnover rate is
generally not a factor in making buy and sell decisions.
To a limited extent, the Portfolio may purchase securities in anticipation of
relatively short-term price gains. The Portfolio may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of
short-term differentials in bond yields or securities prices. Increased
portfolio turnover may result in higher costs for brokerage commissions, dealer
mark-ups and other transaction costs and may also result in taxable capital
gains. Certain tax rules may restrict the Portfolio's ability to engage in
short-term trading if the security has been held for less than three months.
ILLIQUID INVESTMENTS
The Portfolio may invest up to 15% of its net assets in illiquid investments,
including restricted securities or private placements that are not deemed to be
liquid by Janus Capital. An illiquid investment is a security or other position
that cannot be disposed of quickly in the normal course of business. Some
securities cannot be sold to the U.S. public because of their terms or because
of SEC regulations. Janus Capital may determine that securities that cannot be
sold to the U.S. public but that can be sold to institutional investors (for
example, Rule 144A securities) are liquid. Janus Capital will follow guidelines
established by the Trustees of the Trust ("Trustees") in making liquidity
determinations for Rule 144A securities and certain other securities, including
privately placed commercial paper.
BORROWING AND LENDING
The Portfolio may borrow money and lend securities or other assets, as follows:
o The Portfolio may borrow money for temporary or emergency purposes in
amounts up to 25% of its total assets.
o The Portfolio may mortgage or pledge securities as security for borrowings
in amounts up to 15% of its net assets.
o As a fundamental policy, the Portfolio may lend securities or other assets
if, as a result, no more than 25% of its total assets would be lent to
other parties.
The Portfolio intends to seek permission from the SEC to borrow money from or
lend money to other funds that permit such transactions and for which Janus
Capital serves as investment adviser. All such borrowing and lending will be
subject to the above limits. There is no assurance that such permission will be
granted.
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ADDITIONAL RISK FACTORS
HIGH-YIELD/HIGH-RISK SECURITIES
HIGH-YIELD/HIGH-RISK SECURITIES (OR "JUNK" BONDS) ARE DEBT SECURITIES RATED
BELOW INVESTMENT GRADE BY THE PRIMARY RATING AGENCIES (SUCH AS STANDARD & POOR'S
AND MOODY'S) OR UNRATED SECURITIES OF EQUIVALENT QUALITY. PLEASE REFER TO
APPENDIX B FOR A DESCRIPTION OF BOND RATING CATEGORIES. THE PORTFOLIO MAY INVEST
IN BONDS OF ANY QUALITY, INCLUDING UNRATED SECURITIES.
The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
quality securities. Issuers of high-yield/high-risk securities may not be as
strong financially as those issuing bonds with higher credit ratings.
Investments in such companies are considered to be more speculative than higher
quality investments.
Issuers of high-yield/high-risk securities are more vulnerable to real or
perceived economic changes (for instance, an economic downturn or prolonged
period of rising interest rates), political changes or adverse developments
specific to the issuer. Adverse economic, political or other developments may
impair the issuer's ability to service principal and interest obligations, to
meet projected business goals and to obtain additional financing, particularly
if the issuer is highly leveraged. In the event of a default, the Portfolio
would experience a reduction of its income and could expect a decline in the
market value of the defaulted securities.
The market for lower quality securities is generally less liquid than the market
for higher quality bonds. Adverse publicity and investor perceptions as well as
new or proposed laws may also have a greater negative impact on the market for
lower quality securities. Unrated debt, while not 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.
The market prices of high-yield/high-risk securities structured as zero coupon
or payin-kind securities are generally affected to a greater extent by interest
rate changes and tend to be more volatile than securities which pay interest
periodically. In addition, zero coupon, pay-in-kind and delayed interest bonds
often do not pay interest until maturity. However, the Portfolio must recognize
a computed amount of interest income and pay dividends to shareholders even
though it has received no cash. In some instances, the Portfolio may have to
sell securities to have sufficient cash to pay the dividends.
FOREIGN SECURITIES
INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS,
INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES.
Securities of some foreign companies and governments may be traded in the United
States, but most foreign securities are traded primarily in foreign markets. The
risks of foreign investing include:
o Currency Risk. The Portfolio may buy the local currency when it buys a
foreign currency denominated security and sell the local currency when it
sells the security. As long as the Portfolio holds a foreign security, its
value will be affected by the value of the local currency relative to the
U.S. dollar. When the Portfolio sells a foreign security, its value may be
worth less in U.S. dollars even though the security increases in value in
its home country. U.S. dollar denominated securities of foreign issuers may
also be affected by currency risk.
o Political and Economic Risk. Foreign investments may be subject to
heightened political and economic risks, particularly in underdeveloped or
developing countries which may have relatively unstable governments and
economies based on only a few industries. In some countries, there is the
risk that the government may take over the assets or operations of a
company or that the government may impose taxes or limits on the removal of
the Portfolio's assets from that country.
o Regulatory Risk. There may be less government supervision of foreign
markets. Foreign issuers may not be subject to the uniform accounting,
auditing and financial reporting standards and practices applicable to
domestic issuers. There may be less publicly available information about
foreign issuers than domestic issuers.
o Market Risk. Foreign securities markets, particularly those of
underdeveloped or developing countries, may be less liquid and more
volatile than domestic markets. Certain markets may require payment for
securities before delivery and delays may
JANUS ASPEN SERIES HIGH-YIELD PORTFOLIO PROSPECTUS May 1, 1996
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be encountered in settling securities transactions. In some foreign markets,
there may not be protection against failure by other parties to complete
transactions. There may be limited legal recourse against an issuer in the event
of a default on a debt instrument.
o Transaction Costs. Transaction costs of buying and selling foreign
securities, including brokerage, tax and custody costs, are generally
higher than those involved in domestic transactions.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The Portfolio may enter into futures contracts on securities, financial indices
and foreign currencies and options on such contracts ("futures contracts") and
may invest in options on securities, financial indices and foreign currencies
("options"), forward contracts and interest rate swaps and swap-related products
(collectively, "derivative instruments"). The Portfolio intends to use most
derivative instruments primarily to hedge the value of its portfolio against
potential adverse movements in securities prices, foreign currency markets or
interest rates. To a limited extent, the Portfolio may also use derivative
instruments for non-hedging purposes such as seeking to increase the Portfolio's
income or otherwise seeking to enhance return. Please refer to Appendix A to
this Prospectus and the SAI for a more detailed discussion of these instruments.
The use of derivative instruments exposes the Portfolio to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include:
o the risk that interest rates, securities prices and currency markets will
not move in the directions that the portfolio manager anticipates;
o imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies
being hedged;
o the fact that skills needed to use these strategies are different from
those needed to select portfolio securities;
o inability to close out certain hedged positions to avoid adverse tax
consequences;
o the possible absence of a liquid secondary market for any particular
instrument and possible exchange-imposed price fluctuation limits, either
of which may make it difficult or impossible to close out a position when
desired;
o leverage risk, that is, the risk that adverse price movements in an
instrument can result in a loss substantially greater than the Portfolio's
initial investment in that instrument (in some cases, the potential loss is
unlimited); and
o particularly in the case of privately negotiated instruments, the risk that
the counterparty will fail to perform its obligations, which could leave
the Portfolio worse off than if it had not entered into the position.
Although the Portfolio believes the use of derivative instruments will benefit
the Portfolio, the Portfolio's performance could be worse than if the Portfolio
had not used such instruments if the portfolio manager's judgment proves
incorrect.
When the Portfolio invests in a derivative instrument, it may be required to
segregate cash and other high-grade liquid assets or certain portfolio
securities with its custodian to "cover" the Portfolio's position. Assets
segregated or set aside generally may not be disposed of so long as the
Portfolio maintains the positions requiring segregation or cover. Segregating
assets could diminish the Portfolio's return due to the opportunity losses of
foregoing other potential investments with the segregated assets.
SPECIAL SITUATIONS
The Portfolio may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the Portfolio's manager, the securities
of a particular issuer will be recognized and appreciate in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investment in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
See Appendix A for risks associated with certain other investments.
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MANAGEMENT OF THE PORTFOLIO
TRUSTEES
The Trustees oversee the business affairs of the Trust and are responsible for
major decisions relating to the Portfolio's investment objective and policies.
The Trustees delegate the day-to-day management of the Portfolio to the officers
of the Trust and meet at least quarterly to review the Portfolio's investment
policies, performance, expenses and other business affairs.
INVESTMENT ADVISER
Janus Capital, 100 Fillmore, Denver, Colorado 80206-4923, is the investment
adviser to the Portfolio and is responsible for the day-to-day management of its
investment portfolio and other business affairs.
Janus Capital has served as investment adviser to certain series of the Trust
since 1970 and currently serves as investment adviser to all of the Janus funds,
as well as adviser or subadviser to other mutual funds and individual,
corporate, charitable and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus Capital, most of which it acquired in 1984.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President and Chairman of the Board of Janus Capital, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
Janus Capital furnishes continuous advice and recommendations concerning the
Portfolio's investments. Janus Capital also furnishes certain administrative,
compliance and accounting services for the Portfolio, and may be reimbursed by
the Portfolio 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 Portfolio and pays the salaries, fees and expenses of all
Portfolio officers and those Trustees who are affiliated with Janus Capital.
The Portfolio pays all of its expenses not assumed by Janus Capital, including
transfer agent and custodian fees and expenses, legal and auditing fees,
registration fees and expenses, and independent Trustees' fees and expenses and
certain other expenses. Participating insurance companies that purchase the
Portfolio's shares may perform certain administrative services relating to the
Portfolio and Janus Capital or the Portfolio may pay those companies for such
services.
PORTFOLIO MANAGER
Ronald V. Speaker is Executive Vice President and portfolio manager of the
Portfolio. Mr. Speaker joined Janus Capital in 1986 and also manages Janus
Flexible Income Fund (since December 1991), Flexible Income Portfolio (since its
inception) and Janus High-Yield Fund since its inception. He previously managed
each of Janus Intermediate Government Securities Fund, Janus Short-Term Bond
Fund and Janus Federal Tax-Exempt Fund from their inceptions through December
1995 and Short-Term Bond Portfolio from its inception through April 1996. He
holds a Bachelor of Arts in Finance from the University of Colorado and is a
Chartered Financial Analyst.
PERSONAL INVESTING
Janus Capital permits investment and other personnel to purchase and sell
securities for their own accounts, subject to Janus Capital's policy governing
personal investing. Janus Capital's policy requires investment and other
personnel to conduct their personal investment activities in a manner that Janus
Capital believes is not detrimental to the Portfolio or Janus Capital's other
advisory clients. See the SAI for more detailed information.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of the Portfolio are executed by
broker-dealers selected by Janus Capital. Broker-dealers are selected on the
basis of their ability to obtain best price and execution for the Portfolio's
transactions and recognizing brokerage, research and other services provided to
the Portfolio and to Janus Capital. Janus Capital may also consider payments
made by brokers effecting transactions for the Portfolio i) to the Portfolio or
ii) to other persons on behalf of the Portfolio for services provided to the
Portfolio for which it would be obligated to pay. Janus Capital may also
consider sales of shares of the Portfolio as a factor in the selection of
broker-dealers. The Portfolio's Trustees have authorized Janus Capital to place
portfolio transactions on an agency basis with a broker-dealer affiliated with
Janus Capital. When transactions for the Portfolio are effected with that
broker-dealer, the commissions payable by the Portfolio are credited against
certain Portfolio operating expenses. The SAI further explains the selection of
broker-dealers.
BREAKDOWN OF MANAGEMENT EXPENSES AND EXPENSE LIMITS
The Portfolio pays Janus Capital a management fee equal, on an annual basis, to
.75% of the first $300 million of average daily net assets and .65% of average
daily net assets in excess of $300 million. The fee is accrued daily. The
advisory agreement with the Portfolio spells out the management fee and other
expenses that the Portfolio must pay. Janus Capital will waive certain fees and
expenses to the extent that the Portfolio's total expenses exceed 1.00% in any
fiscal year. Janus Capital may terminate this waiver at any time upon 90 days'
notice to the Trustees.
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OTHER SERVICE PROVIDERS
The following parties provide the Portfolio with administrative and other
services.
Domestic Custodian
Investors Fiduciary Trust Company
127 W. 10th Street
Kansas City, Missouri 64105
Foreign Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Janus Service Corporation
P.O. Box 173375
Denver, Colorado 80217
Janus Service Corporation is a wholly-owned subsidiary of Janus Capital.
Investors Fiduciary Trust Company is a wholly-owned subsidiary of State Street
Bank and Trust Company.
OTHER INFORMATION
THE TRUST
The Trust is an open-end management investment company organized as a Delaware
business trust on May 20, 1993. The Portfolio has been established as a separate
series of the Trust.
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings. However, special
meetings may be called specifically for the Portfolio 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 a
separate portfolio only if a matter affects or requires the vote of just that
Portfolio or the Portfolio'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.
An insurance company issuing a variable contract invested in shares of the
Portfolio will request voting instructions from variable contract holders. Under
current law, the insurance company must vote all shares held by the separate
account in proportion to the voting instructions received.
CONFLICTS OF INTEREST
Portfolio shares are available only to variable annuity and variable life
separate accounts of insurance companies that are unaffiliated with Janus
Capital and to certain qualified retirement plans. The Portfolio does not
foresee any disadvantages to policy owners arising out of the fact that the
Portfolio offers its shares to such entities. Nevertheless, the Trustees intend
to monitor events in order to identify any material irreconcilable conflicts
that may arise and to determine what action, if any, should be taken in response
to such conflicts. If a conflict occurs, the Trustees may require one or more
insurance company separate accounts or plans to withdraw its investments in the
Portfolio and to substitute shares of another portfolio of the Trust. As a
result, the Portfolio may be forced to sell securities at disadvantageous
prices. In addition, the Trustees may refuse to sell shares of the Portfolio to
any separate account or may suspend or terminate the offering of shares of the
Portfolio if such action is required by law or regulatory authority or is in the
best interests of the shareholders of the Portfolio.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve the Portfolio's investment objective
by investing all of the Portfolio's assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to the Portfolio. It is expected that any such
investment company would be managed by Janus Capital in substantially the same
manner as the Portfolio. The shareholders of the Trust of record on April 30,
1992, and the initial shareholder(s) of the Portfolio, have voted to vest
authority to use this investment structure in the sole discretion of the
Trustees. No further approval of the shareholders of the Portfolio is required.
You will receive at least 30 days' prior notice of any such investment. Such
investment would be made only if the Trustees determine it to be in the best
interests of the Portfolio and its shareholders. In making that determination,
the Trustees will consider, among other things, the benefits to shareholders
and/or the opportunity to reduce costs and achieve operational efficiencies.
Although management of the Portfolio believes that the Trustees will not approve
an arrangement that is likely to result in higher costs, no assurance is given
that costs will be materially reduced if this option is implemented.
THE VALUATION OF SHARES
The NAV of the shares of the Portfolio is determined at the close of the regular
trading session of the New York Stock Exchange (the "NYSE") (normally 4:00 p.m.,
New York time) each day that the NYSE is open. Net asset value ("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. Securities are
valued at market value or, if market information 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.
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DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
THE INTERNAL REVENUE CODE REQUIRES THE PORTFOLIO TO DISTRIBUTE NET INCOME AND
ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. THE PORTFOLIO'S INCOME FROM
DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM CAPITAL GAINS ARE PAID TO
SHAREHOLDERS AS DIVIDENDS. NET REALIZED LONG-TERM GAINS ARE PAID TO SHAREHOLDERS
AS CAPITAL GAINS DISTRIBUTIONS. THE PORTFOLIO MAKES SEMIANNUAL DISTRIBUTIONS IN
JUNE AND DECEMBER OF SUBSTANTIALLY ALL OF ITS INVESTMENT INCOME AND AN ANNUAL
DISTRIBUTION IN JUNE OF ITS NET REALIZED CAPITAL GAINS, IF ANY. ALL DIVIDENDS
AND CAPITAL GAINS DISTRIBUTIONS FROM THE PORTFOLIO WILL BE AUTOMATICALLY
REINVESTED INTO ADDITIONAL SHARES OF THE PORTFOLIO.
HOW DISTRIBUTIONS AFFECT THE PORTFOLIO'S NAV
Distributions are paid to shareholders as of the record date of the distribution
of the Portfolio, regardless of how long the shares have been held. Dividends
and capital gains awaiting distribution are included in the Portfolio's daily
NAV. The share price of the Portfolio drops by the amount of the distribution,
net of any subsequent market fluctuations. As an example, assume that on
December 31, the Portfolio declared a dividend in the amount of $0.25 per share.
If the Portfolio's share price was $10.00 on December 30, the Portfolio's share
price on December 31 would be $9.75, barring market fluctuations.
TAXES
TAXES ON DISTRIBUTIONS
Because shares of the Portfolio may be purchased only through variable insurance
contracts and qualified plans, it is anticipated that any income dividends or
capital gains distributions made by the Portfolio will be exempt from current
taxation if left to accumulate within the variable insurance contract or
qualified plan. Generally, withdrawals from such contracts may be subject to
ordinary income tax and, if made before age 591/2, a 10% penalty tax. The tax
status of your investment in the Portfolio depends on the features of the
variable insurance contracts purchased from a participating insurance company.
Further information may be found in the prospectus of the separate account
offering such contract.
TAXATION OF THE PORTFOLIO
Dividends, interest and some capital gains received by the Portfolio on foreign
securities may give rise to withholding and other taxes imposed by foreign
countries. It is expected that foreign taxes paid by the Portfolio will be
treated as expenses of the Portfolio. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes.
The Portfolios do not expect to pay any federal income or excise taxes because
they intend to meet certain requirements of the Internal Revenue Code. In
addition, the Portfolio intends to qualify under the Internal Revenue Code with
respect to the diversification requirements related to the tax-deferred status
of insurance company separate accounts.
PERFORMANCE TERMS
This section will help you understand various terms that are commonly used to
describe the Portfolio's performance. You may see references to these terms in
our newsletters, advertisements (or those published by participating insurance
companies) and in media articles. Newsletters and advertisements may include
comparisons of the Portfolio's performance to the performance of other mutual
funds, mutual fund averages or recognized stock market indices. The Portfolio
may measure performance in terms of yield or total return.
Cumulative total return represents the actual rate of return on an investment
for a specified period. Cumulative total return is generally quoted for more
than one year (e.g., the life of the Portfolio). A cumulative total return does
not show interim fluctuations in the value of an investment.
Average annual total return represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in the Portfolio's return and are
not the same as actual annual results.
Yield shows the rate of income the Portfolio earns on its investments as a
percentage of the Portfolio's share price. It is calculated by dividing a
Portfolio's net investment income for a 30-day period by the average number of
shares entitled to receive dividends and dividing the result by the Portfolio's
NAV per share at the end of the 30-day period. Yield does not include changes in
NAV.
Yields are calculated according to standardized SEC formulas and may not equal
the income on an investor's account. Yield is usually quoted on an annualized
basis. An annualized yield represents the amount you would earn if you remained
in a Portfolio for a year and that Portfolio continued to have the same yield
for the entire year.
THE PORTFOLIO IMPOSES NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN
OR YIELD COMPUTATIONS. YIELD AND TOTAL RETURN FIGURES OF THE PORTFOLIO INCLUDES
THE EFFECT OF DEDUCTING THE PORTFOLIO'S EXPENSES, BUT MAY NOT INCLUDE CHARGES
AND EXPENSES ATTRIBUTABLE TO ANY PARTICULAR INSURANCE PRODUCT. PORTFOLIO
PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
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SHAREHOLDER'S GUIDE
INVESTORS MAY NOT PURCHASE OR REDEEM SHARES OF THE PORTFOLIO DIRECTLY. SHARES
MAY BE PURCHASED OR REDEEMED ONLY THROUGH VARIABLE INSURANCE CONTRACTS OFFERED
BY THE SEPARATE ACCOUNTS OF PARTICIPATING INSURANCE COMPANIES OR THROUGH
QUALIFIED RETIREMENT PLANS. REFER TO THE PROSPECTUS FOR THE PARTICIPATING
INSURANCE COMPANY'S SEPARATE ACCOUNT OR YOUR PLAN DOCUMENTS FOR INSTRUCTIONS ON
PURCHASING OR SELLING A VARIABLE INSURANCE CONTRACT AND ON HOW TO SELECT THE
PORTFOLIO AS AN INVESTMENT OPTION FOR A CONTRACT OR A QUALIFIED PLAN.
PURCHASES
Purchases of Portfolio shares may be made only by the separate accounts of
insurance companies for the purpose of funding variable insurance contracts or
by qualified plans. Refer to the prospectus of the appropriate insurance
company's separate account or to your plan documents for information on how to
invest in the Portfolio.
All investments in the Portfolio are credited to a participating insurance
company's separate account or a qualified plan immediately upon acceptance of
the investment by the Portfolio. Investments will be processed at the NAV next
calculated after an order is received and accepted by the Portfolio.
The Portfolio reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in Janus Capital's opinion, they are of the size that
would disrupt the management of the Portfolio. The Portfolio may discontinue
sales of its shares if management believes that a substantial further increase
may adversely affect the Portfolio's ability to achieve its investment
objective. In such event, however, it is anticipated that existing policy owners
and plan participants invested in the Portfolio would be permitted to continue
to authorize investment in the Portfolio and to reinvest any dividends or
capital gains distribution.
REDEMPTIONS
Redemptions, like purchases, may be effected only through the separate accounts
of participating insurance companies or through qualified plans. Please refer to
the appropriate separate account prospectus or plan documents for details.
Shares of the Portfolio may be redeemed on any business day. Redemptions are
processed at the NAV next calculated after receipt and acceptance of the
redemption order by the Portfolio. Redemption proceeds will normally be wired to
the participating insurance company the business day following receipt of the
redemption order, but in no event later than seven days after receipt of such
order.
SHAREHOLDER COMMUNICATIONS
Owners of variable insurance contracts and plan participants will receive annual
and semiannual reports including the financial statements of the Portfolio. Each
report will show the investments owned by the Portfolio and market values
thereof, as well as other information about the Portfolio and its operations.
The Trust's fiscal year ends December 31.
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APPENDIX A
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types of
securities and other instruments in which the Portfolio may invest. The
Portfolio may invest in these instruments to the extent permitted by its
investment objective and policies. The Portfolio is not limited by this
discussion and may invest in any other types of instruments not precluded by the
policies discussed elsewhere in this Prospectus. Please refer to the SAI for a
more detailed discussion of certain instruments.
I. EQUITY AND DEBT SECURITIES
Bonds are debt securities issued by a company, municipality, government or
government agency. The issuer of a bond is required to pay the holder the amount
of the loan (or par value) at a specified maturity and to make scheduled
interest payments.
Certificates of Participation ("COP"s) are certificates representing an interest
in a pool of securities. Holders are entitled to a proportionate interest in the
underlying securities.
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 Portfolio may purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933.
Common stock represents a share of ownership in a company and usually carries
voting rights and earns dividends. Unlike preferred stock, dividends on common
stock are not fixed but are declared at the discretion of the issuer's board of
directors.
Convertible securities are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
Depositary receipts are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
Fixed-income securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
High-yield/High-risk securities are securities that are rated below investment
grade by the primary rating agencies ( BB or lower by Standard & Poor's and Ba
or lower by Moody's). Other terms commonly used to describe such securities
include "lower rated bonds," "noninvestment grade bonds" and "junk bonds."
Mortgage- and asset-backed securities are shares in a pool of mortgages or other
debt. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities during
periods of declining interest rates. In that case, the portfolio manager may
have to reinvest the proceeds from the securities at a lower rate. Potential
market gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.
Passive foreign investment companies (PFICs) are any foreign corporations which
generate certain amounts of passive income or hold certain amounts of assets for
the production of passive income. Passive income includes dividends, interest,
royalties, rents and annuities. Income tax regulations may require the Portfolio
to recognize income associated with the PFIC prior to the actual receipt of any
such income.
Preferred stock is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. Preferred stock generally does not carry voting rights.
Repurchase agreements involve the purchase of a security by the Portfolio and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Portfolio at a specified date or upon demand. This
technique offers a method of earning income on idle cash. These securities
involve the risk that the seller will fail to repurchase the security, as
agreed. In that case, the Portfolio 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 Portfolio to
another party (generally a bank or dealer) in return for cash and an agreement
by the Portfolio to buy the security back at a specified price and time. This
technique may be used to provide cash to satisfy unusually high redemption
requests or for other temporary or emergency purposes.
Rule 144A securities are securities that are not registered for sale to the
general public under the Securities Act of 1933, but that may be resold to
certain institutional investors.
Standby commitments are obligations purchased by the Portfolio from a dealer
that give the Portfolio the option to sell a security to the dealer at a
specified price.
Tender option bonds are generally long-term securities that are coupled with an
option to tender the securities to a bank, broker-dealer or other financial
institution at periodic intervals and receive the face value of the bond. This
type of security is commonly used as a means of enhancing the security's
liquidity.
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U.S. government securities include direct obligations of the U.S. government
that are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. government securities also include
indirect obligations of the U.S. government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations and others are supported only by
the credit of the sponsoring agency.
Variable and floating rate securities have variable or floating rates of
interest and, under certain limited circumstances, may have varying principal
amounts. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates.
Warrants are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
When-issued, delayed delivery and forward transactions generally involve the
purchase of a security with payment and delivery at some time in the future -
i.e., beyond normal settlement. The Portfolio does not earn interest on such
securities until settlement and bears the risk of market value fluctuations
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
Zero coupon bonds are debt securities that do not pay interest at regular
intervals, but are issued at a discount from face value. The discount
approximates the total amount of interest the security will accrue from the date
of issuance to maturity. Strips are debt securities that are stripped of their
interest (usually by a financial intermediary) after the securities are issued.
The market value of these securities generally fluctuates more in response to
changes in interest rates than interest-paying securities of comparable
maturity.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
Forward contracts are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts are not
currently exchange traded and are typically negotiated on an individual basis.
The Portfolio may enter into forward currency contracts to hedge against
declines in the value of non-dollar denominated securities or to reduce the
impact of currency appreciation on purchases of nondollar denominated
securities. The Portfolio 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 Portfolio 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 Portfolio
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. The Portfolio bears the market risk of
an investment in the underlying instruments, as well as the credit risk of the
issuer.
Interest rate swaps involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
Inverse floaters are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
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 changes in the underlying index. Such mechanism
may increase the volatility of the security's market value.
Options are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. The Portfolio may purchase and write put and call options on securities,
securities indices and foreign currencies.
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APPENDIX B
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although the adviser considers security ratings when
making investment decisions, it also performs its own investment analysis and
does not rely solely on the ratings assigned by credit agencies.
Standard & Poor's Ratings Services
Bond Rating Explanation
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Investment Grade
AAA Highest rating; extremely strong capacity to pay
principal and interest.
AA High quality; very strong capacity to pay
principal and interest.
A Strong capacity to pay principal and interest;
somewhat more susceptible to the adverse effects
of changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters,
but adverse economic conditions or changing
circumstances more likely to lead to a weakened
capacity to pay principal and interest than for
higher rated bonds.
Noninvestment Grade
BB, B, Predominantly speculative with respect to the
issuer's capacity to meet required interest and
principal payments.
CCC, CC, C BB - lowest degree of speculation; C - the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties
or major risk exposure to adverse conditions.
D In default.
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Moody's Investors Service, Inc.
Investment Grade
Aaa Highest quality, smallest degree of investment
risk.
Aa High quality; together with Aaa bonds, they
compose the high-grade bond group.
A Upper-medium grade obligations; many favorable
investment attributes.
Baa Medium-grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present but certain protective
elements may be lacking or may be unreliable over
any great length of time.
Noninvestment Grade
Ba More uncertain, with speculative elements.
Protection of interest and principal payments not
well safeguarded during good and bad times.
B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other
contract terms over time.
Caa Poor standing, may be in default; elements of
danger with respect to principal or interest
payments.
Ca Speculative in a high degree; could be in default
or have other marked shortcomings.
C Lowest-rated; extremely poor prospects of ever
attaining investment standing.
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*Unrated securities are treated as noninvestment grade unless the portfolio
manager determines that such securities are the equivalent of investment grade
securities. Split rated securities may be treated as investment grade so long as
at least one major agency has rated the security as investment grade.
JANUS ASPEN SERIES HIGH-YIELD PORTFOLIO PROSPECTUS May 1, 1996
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