Registration No. 33-63212
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /__/
Pre-Effective Amendment No. __ /__/
Post-Effective Amendment No. 8 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /__/
Amendment No. 10 /X/
(Check appropriate box or boxes.)
JANUS ASPEN SERIES
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(Exact Name of Registrant as Specified in Charter)
100 Fillmore Street, Denver, Colorado 80206-9916
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Address of Principal Executive Offices (Zip Code)
Registrant's Telephone No., including Area Code: 303-333-3863
David C. Tucker - 100 Fillmore Street, Denver, Colorado 80206-9916
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(Name and Address of Agent for Service)
Approximate Date of Proposed Offering: May 1, 1996
It is proposed that this filing will become effective (check appropriate line):
___ immediately upon filing pursuant to paragraph (b) of Rule 485.
X on May 1, 1996, pursuant to paragraph (b) of Rule 485.
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
___ on (date) pursuant to paragraph (a)(1) of Rule 485.
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
___ on May 1, 1996, pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2(a) and filed a Rule
24f-2 Notice on February 28, 1996, for the fiscal year ended December 31, 1995,
with respect to all of its series in existence as of December 31, 1995.
<PAGE>
JANUS ASPEN SERIES
Cross Reference Sheet
Between each Prospectus and Statement of
Additional Information and Form N-1A Item
(Cross Reference Sheets for High-Yield Portfolio
are included in previous post-effective amendments
related to that series)
FORM N-1A ITEM
PART A CAPTION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Financial Highlights (in Combined and
Information Money Market Prospectuses only);
Performance
4. General Description of Investment Objective, Policies and
Registrant Techniques (Money Market Prospectus
only); The Portfolio's (Portfolios')
Investment Objectives and Policies;
Miscellaneous Information (Money Market
Prospectus only); Other Information
(Combined Prospectus only)
5. Management of the Fund Investment Adviser; Miscellaneous
Information (Money Market Prospectus
only); Other Information (Combined
Prospectus only)
6. Capital Stock and Other Distributions and Taxes; Shareholder's
Securities Guide
7. Purchase of Securities Being Shareholder's Guide
Offered
8. Redemption or Repurchase Shareholder's Guide
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Miscellaneous Information
History
13. Investment Objectives and Investment Policies and Restrictions
Policies (Money Market Prospectus only);
Investment Policies, Restrictions and
Techniques (Combined Prospectus only);
Types of Securities and Investment
Techniques; Appendix A - Description of
Securities Ratings (Money Market
Prospectus only); Appendix B -
Description of Municipal Securities
(Money Market Prospectus only)
14. Management of the Fund Investment Adviser; Officers and
Trustees
15. Control Persons and Principal Shareholders (Combined and
Principal Holders of Money Market Prospectuses only)
Securities
16. Investment Advisory and Investment Adviser; Custodian, Transfer
Other Services Agent and Certain Affiliations;
Portfolio Transactions and Brokerage;
Officers and Trustees; Miscellaneous
Information
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Practices
18. Capital Stock and Other Shares of the Trust; Miscellaneous
Securities Information
19. Purchase, Redemption and Shares of the Trust
Pricing of Securities
Being Offered
20. Tax Status Dividends and Tax Status
21. Underwriters Not Applicable
22. Calculation of Performance Performance Data (Money Market
Data Prospectus only); Performance
Information (Combined Prospectus only)
23. Financial Statements Financial Statements (Money Market and
Combined Prospectuses only)
<PAGE>
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
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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
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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
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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)
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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) -- -- -- -- -- --
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8. Total distributions (.22) (.10) (.08) (.60) (.40) (.10)
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9. Net asset value, end of period $13.03 $10.63 $10.64 $11.11 $9.48 $9.97
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10. Total return 24.79% 0.84% 7.20% 23.86% (0.91%) 0.70%
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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)
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<S> <C> <C> <C>
1. Net asset value, beginning of period $9.72 $9.93 $10.00
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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)
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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) -- -- --
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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.
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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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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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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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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
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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
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<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
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<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
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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
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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
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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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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
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[LOGO]
JANUS FUNDS
100 Fillmore Street
Denver, CO 80206-4923
1-800-525-3713
<PAGE>
[LOGO]
JANUS ASPEN SERIES
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Statement of Additional Information
May 1, 1996
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Growth Portfolio Balanced Portfolio
Aggressive Growth Portfolio Flexible Income Portfolio
Worldwide Growth Portfolio Short-Term Bond Portfolio
International Growth Portfolio
This Statement of Additional Information ("SAI") pertains to the funds listed
above, each of which is a separate series of Janus Aspen Series, a Delaware
business trust (the "Trust"). Each of these series of the Trust represents
shares of beneficial interest in a separate portfolio of securities and other
assets with its own objective and policies (individually, a "Portfolio" and
collectively, the "Portfolios"). Each Portfolio is managed separately by Janus
Capital Corporation ("Janus Capital").
Shares of the Portfolios may be purchased only by the separate accounts of
insurance companies for the purpose of funding variable life insurance policies
and variable annuity contracts (collectively, "variable insurance contracts")
and by certain qualified retirement plans.
This SAI is not a Prospectus and should be read in conjunction with the
Prospectus dated May 1, 1996, which is incorporated by reference into this SAI
and may be obtained from your insurance company. This SAI contains additional
and more detailed information about the Portfolios' operations and activities
than the Prospectus.
<PAGE>
JANUS ASPEN SERIES
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
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Investment Policies, Restrictions and Techniques ........................ 3
Investment Objectives .............................................. 3
Portfolio Policies ................................................. 3
Investment Restrictions Applicable to All Portfolios ............... 4
Investment Policies Applicable to Certain Portfolios ............... 5
Types of Securities and Investment Techniques ...................... 6
Illiquid Investments .......................................... 6
Zero Coupon, Pay-In-Kind and Step Coupon Securities ........... 6
Pass-Through Securities ....................................... 7
Depositary Receipts ........................................... 8
Municipal Obligations ......................................... 8
Other Income-Producing Securities ............................. 8
Repurchase and Reverse Repurchase Agreements .................. 8
High-Yield/High-Risk Bonds .................................... 9
Futures, Options and Other Derivative Instruments ............. 9
Investment Adviser ...................................................... 16
Custodian, Transfer Agent and Certain Affiliations ...................... 18
Portfolio Transactions and Brokerage .................................... 19
Officers and Trustees ................................................... 21
Shares of the Trust ..................................................... 23
Net Asset Value Determination ...................................... 23
Purchases .......................................................... 24
Redemptions ........................................................ 24
Income Dividends, Capital Gains Distributions and Tax Status ............ 24
Principal Shareholders .................................................. 25
Miscellaneous Information ............................................... 25
Shares of the Trust ................................................ 25
Voting Rights ...................................................... 25
Independent Accountants ............................................ 26
Registration Statement ............................................. 26
Performance Information ................................................. 26
Financial Statements .................................................... 27
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INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES
Each Portfolio's investment objective is discussed in the Prospectus and
summarized below. There is no assurance that the Portfolios will achieve their
respective objectives. The investment objectives of the Portfolios are not
fundamental and may be changed by the Trustees without shareholder approval.
INVESTMENT OBJECTIVES
Growth Portfolio is a diversified fund that seeks long-term growth of
capital in a manner consistent with the preservation of capital by investing
primarily in common stocks of issuers of any size. Generally, this Portfolio
emphasizes issuers with larger market capitalizations.
Aggressive Growth Portfolio is a nondiversified fund that seeks long-term
growth of capital by investing primarily in common stocks. The Portfolio intends
to normally invest at least 50% of its equity assets in securities issued by
medium-sized companies (as defined in the Prospectus).
Worldwide Growth Portfolio is a diversified fund that seeks long-term
growth of capital in a manner consistent with the preservation of capital by
investing primarily in common stocks of foreign and domestic issuers of any
size. Worldwide Growth Portfolio normally invests in issuers from at least five
different countries including the United States.
International Growth Portfolio is a diversified fund that seeks long-term
growth of capital by investing primarily in common stocks of foreign issuers of
any size. The Portfolio normally invests at least 65% of its total assets in
issuers from at least five different countries excluding the United States.
Balanced Portfolio is a diversified fund that seeks long-term capital
growth, consistent with preservation of capital and balanced by current income.
The Portfolio normally invests 40-60% of its assets in securities selected
primarily for growth potential and 40-60% of its assets in securities selected
primarily for their income potential.
Flexible Income Portfolio is a diversified fund that seeks to maximize
total return consistent with preservation of capital. Total return is expected
to result from a combination of current income and capital appreciation,
although income will normally be the dominant component of total return. The
Portfolio invests in all types of income-producing securities, and may have
substantial holdings of debt securities rated below investment grade.
Short-Term Bond Portfolio is a diversified fund that seeks as high a level
of current income as is consistent with the preservation of capital by investing
primarily in short- and intermediate-term fixed-income securities. It will
normally maintain an average-weighted maturity not to exceed three years.
PORTFOLIO POLICIES
The Prospectus discusses the types of securities in which the Portfolios
will invest, policies of the Portfolios and the investment techniques of the
Portfolios. The Prospectus includes a discussion of portfolio turnover policies.
Portfolio turnover is calculated by dividing total purchases or sales, whichever
is less, by the average monthly value of a Portfolio's securities. The following
table summarizes the portfolio turnover rates for the fiscal periods indicated.
The information below is for fiscal years ended December 31.
Portfolio Name 1995 1994
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Growth Portfolio 185% 169%
Aggressive Growth Portfolio 155% 259%
Worldwide Growth Portfolio 113% 217%
International Growth Portfolio 211% 275%(1)*
Balanced Portfolio 149% 158%
Flexible Income Portfolio 236% 234%
Short-Term Bond Portfolio 417% 256%
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* Annualized for periods of less than one year.
(1) May 2, 1994 (inception) to December 31, 1994.
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INVESTMENT RESTRICTIONS APPLICABLE TO ALL PORTFOLIOS
As indicated in the Prospectus, the Portfolios are subject to certain
fundamental policies and restrictions that may not be changed without
shareholder approval. Shareholder approval means approval by the lesser of (i)
more than 50% of the outstanding voting securities of the Trust (or a particular
Portfolio if a matter affects just that Portfolio), or (ii) 67% or more of the
voting securities present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Trust (or a particular Portfolio) are
present or represented by proxy. As fundamental policies, each of the Portfolios
may not:
(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to fifty percent (50%) of the value of the total assets of
Aggressive Growth Portfolio and as to seventy-five percent (75%) of the value of
the total assets of the other Portfolios, purchase the securities of any one
issuer (except cash items and "government securities" as defined under the
Investment Company Act of 1940, as amended (the "1940 Act")), if immediately
after and as a result of such purchase, the value of the holdings of a Portfolio
in the securities of such issuer exceeds 5% of the value of such Portfolio's
total assets. With respect to the other 50% of the value of its total assets,
Aggressive Growth Portfolio may invest in the securities of as few as two
issuers.
(2) Invest more than 25% of the value of their respective assets in any
particular industry (other than U.S. government securities).
(3) Invest directly in real estate or interests in real estate; however,
the Portfolios may own debt or equity securities issued by companies engaged in
those businesses.
(4) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the Portfolios from purchasing or selling options, futures,
swaps and forward contracts or from investing in securities or other instruments
backed by physical commodities).
(5) Lend any security or make any other loan if, as a result, more than 25%
of a Portfolio's total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt securities or
repurchase agreements).
(6) Act as an underwriter of securities issued by others, except to the
extent that a Portfolio may be deemed an underwriter in connection with the
disposition of its portfolio securities.
As a fundamental policy, each Portfolio may, notwithstanding any other
investment policy or limitation (whether or not fundamental), invest all of its
assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as such Portfolio.
The Trustees have adopted additional investment restrictions for the
Portfolios. These restrictions are operating policies of the Portfolios and may
be changed by the Trustees without shareholder approval. The additional
investment restrictions adopted by the Trustees to date include the following:
(a) A Portfolio's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of a Portfolio's net assets, may be
warrants that are not listed on the New York or American Stock Exchange.
Warrants acquired by a Portfolio in units or attached to securities shall be
deemed to be without value for the purpose of monitoring this policy.
(b) A Portfolio will not (i) enter into any futures contracts and related
options for purposes other than bona fide hedging transactions within the
meaning of Commodity Futures Trading Commission ("CFTC") regulations if the
aggregate initial margin and premiums required to establish positions in futures
contracts and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value of a
Portfolio's net assets, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; and (ii) enter into
any futures contracts if the aggregate amount of such Portfolio's commitments
under outstanding futures contracts positions would exceed the market value of
its total assets.
(c) The Portfolios do not currently intend to sell securities short, unless
they own or have the right to obtain securities equivalent in kind and amount to
the securities sold short without the payment of any additional consideration
therefor, and provided that transactions in futures, options, swaps and forward
contracts are not deemed to constitute selling securities short.
(d) The Portfolios do not currently intend to purchase securities on
margin, except that the Portfolios may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin payments
and other deposits in connection with transactions in futures, options, swaps
and forward contracts shall not be deemed to constitute purchasing securities on
margin.
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(e) The Portfolios do not currently intend to (i) purchase securities of
other investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (ii) purchase or retain securities
issued by other open-end investment companies. Limitations (i) and (ii) do not
apply to money market funds or to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger. If a Portfolio invests in a money market fund, Janus Capital will reduce
its advisory fee by the amount of any investment advisory and administrative
services fees paid to the investment manager of the money market fund.
(f) A Portfolio may not mortgage or pledge any securities owned or held by
such Portfolio in amounts that exceed, in the aggregate, 15% of that Portfolio's
net asset value, provided that this limitation does not apply to reverse
repurchase agreements, deposits of assets to margin, guarantee positions in
futures, options, swaps or forward contracts, or the segregation of assets in
connection with such contracts.
(g) The Portfolios do not intend to purchase securities of any issuer
(other than U.S. government agencies and instrumentalities or instruments
guaranteed by an entity with a record of more than three years' continuous
operation, including that of predecessors) with a record of less than three
years' continuous operation (including that of predecessors) if such purchase
would cause the cost of a Portfolio's investments in all such issuers to exceed
5% of that Portfolio's total assets taken at market value at the time of such
purchase.
(h) The Portfolios do not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases; however, the
Portfolios may own debt or equity securities of companies engaged in those
businesses.
(i) The Portfolios may borrow money for temporary or emergency purposes
(not for leveraging or investment) in an amount not exceeding 25% of the value
of their respective total assets (including the amount borrowed) less
liabilities (other than borrowings). If borrowings exceed 25% of the value of a
Portfolio's total assets by reason of a decline in net assets, the Portfolio
will reduce its borrowings within three business days to the extent necessary to
comply with the 25% limitation. This policy shall not prohibit reverse
repurchase agreements, deposits of assets to margin or guarantee positions in
futures, options, swaps or forward contracts, or the segregation of assets in
connection with such contracts.
(j) The Portfolios do not currently intend to purchase any security or
enter into a repurchase agreement, if as a result, more than 15% of their
respective net assets would be invested in repurchase agreements not entitling
the holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees, or the
Portfolios' investment adviser acting pursuant to authority delegated by the
Trustees, may determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities"), or any successor to such rule, Section 4(2) commercial
paper and municipal lease obligations. Accordingly, such securities may not be
subject to the foregoing limitation.
(k) The Portfolios may not invest in companies for the purpose of
exercising control of management.
For purposes of the Portfolios' restriction on investing in a particular
industry, the Portfolios will rely primarily on industry classifications as
published by Bloomberg L.P., provided that financial service companies will be
classified according to the end users of their services (for example, automobile
finance, bank finance and diversified finance are each considered to be a
separate industry). To the extent that Bloomberg L.P. classifications are so
broad that the primary economic characteristics in a single class are materially
different, the Portfolios may further classify issuers in accordance with
industry classifications as published by the Securities and Exchange Commission
("SEC").
INVESTMENT POLICIES APPLICABLE TO CERTAIN PORTFOLIOS
Balanced Portfolio. As an operational policy, at least 25% of the assets of
Balanced Portfolio normally will be invested in fixed-income senior securities,
which include debt securities and preferred stock.
Flexible Income Portfolio. As a fundamental policy, this Portfolio may not
purchase a non-income-producing security if, after such purchase, less than 80%
of the Portfolio's total assets would be invested in income-producing
securities. Income-producing securities include securities that make periodic
interest payments as well as those that make interest payments on a deferred
basis or pay interest only at maturity (e.g., Treasury bills or zero coupon
bonds).
The Portfolio will purchase defaulted securities only when its portfolio
manager believes, based upon its analysis of the financial condition, results of
operations and economic outlook of an issuer, that there is potential for
resumption of income payments and that the securities offer an unusual
opportunity for capital appreciation. Notwithstanding the portfolio manager's
belief as to the resumption of income, however, the purchase of any security on
which payment of interest or dividends is suspended involves a high degree of
risk. Such risk includes, among other things, the following:
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A. Financial and Market Risks. Investments in securities that are in
default involve a high degree of financial and market risks that can result in
substantial or, at times, even total losses. Issuers of defaulted securities may
have substantial capital needs and may become involved in bankruptcy or
reorganization proceedings. Among the problems involved in investments in such
issuers is the fact that it may be difficult to obtain information about the
condition of such issuers. The market prices of such securities also are subject
to abrupt and erratic movements and above average price volatility, and the
spread between the bid and asked prices of such securities may be greater than
normally expected.
B. Disposition of Portfolio Securities. Although Flexible Income Portfolio
generally will purchase securities for which its portfolio manager expects an
active market to be maintained, defaulted securities may be less actively traded
than other securities and it may be difficult to dispose of substantial holdings
of such securities at prevailing market prices. Flexible Income Portfolio will
limit its holdings of any such securities to amounts that its portfolio manager
believes could be readily sold, and its holdings of such securities would, in
any event, be limited so as not to limit the Portfolio's ability to readily
dispose of its securities to meet redemptions.
C. Other. Defaulted securities require active monitoring and may, at times,
require participation in bankruptcy or receivership proceedings on behalf of the
Portfolio.
Short-Term Bond Portfolio. As an operational policy, this Portfolio will
not invest in any debt security that, at the time of purchase, causes its
portfolio of debt securities to have a dollar-weighted average, then remaining
term to maturity of three years or more. The portfolio manager will consider the
estimated prepayment date of mortgage-backed securities in computing the
portfolio's maturity.
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES
ILLIQUID INVESTMENTS
Each Portfolio may invest up to 15% of its net assets in illiquid
investments (i.e., securities that are not readily marketable). The Trustees of
the Portfolios have authorized Janus Capital to make liquidity determinations
with respect to its securities, including Rule 144A Securities, commercial paper
and municipal lease obligations. Under the guidelines established by the
Trustees, Janus Capital will consider the following factors: 1) the frequency of
trades and quoted prices for the obligation; 2) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; 3)
the willingness of dealers to undertake to make a market in the security; and 4)
the nature of the security and the nature of the marketplace trades, including
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of the transfer. In the case of commercial paper, Janus Capital
will also consider whether the paper is traded flat or in default as to
principal and interest and any ratings of the paper by a Nationally Recognized
Statistical Rating Organization ("NRSRO").
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES
Each Portfolio may invest up to 10% of its assets in zero coupon,
pay-in-kind and step coupon securities. Zero coupon bonds are issued and traded
at a discount from their face value. They do not entitle the holder to any
periodic payment of interest prior to maturity. Step coupon bonds trade at a
discount from their face value and pay coupon interest. The coupon rate is low
for an initial period and then increases to a higher coupon rate thereafter. The
discount from the face amount or par value depends on the time remaining until
cash payments begin, prevailing interest rates, liquidity of the security and
the perceived credit quality of the issuer. Pay-in-kind bonds normally give the
issuer an option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal to the
amount of the coupon payment that would have been made.
Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), a Portfolio must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds. Because a Portfolio will
not receive cash payments on a current basis in respect of accrued
original-issue discount on zero coupon bonds or step coupon bonds during the
period before interest payments begin, in some years that Portfolio may have to
distribute cash obtained from other sources in order to satisfy the distribution
requirements under the Code. A Portfolio might obtain such cash from selling
other portfolio holdings which might cause that Portfolio to incur capital gains
or losses on the sale. Additionally, these actions are likely to reduce the
assets to which Portfolio expenses could be allocated and to reduce the rate of
return for that Portfolio. In some circumstances, such sales might be necessary
in order to satisfy cash distribution requirements
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even though investment considerations might otherwise make it undesirable for a
Portfolio to sell the securities at the time.
Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.
PASS-THROUGH SECURITIES
The Portfolios may invest in various types of pass-through securities, such
as mortgage-backed securities, asset-backed securities and participation
interests. A pass-through security is a share or certificate of interest in a
pool of debt obligations that have been repackaged by an intermediary, such as a
bank or broker-dealer. The purchaser of a pass-through security receives an
undivided interest in the underlying pool of securities. The issuers of the
underlying securities make interest and principal payments to the intermediary
which are passed through to purchasers, such as the Portfolios. The most common
type of pass-through securities are mortgage-backed securities. Government
National Mortgage Association ("GNMA") Certificates are mortgage-backed
securities that evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly by the
borrowers over the term of the loan rather than returned in a lump sum at
maturity. A Portfolio will generally purchase "modified pass-through" GNMA
Certificates, which entitle the holder to receive a share of all interest and
principal payments paid and owned on the mortgage pool, net of fees paid to the
"issuer" and GNMA, regardless of whether or not the mortgagor actually makes the
payment. GNMA Certificates are backed as to the timely payment of principal and
interest by the full faith and credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC") issues two types of
mortgage pass-through securities: mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. FHLMC guarantees timely payments of
interest on PCs and the full return of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semiannually and return principal once a year in guaranteed minimum payments.
This type of security is guaranteed by FHLMC as to timely payment of principal
and interest but it is not guaranteed by the full faith and credit of the U.S.
government.
The Federal National Mortgage Association ("FNMA") issues guaranteed
mortgage pass-through certificates ("FNMA Certificates"). FNMA Certificates
resemble GNMA Certificates in that each FNMA Certificate represents a pro rata
share of all interest and principal payments made and owned on the underlying
pool. This type of security is guaranteed by FNMA as to timely payment of
principal and interest but it is not guaranteed by the full faith and credit of
the U.S. government.
Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Portfolios), like the payments on the
underlying loans, represent both principal and interest. Although the underlying
mortgage loans are for specified periods of time, such as 20 or 30 years, the
borrowers can, and typically do, pay them off sooner. Thus, the security holders
frequently receive prepayments of principal in addition to the principal that is
part of the regular monthly payments. A portfolio manager will consider
estimated prepayment rates in calculating the average-weighted maturity of a
Portfolio. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining interest
rates, higher yielding mortgage-backed securities held by a Portfolio might be
converted to cash and that Portfolio will be forced to accept lower interest
rates when that cash is used to purchase additional securities in the
mortgage-backed securities sector or in other investment sectors. Additionally,
prepayments during such periods will limit a Portfolio's ability to participate
in as large a market gain as may be experienced with a comparable security not
subject to prepayment.
Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor nor guarantor of the security and
interest and principal payments ultimately depend upon payment of the underlying
loans by individuals. Tax-exempt asset-backed securities include units of
beneficial interests in pools of purchase contracts, financing leases, and sales
agreements that may be created when a municipality enters into an installment
purchase contract or lease with a vendor. Such securities may be secured by the
assets purchased or leased by the municipality; however, if the municipality
stops making payments, there generally will be no recourse against the vendor.
The market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.
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DEPOSITARY RECEIPTS
The Portfolios may invest in sponsored and unsponsored American Depositary
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underying securities issued by a foreign issuer.
ADRs, in registered form, are designed for use in U.S. securities markets.
Unsponsored ADRs may be created without the participation of the foreign issuer.
Holders of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depositary of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights. The Portfolios may also invest in European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in other
similar instruments representing securities of foreign companies. EDRs are
receipts issued by a European financial institution evidencing an arrangement
similar to that of ADRs. EDRs, in bearer form, are designed for use in European
securities markets. GDRs are securities convertible into equity securities of
foreign issuers.
MUNICIPAL OBLIGATIONS
The Portfolios may invest in municipal obligations issued by states,
territories and possessions of the United States and the District of Columbia.
The value of municipal obligations can be affected by changes in their actual or
perceived credit quality. The credit quality of municipal obligations can be
affected by, among other things, the financial condition of the issuer or
guarantor, the issuer's future borrowing plans and sources of revenue, the
economic feasibility of the revenue bond project or general borrowing purpose,
political or economic developments in the region where the security is issued,
and the liquidity of the security. Because municipal securities are generally
traded over-the-counter, the liquidity of a particular issue often depends on
the willingness of dealers to make a market in the security. The liquidity of
some municipal obligations may be enhanced by demand features, which would
enable a Portfolio to demand payment on short notice from the issuer or a
financial intermediary.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Portfolios may purchase
include, but are not limited to, the following types of securities:
Variable and floating rate obligations. These types of securities are
relatively long-term instruments that often carry demand features permitting the
holder to demand payment of principal at any time or at specified intervals
prior to maturity.
Standby commitments. These instruments, which are similar to a put, give a
Portfolio the option to obligate a broker, dealer or bank to repurchase a
security held by that Portfolio at a specified price.
Tender option bonds. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker, dealer
or bank) to grant the holders of such securities the option to tender the
securities to the institution at periodic intervals.
Inverse floaters. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security. The
Portfolios will not invest more than 5% of their respective assets in inverse
floaters.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement, a Portfolio purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
price on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon incremental amount that is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value (at least equal to the amount of the agreed upon
resale price and marked-to-market daily) of the underlying security or
"collateral." A Portfolio may engage in a repurchase agreement with respect to
any security in which it is authorized to invest. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause a Portfolio to suffer a loss if the market value of
such securities declines before they can be liquidated on the open market. In
the event of bankruptcy or insolvency of the seller, a Portfolio may encounter
delays and incur costs in liquidating the underlying security. Repurchase
agreements that mature in more than seven days will be subject to the 15% limit
on illiquid investments. While it is not possible to eliminate all risks from
these
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transactions, it is the policy of the Portfolios to limit repurchase agreements
to those parties whose creditworthiness has been reviewed and found satisfactory
by Janus Capital.
A Portfolio may use reverse repurchase agreements to provide cash to
satisfy unusually heavy redemption requests or for other temporary or emergency
purposes without the necessity of selling portfolio securities, or to earn
additional income on portfolio securities, such as Treasury bills or notes. In a
reverse repurchase agreement, a Portfolio sells a portfolio security to another
party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, a Portfolio will maintain cash and
appropriate liquid assets in a segregated custodial account to cover its
obligation under the agreement. The Portfolios will enter into reverse
repurchase agreements only with parties that Janus Capital deems creditworthy.
HIGH-YIELD/HIGH-RISK SECURITIES
Flexible Income Portfolio may invest without limit in debt securities that
are rated below investment grade (e.g., securities rated BB or lower by Standard
& Poor's Ratings Services ("Standard & Poor's") or Ba or lower by Moody's
Investors Service, Inc. ("Moody's")). Each of the other Portfolios may invest up
to 35% of its net assets in such securities. Lower rated securities involve a
higher degree of credit risk, which is the risk that the issuer will not make
interest or principal payments when due. In the event of an unanticipated
default, a Portfolio would experience a reduction in its income, and could
expect a decline in the market value of the securities so affected.
Each Portfolio may also invest in unrated debt securities of foreign and
domestic issuers. Unrated debt, while not necessarily of lower quality than
rated securities, may not have as broad a market. Because these ratings do not
take into account individual factors relevant to each issue and may not be
updated regularly, Janus Capital may treat such securities as unrated debt.
Unrated debt securities will be included in the 35% limit of each Portfolio
unless its manager deems such securities to be the equivalent of investment
grade securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Futures Contracts. The Portfolios may enter into contracts for the purchase
or sale for future delivery of fixed-income securities, foreign currencies or
contracts based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the CFTC and must be executed through a futures commission
merchant ("FCM"), or brokerage firm, which is a member of the relevant contract
market. Through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.
The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or
certain high-grade liquid assets by the Portfolios' custodian or subcustodian
for the benefit of the FCM. Initial margin payments are similar to good faith
deposits or performance bonds. Unlike margin extended by a securities broker,
initial margin payments do not constitute purchasing securities on margin for
purposes of the Portfolio's investment limitations. If the value of either
party's position declines, that party will be required to make additional
"variation margin" payments for the benefit of the FCM to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. In the event of the bankruptcy of the FCM that
holds margin on behalf of a Portfolio, that Portfolio may be entitled to return
of margin owed to such Portfolio only in proportion to the amount received by
the FCM's other customers. Janus Capital will attempt to minimize the risk by
careful monitoring of the creditworthiness of the FCMs with which the Portfolios
do business and by depositing margin payments in a segregated account with the
Portfolios' custodian.
The Portfolios intend to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" adopted by
the CFTC and the National Futures Association, which regulate trading in the
futures markets. The Portfolios will use futures contracts and related options
primarily for bona fide hedging purposes within the meaning of CFTC regulations.
To the extent that the Portfolios hold positions in futures contracts and
related options that do not fall within the definition of bona fide hedging
transactions, the aggregate initial margin and premiums required to establish
such positions will not exceed 5% of the fair market value of a Portfolio's net
assets, after taking into account unrealized profits and unrealized losses on
any such contracts it has entered into.
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Although a Portfolio will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets would be
available to that Portfolio immediately upon closing out the futures position,
while settlement of securities transactions could take several days. However,
because a Portfolio's cash that may otherwise be invested would be held
uninvested or invested in high-grade liquid assets so long as the futures
position remains open, such Portfolio's return could be diminished due to the
opportunity losses of foregoing other potential investments.
A Portfolio's primary purpose in entering into futures contracts is to
protect that Portfolio from fluctuations in the value of securities or interest
rates without actually buying or selling the underlying debt or equity security.
For example, if the Portfolio anticipates an increase in the price of stocks,
and it intends to purchase stocks at a later time, that Portfolio could enter
into a futures contract to purchase a stock index as a temporary substitute for
stock purchases. If an increase in the market occurs that influences the stock
index as anticipated, the value of the futures contracts will increase, thereby
serving as a hedge against that Portfolio not participating in a market advance.
This technique is sometimes known as an anticipatory hedge. To the extent a
Portfolio enters into futures contracts for this purpose, the segregated assets
maintained to cover such Portfolio's obligations with respect to the futures
contracts will consist of high-grade liquid assets from its portfolio in an
amount equal to the difference between the contract price and the aggregate
value of the initial and variation margin payments made by that Portfolio with
respect to the futures contracts. Conversely, if a Portfolio holds stocks and
seeks to protect itself from a decrease in stock prices, the Portfolio might
sell stock index futures contracts, thereby hoping to offset the potential
decline in the value of its portfolio securities by a corresponding increase in
the value of the futures contract position. A Portfolio could protect against a
decline in stock prices by selling portfolio securities and investing in money
market instruments, but the use of futures contracts enables it to maintain a
defensive position without having to sell portfolio securities.
If a Portfolio owns Treasury bonds and the portfolio manager expects
interest rates to increase, that Portfolio may take a short position in interest
rate futures contracts. Taking such a position would have much the same effect
as that Portfolio selling Treasury bonds in its portfolio. If interest rates
increase as anticipated, the value of the Treasury bonds would decline, but the
value of that Portfolio's interest rate futures contract will increase, thereby
keeping the net asset value of that Portfolio from declining as much as it may
have otherwise. If, on the other hand, a portfolio manager expects interest
rates to decline, that Portfolio may take a long position in interest rate
futures contracts in anticipation of later closing out the futures position and
purchasing the bonds. Although a Portfolio can accomplish similar results by
buying securities with long maturities and selling securities with short
maturities, given the greater liquidity of the futures market than the cash
market, it may be possible to accomplish the same result more easily and more
quickly by using futures contracts as an investment tool to reduce risk.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery of the instrument underlying a futures contract. To the extent
participants decide to make or take delivery, liquidity in the futures market
could be reduced and prices in the futures market distorted. Third, from the
point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of the foregoing
distortions, a correct forecast of general price trends by a portfolio manager
still may not result in a successful use of futures.
Futures contracts entail risks. Although the Portfolios believe that use of
such contracts will benefit the Portfolios, a Portfolio's overall performance
could be worse than if such Portfolio had not entered into futures contracts if
the portfolio manager's investment judgement proves incorrect. For example, if a
Portfolio has hedged against the effects of a possible decrease in prices of
securities held in its portfolio and prices increase instead, that Portfolio
will lose part or all of the benefit of the increased value of these securities
because of offsetting losses in its futures positions. In addition, if a
Portfolio has insufficient cash, it may have to sell securities from its
portfolio to meet daily variation margin requirements. Those sales may be, but
will not necessarily be, at increased prices which reflect the rising market and
may occur at a time when the sales are disadvantageous to such Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to a
Portfolio will not match exactly such Portfolio's current or potential
investments. A Portfolio may buy and sell futures contracts based on underlying
instruments with different characteristics from the securities in which it
typically
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invests - for example, by hedging investments in portfolio securities with a
futures contract based on a broad index of securities - which involves a risk
that the futures position will not correlate precisely with the performance of
such Portfolio's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with a
Portfolio's investments. Futures prices are affected by factors such as current
and anticipated short-term interest rates, changes in volatility of the
underlying instruments and the time remaining until expiration of the contract.
Those factors may affect securities prices differently from futures prices.
Imperfect correlations between a Portfolio's investments and its futures
positions also may result from differing levels of demand in the futures markets
and the securities markets, from structural differences in how futures and
securities are traded, and from imposition of daily price fluctuation limits for
futures contracts. A Portfolio may buy or sell futures contracts with a greater
or lesser value than the securities it wishes to hedge or is considering
purchasing in order to attempt to compensate for differences in historical
volatility between the futures contract and the securities, although this may
not be successful in all cases. If price changes in a Portfolio's futures
positions are poorly correlated with its other investments, its futures
positions may fail to produce desired gains or result in losses that are not
offset by the gains in that Portfolio's other investments.
Because futures contracts are generally settled within a day from the date
they are closed out, compared with a settlement period of three days for some
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance that a liquid secondary
market will exist for any particular futures contract at any particular time. In
addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for a Portfolio to
enter into new positions or close out existing positions. If the secondary
market for a futures contract is not liquid because of price fluctuation limits
or otherwise, a Portfolio may not be able to promptly liquidate unfavorable
futures positions and potentially could be required to continue to hold a
futures position until the delivery date, regardless of changes in its value. As
a result, such Portfolio's access to other assets held to cover its futures
positions also could be impaired.
Options on Futures Contracts. The Portfolios may buy and write put and call
options on futures contracts. An option on a future gives a Portfolio the right
(but not the obligation) to buy or sell a futures contract at a specified price
on or before a specified date. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less risky than
ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when a Portfolio is not fully invested it may buy
a call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in that Portfolio's
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
a Portfolio will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which that
Portfolio is considering buying. If a call or put option a Portfolio has written
is exercised, such Portfolio will incur a loss which will be reduced by the
amount of the premium it received. Depending on the degree of correlation
between the change in the value of its portfolio securities and changes in the
value of the futures positions, a Portfolio's losses from existing options on
futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices or rising interest rates.
The amount of risk a Portfolio assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
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Forward Contracts. A forward contract is an agreement between two parties
in which one party is obligated to deliver a stated amount of a stated asset at
a specified time in the future and the other party is obligated to pay a
specified amount for the assets at the time of delivery. The Portfolios may
enter into forward contracts to purchase and sell government securities, equity
or income securities, foreign currencies or other financial instruments. Forward
contracts generally are traded in an interbank market conducted directly between
traders (usually large commercial banks) and their customers. Unlike futures
contracts, which are standardized contracts, forward contracts can be
specifically drawn to meet the needs of the parties that enter into them. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated exchange.
The following discussion summarizes the Portfolios' principal uses of
forward foreign currency exchange contracts ("forward currency contracts"). A
Portfolio may enter into forward currency contracts with stated contract values
of up to the value of that Portfolio's assets. A forward currency contract is an
obligation to buy or sell an amount of a specified currency for an agreed price
(which may be in U.S. dollars or a foreign currency). A Portfolio will exchange
foreign currencies for U.S. dollars and for other foreign currencies in the
normal course of business and may buy and sell currencies through forward
currency contracts in order to fix a price for securities it has agreed to buy
or sell ("transaction hedge"). A Portfolio also may hedge some or all of its
investments denominated in a foreign currency against a decline in the value of
that currency relative to the U.S. dollar by entering into forward currency
contracts to sell an amount of that currency (or a proxy currency whose
performance is expected to replicate or exceed the performance of that currency
relative to the U.S. dollar) approximating the value of some or all of its
portfolio securities denominated in that currency ("position hedge") or by
participating in options or futures contracts with respect to the currency. A
Portfolio also may enter into a forward currency contract with respect to a
currency where the Portfolio is considering the purchase or sale of investments
denominated in that currency but has not yet selected the specific investments
("anticipatory hedge"). In any of these circumstances a Portfolio may,
alternatively, enter into a forward currency contract to purchase or sell one
foreign currency for a second currency that is expected to perform more
favorably relative to the U.S. dollar if the portfolio manager believes there is
a reasonable degree of correlation between movements in the two currencies
("cross-hedge").
These types of hedging minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on a Portfolio's foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting a Portfolio's currency exposure from one foreign
currency to another removes that Portfolio's opportunity to profit from
increases in the value of the original currency and involves a risk of increased
losses to such Portfolio if its portfolio manager's projection of future
exchange rates is inaccurate. Proxy hedges and cross-hedges may result in losses
if the currency used to hedge does not perform similarly to the currency in
which hedged securities are denominated. Unforeseen changes in currency prices
may result in poorer overall performance for a Portfolio than if it had not
entered into such contracts.
The Portfolios will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency being hedged. To the extent that a
Portfolio is not able to cover its forward currency positions with underlying
portfolio securities, the Portfolios' custodian will segregate cash or
high-grade liquid assets having a value equal to the aggregate amount of such
Portfolio's commitments under forward contracts entered into with respect to
position hedges, cross-hedges and anticipatory hedges. If the value of the
securities used to cover a position or the value of segregated assets declines,
a Portfolio will find alternative cover or segregate additional cash or
high-grade liquid assets on a daily basis so that the value of the covered and
segregated assets will be equal to the amount of such Portfolio's commitments
with respect to such contracts. As an alternative to segregating assets, a
Portfolio may buy call options permitting such Portfolio to buy the amount of
foreign currency being hedged by a forward sale contract or a Portfolio may buy
put options permitting it to sell the amount of foreign currency subject to a
forward buy contract.
While forward contracts are not currently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event,
the Portfolios' ability to utilize forward contracts may be restricted. In
addition, a Portfolio may not always be able to enter into forward contracts at
attractive prices and may be limited in its ability to use these contracts to
hedge Portfolio assets.
Options on Foreign Currencies. The Portfolios may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Portfolio may buy put
options on the foreign currency.
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<PAGE>
If the value of the currency declines, such Portfolio will have the right to
sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in
whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may buy call options on the foreign
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to a Portfolio from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in the
direction or to the extent desired, a Portfolio could sustain losses on
transactions in foreign currency options that would require such Portfolio to
forego a portion or all of the benefits of advantageous changes in those rates.
The Portfolios may also write options on foreign currencies. For example,
to hedge against a potential decline in the U.S. dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates, a
Portfolio could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the decline in value of portfolio securities will be offset
by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, a Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow that Portfolio to hedge the
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium. If exchange rates do not move
in the expected direction, the option may be exercised and a Portfolio would be
required to buy or sell the underlying currency at a loss which may not be
offset by the amount of the premium. Through the writing of options on foreign
currencies, a Portfolio also may lose all or a portion of the benefits which
might otherwise have been obtained from favorable movements in exchange rates.
The Portfolios may write covered call options on foreign currencies. A call
option written on a foreign currency by a Portfolio is "covered" if that
Portfolio owns the foreign currency underlying the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currencies held
in its portfolio. A call option is also covered if a Portfolio has a call on the
same foreign currency in the same principal amount as the call written if the
exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written, if the difference is maintained by such Portfolio in cash or high-grade
liquid assets in a segregated account with the Portfolios' custodian.
The Portfolios also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security which
a Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option. Call options on foreign currencies which are
entered into for cross-hedging purposes are not covered. However, in such
circumstances, a Portfolio will collateralize the option by segregating cash or
high-grade liquid assets in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
Options on Securities. In an effort to increase current income and to
reduce fluctuations in net asset value, the Portfolios may write covered put and
call options and buy put and call options on securities that are traded on
United States and foreign securities exchanges and over-the-counter. The
Portfolios may write and buy options on the same types of securities that the
Portfolios may purchase directly.
A put option written by a Portfolio is "covered" if that Portfolio (i)
segregates cash not available for investment or high-grade liquid assets with a
value equal to the exercise price of the put with the Portfolios' custodian or
(ii) holds a put on the same security and in the same principal amount as the
put written and the exercise price of the put held is equal to or greater than
the exercise price of the put written. The premium paid by the buyer of an
option will reflect, among other things, the relationship of the exercise price
to the market price and the volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates.
A call option written by a Portfolio is "covered" if that Portfolio owns
the underlying security covered by the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by the Portfolios'
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if a Portfolio holds a
call on the same security and in the same principal amount as the call written
and the exercise price of the call held (i) is equal to or less than the
exercise price of the call written or (ii) is greater than the exercise price of
the call written if the difference is maintained by that Portfolio in cash and
high-grade liquid assets in a segregated account with its custodian.
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<PAGE>
The Portfolios also may write call options that are not covered for
cross-hedging purposes. A Portfolio collateralizes its obligation under a
written call option for cross-hedging purposes by segregating cash or high-grade
liquid assets in an amount not less than the market value of the underlying
security, marked-to-market daily. A Portfolio would write a call option for
cross-hedging purposes, instead of writing a covered call option, when the
premium to be received from the cross-hedge transaction would exceed that which
would be received from writing a covered call option and its portfolio manager
believes that writing the option would achieve the desired hedge.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or bought, in the case of
a put option, since with regard to certain options, the writer may be assigned
an exercise notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains the amount of
the premium. This amount, of course, may, in the case of a covered call option,
be offset by a decline in the market value of the underlying security during the
option period. If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction will
permit a Portfolio to write another call option on the underlying security with
either a different exercise price or expiration date or both. In the case of a
written put option, such transaction will permit a Portfolio to write another
put option to the extent that the exercise price thereof is secured by deposited
high-grade liquid assets. Effecting a closing transaction also will permit a
Portfolio to use the cash or proceeds from the concurrent sale of any securities
subject to the option for other investments. If a Portfolio desires to sell a
particular security from its portfolio on which it has written a call option,
such Portfolio will effect a closing transaction prior to or concurrent with the
sale of the security.
A Portfolio will realize a profit from a closing transaction if the price
of the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option. A Portfolio will realize a loss from a closing
transaction if the price of the purchase transaction is more than the premium
received from writing the option or the price received from a sale transaction
is less than the premium paid to buy the option. Because increases in the market
of a call option generally will reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Portfolio.
An option position may be closed out only where a secondary market for an
option of the same series exists. If a secondary market does not exist, the
Portfolio may not be able to effect closing transactions in particular options
and the Portfolio would have to exercise the options in order to realize any
profit. If a Portfolio is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. The absence
of a liquid secondary market may be due to the following: (i) insufficient
trading interest in certain options, (ii) restrictions imposed by a national
securities exchange ("Exchange") on which the option is traded on opening or
closing transactions or both, (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of options or
underlying securities, (iv) unusual or unforeseen circumstances that interrupt
normal operations on an Exchange, (v) the facilities of an Exchange or of the
Options Clearing Corporation ("OCC") may not at all times be adequate to handle
current trading volume, or (vi) one or more Exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options on that Exchange that had
been issued by the OCC as a result of trades on that Exchange would continue to
be exercisable in accordance with their terms.
A Portfolio may write options in connection with buy-and-write
transactions. In other words, a Portfolio may buy a security and then write a
call option against that security. The exercise price of such call will depend
upon the expected price movement of the underlying security. The exercise price
of a call option may be below ("in-the-money"), equal to ("at-the-money") or
above ("out-of-the-money") the current value of the underlying security at the
time the option is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period.
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<PAGE>
Buy-and-write transactions using at-the-money call options may be used when it
is expected that the price of the underlying security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, a Portfolio's maximum gain will be the
premium received by it for writing the option, adjusted upwards or downwards by
the difference between that Portfolio's purchase price of the security and the
exercise price. If the options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset by the amount of
premium received.
The writing of covered put options is similar in terms of risk and return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and a Portfolio's gain will be limited to the
premium received. If the market price of the underlying security declines or
otherwise is below the exercise price, a Portfolio may elect to close the
position or take delivery of the security at the exercise price and that
Portfolio's return will be the premium received from the put options minus the
amount by which the market price of the security is below the exercise price.
A Portfolio may buy put options to hedge against a decline in the value of
its portfolio. By using put options in this way, a Portfolio will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs.
A Portfolio may buy call options to hedge against an increase in the price
of securities that it may buy in the future. The premium paid for the call
option plus any transaction costs will reduce the benefit, if any, realized by
such Portfolio upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to that
Portfolio.
Eurodollar Instruments. A Portfolio may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Portfolio might use Eurodollar futures contracts and options
thereon to hedge against changes in LIBOR, to which many interest rate swaps and
fixed-income instruments are linked.
Swaps and Swap-Related Products. A Portfolio may enter into interest rate
swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis (i.e., the two payment
streams are netted out, with a Portfolio receiving or paying, as the case may
be, only the net amount of the two payments). The net amount of the excess, if
any, of a Portfolio's obligations over its entitlement with respect to each
interest rate swap will be calculated on a daily basis and an amount of cash or
high-grade liquid assets having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account by the Portfolios'
custodian. If a Portfolio enters into an interest rate swap on other than a net
basis, it would maintain a segregated account in the full amount accrued on a
daily basis of its obligations with respect to the swap. A Portfolio will not
enter into any interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is rated in
one of the three highest rating categories of at least one nationally recognized
statistical rating organization at the time of entering into such transaction.
Janus Capital will monitor the creditworthiness of all counterparties on an
ongoing basis. If there is a default by the other party to such a transaction, a
Portfolio will have contractual remedies pursuant to the agreements related to
the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Janus Capital has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent a
Portfolio sells (i.e., writes) caps and floors, it will segregate cash or
high-grade liquid assets having an aggregate net asset value at least equal to
the full amount, accrued on a daily basis, of its obligations with respect to
any caps or floors.
There is no limit on the amount of interest rate swap transactions that may
be entered into by a Portfolio. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Portfolio or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the payments that a
Portfolio is contractually obligated to make. If the other party to an interest
rate swap that is not collateralized defaults, a Portfolio would risk the loss
of the net amount of the payments that it contractually is entitled to receive.
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A Portfolio may buy and sell (i.e., write) caps and floors without limitation,
subject to the segregation requirement described above.
Additional Risks of Options on Foreign Currencies, Forward Contracts and
Foreign Instruments. Unlike transactions entered into by the Portfolios in
futures contracts, options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain Exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. Similarly, options on currencies may be traded over-the-counter.
In an over-the-counter trading environment, many of the protections afforded to
Exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As a
result, many of the protections provided to traders on organized Exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an Exchange are cleared and guaranteed
by the OCC, thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on an Exchange may be more readily available
than in the over-the-counter market, potentially permitting a Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Portfolio's ability to act upon economic events occurring in foreign markets
during non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
INVESTMENT ADVISER
As stated in the Prospectus, each Portfolio has an Investment Advisory
Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923.
Each Advisory Agreement provides that Janus Capital will furnish continuous
advice and recommendations concerning the Portfolios' investments, provide
office space for the Portfolios, pay the salaries, fees and expenses of all
Portfolio officers and of those Trustees who are affiliated with Janus Capital,
and pay all expenses of promoting the sale of Portfolio shares other than the
cost of complying with applicable laws relating to the offer or sale of shares
of the Portfolios. Janus Capital also may make payments to selected
broker-dealer firms or institutions which were instrumental in the acquisition
of shareholders for the Portfolios or other Janus Funds or which perform
recordkeeping or other services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital. Janus Capital is
also authorized to perform the management and administrative services necessary
for the operation of the Portfolios.
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The Portfolios pay custodian and transfer agent fees and expenses,
brokerage commissions and dealer spreads and other expenses in connection with
the execution of portfolio transactions, legal and accounting expenses, interest
and taxes, registration fees, expenses of shareholders' meetings and reports to
shareholders, fees and expenses of Portfolio Trustees who are not affiliated
with Janus Capital and other costs of complying with applicable laws regulating
the sale of Portfolio shares. Pursuant to the Advisory Agreements, Janus Capital
furnishes certain other services, including net asset value determination,
portfolio accounting and recordkeeping, for which the Portfolios may reimburse
Janus Capital for its costs.
Growth Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio,
International Growth Portfolio and Balanced Portfolio have each agreed to
compensate Janus Capital for its services by the monthly payment of a fee at the
annual rate of 1% of the first $30 million of the average daily net assets of
each Portfolio, .75% of the next $270 million of the average daily net assets of
each Portfolio, .70% of the next $200 million of the average daily net assets of
each Portfolio and .65% of the average daily net assets of each Portfolio in
excess of $500 million. The advisory fee is calculated and payable daily. Janus
Capital has voluntarily agreed to cap the advisory fee of Growth Portfolio,
Aggressive Growth Portfolio, Worldwide Growth Portfolio, International Growth
Portfolio and Balanced Portfolio at the effective rate of Janus Fund, Janus
Enterprise Fund, Janus Worldwide Fund, Janus Overseas Fund and Janus Balanced
Fund (the "retail funds"), respectively. The effective rate of each retail fund
is the advisory fee calculated by such fund on the last day of each calendar
quarter. If the assets of the corresponding retail fund exceed the assets of a
Portfolio as of the last day of any calendar quarter, then the advisory fee
payable by that Portfolio for the following calendar quarter will be a flat rate
equal to such effective rate. The effective rate (annualized) 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.
In addition, Janus Capital has agreed to reimburse Growth Portfolio,
Aggressive Growth Portfolio, Worldwide Growth Portfolio, International Growth
Portfolio and Balanced Portfolio by the amount, if any, that such Portfolio's
normal operating expenses chargeable to its income account in any fiscal year,
including the investment advisory fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, exceed 2.50% of the first $30
million of average daily net assets, plus 2.00% of the next $70 million of
average daily net assets, plus 1.50% of the balance of the average daily net
assets of each Portfolio for a fiscal year. Mortality risk, expense risk and
other charges imposed by participating insurance companies are excluded from the
above expense limitation.
Flexible Income Portfolio and Short-Term Bond Portfolio have each agreed to
compensate Janus Capital for its services by the monthly payment of a fee at the
annual rate of .65% of the first $300 million of the average daily net assets of
the Portfolio, plus .55% of the average daily net assets of the Portfolio in
excess of $300 million. The fee is calculated and payable daily. Janus Capital
has agreed to waive the advisory fee payable by either of these Portfolios in an
amount equal to the amount, if any, that such Portfolio's normal operating
expenses chargeable to its income account in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, exceed 1% of the average daily net assets for a fiscal
year for Flexible Income Portfolio and .65% of the average daily net assets for
a fiscal year for Short-Term Bond Portfolio. Mortality risk, expense risk and
other charges imposed by participating insurance companies are excluded from the
above expense limitation.
Janus Capital may terminate any of the fee reductions, waivers or expense
limitation arrangements described above at any time upon 90 days' notice to the
Trustees.
The following table summarizes the advisory fees paid by the Portfolios and
any advisory fee waivers for the periods indicated. The information below is for
fiscal years ended December 31.
<TABLE>
<CAPTION>
1995 1994 1993(1)
Portfolio Name Advisory Fees Waivers(4) Advisory Fees Waivers(4) Advisory Fees Waivers(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $505,442 -- $173,369 -- $6,304 $6,304(2)
Aggressive Growth Portfolio 809,493 -- 109,603 -- 2,573 2,573(2)
Worldwide Growth Portfolio 402,832 -- 157,194 -- 4,834 4,834(2)
International Growth Portfolio 15,182 $12,920 9,008(3) $9,008(2,3) N/A N/A
Balanced Portfolio 46,900 -- 19,489 -- 1,351 1,351(2)
Flexible Income Portfolio 36,114 160 10,635 5,688 974 974(2)
Short-Term Bond Portfolio 17,725 17,725(2) 11,530 11,530(2) 965 965(2)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) September 13, 1993 (inception) to December 31, 1993.
(2) Fee waiver by Janus Capital exceeded the advisory fee.
(3) May 2, 1994 (inception) to December 31, 1994.
(4) In addition to these fee waivers, Janus Capital has agreed to reduce the
advisory fee of the Growth, Aggressive Growth, Worldwide Growth,
International Growth and Balanced Portfolios to the extent that such fee
exceeds the effective rate of the Janus retail fund corresponding to such
Portfolio. See the prospectus for details.
The current Advisory Agreement for International Growth Portfolio became
effective on February 10, 1994. The current Advisory Agreements for the other
Portfolios became effective on June 16, 1993. Each Advisory
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Agreement will continue in effect until June 16, 1996, and thereafter from year
to year so long as such continuance is approved annually by a majority of the
Portfolios' Trustees who are not parties to the Advisory Agreements or
interested persons of any such party, and by either a majority of the
outstanding voting shares or the Trustees of the Portfolios. Each Advisory
Agreement i) may be terminated without the payment of any penalty by any
Portfolio or Janus Capital on 60 days' written notice; ii) terminates
automatically in the event of its assignment; and iii) generally, may not be
amended without the approval by vote of a majority of the Trustees of the
affected Portfolio, including the Trustees who are not interested persons of
that Portfolio or Janus Capital and, to the extent required by the 1940 Act, the
vote of a majority of the outstanding voting securities of that Portfolio.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Portfolios, are made independently from those for any other account that is or
may in the future become managed by Janus Capital or its affiliates. If,
however, a number of accounts managed by Janus Capital are contemporaneously
engaged in the purchase or sale of the same security, the orders may be
aggregated and/or the transactions may be averaged as to price and allocated
equitably to each account. In some cases, this policy might adversely affect the
price paid or received by an account or the size of the position obtained or
liquidated for an account. Pursuant to an exemptive order granted by the SEC,
the Portfolios and other portfolios advised by Janus Capital may also transfer
daily uninvested cash balances into one or more joint trading accounts. Assets
in the joint trading accounts are invested in money market instruments and the
proceeds are allocated to the participating portfolios on a pro rata basis.
Each account managed by Janus Capital has its own investment objective and
policies and is managed accordingly by a particular portfolio manager or team of
portfolio managers. As a result, from time to time two or more different managed
accounts may pursue divergent investment strategies with respect to investments
or categories of investments.
As indicated in the Prospectus, Janus Capital permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a Janus Capital policy regarding personal investing by directors, officers
and employees of Janus Capital and the Portfolios. The policy requires
investment personnel and officers of Janus Capital, inside directors of Janus
Capital and the Portfolios and other designated persons deemed to have access to
current trading information to pre-clear all transactions in securities not
otherwise exempt under the policy. Requests for trading authority will be denied
when, among other reasons, the proposed personal transaction would be contrary
to the provisions of the policy or would be deemed to adversely affect any
transaction then known to be under consideration for or to have been effected on
behalf of any client account, including the Portfolios.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Portfolios to various trading restrictions and reporting obligations.
All reportable transactions are reviewed for compliance with Janus Capital's
policy. Those persons also may be required under certain circumstances to
forfeit their profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus Capital's Board.
CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS
Investors Fiduciary Trust Company ("IFTC"), 127 W. 10th Street, Kansas
City, Missouri 64105, is the custodian of the securities and cash of the
Portfolios maintained in the United States. IFTC is a wholly-owned subsidiary of
State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
Massachusetts 02101. State Street maintains custody of assets held through IFTC.
State Street and the foreign subcustodians selected by it and approved by the
Trustees, have custody of the assets of the Portfolios held outside the U.S. and
cash incidental thereto. State Street may also have custody of certain domestic
and foreign securities held in connection with repurchase agreements. The
custodians and subcustodians hold the Portfolios' assets in safekeeping and
collect and remit the income thereon, subject to the instructions of each
Portfolio.
Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the
Portfolios' transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the
Portfolios. Janus Service is not compensated for its services, except for
out-of-pocket costs.
The Portfolios pay DST Systems, Inc. ("DST"), a minority owned subsidiary
of KCSI, license fees for the use of DST's fund accounting systems.
18
<PAGE>
The Portfolios paid the following fees to DST, net of credits, for the year
ended December 31, 1995:
Portfolio Name Fees and Expenses to DST
- --------------------------------------------------------------------------------
Growth Portfolio $4,182
Aggressive Growth Portfolio ($1,528)
Worldwide Growth Portfolio $6,520
International Growth Portfolio $3,331
Balanced Portfolio $3,984
Flexible Income Portfolio $4,462
Short-Term Bond Portfolio $3,386
- --------------------------------------------------------------------------------
The Trustees have authorized the Portfolios to use another affiliate of DST
as introducing broker for certain Portfolio transactions as a means to reduce
Portfolio expenses through a credit against the charges of DST and its
affiliates with regard to commissions earned by such affiliate. DST charges
shown above are net of such credits. See "Portfolio Transactions and Brokerage."
PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of portfolio business for the Portfolios and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions. The Portfolios may trade foreign
securities in foreign countries because the best available market for these
securities is often on foreign exchanges. In transactions on foreign stock
exchanges, brokers' commissions are frequently fixed and are often higher than
in the United States, where commissions are negotiated.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; rebates of commissions by a broker to a Portfolio or to a
third party service provider to the Portfolio to pay Portfolio expenses; and
research products or services provided. In recognition of the value of the
foregoing factors, Janus Capital may place portfolio transactions with a broker
or dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting that
transaction if Janus Capital determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
provided by such broker or dealer viewed in terms of either that particular
transaction or of the overall responsibilities of Janus Capital. Research may
include furnishing advice, either directly or through publications or writings,
as to the value of securities, the advisability of purchasing or selling
specific securities and the availability of securities or purchasers or sellers
of securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management personnel,
industry experts, economists and government officials; comparative performance
evaluation and technical measurement services and quotation services, and
products and other services (such as third party publications, reports and
analyses, and computer and electronic access, equipment, software, information
and accessories that deliver, process or otherwise utilize information,
including the research described above) that assist Janus Capital in carrying
out its responsibilities. Research received from brokers or dealers is
supplemental to Janus Capital's own research efforts. Most brokers and dealers
used by Janus Capital provide research and other services described above.
For the year ended December 31, 1995, the total brokerage commissions paid
by the Portfolios to brokers and dealers in transactions identified for
execution primarily on the basis of research and other services provided to the
Portfolios are summarized below:
Portfolio Name Commissions Transactions % of Total Transactions
- --------------------------------------------------------------------------------
Growth Portfolio $ 90,387 $63,658,884 23.60%
Aggressive Growth Portfolio $121,258 $66,654,404 21.61%
Worldwide Growth Portfolio $ 20,605 $ 9,598,697 7.02%
International Growth Portfolio $ 217 $ 82,661 1.63%
Balanced Portfolio $ 3,806 $ 2,319,352 16.33%
- --------------------------------------------------------------------------------
19
<PAGE>
Janus Capital may use research products and services in servicing other
accounts in addition to the Portfolios. If Janus Capital determines that any
research product or service has a mixed use, such that it also serves functions
that do not assist in the investment decision-making process, Janus Capital may
allocate the costs of such service or product accordingly. Only that portion of
the product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital does not enter into agreements with any brokers regarding the
placement of securities transactions because of the research services they
provide. It does, however, have an internal procedure for allocating
transactions in a manner consistent with its execution policy to brokers that it
has identified as providing superior executions and research, research-related
products or services which benefit its advisory clients, including the
Portfolios. Research products and services incidental to effecting securities
transactions furnished by brokers or dealers may be used in servicing any or all
of Janus Capital's clients and such research may not necessarily be used by
Janus Capital in connection with the accounts which paid commissions to the
broker-dealer providing such research products and services.
Janus Capital may consider sales of Portfolio shares or shares of other
Janus funds by a broker-dealer or the recommendation of a broker-dealer to its
customers that they purchase Portfolio shares as a factor in the selection of
broker-dealers to execute Portfolio transactions. 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. In placing
Portfolio business with such broker-dealers, Janus Capital will seek the best
execution of each transaction.
When the Portfolios purchase or sell a security in the over-the-counter
market, the transaction takes place directly with a principal market-maker,
without the use of a broker, except in those circumstances where in the opinion
of Janus Capital better prices and executions will be achieved through the use
of a broker.
The Portfolios' Trustees have authorized Janus Capital to place
transactions with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer
subsidiary of DST. Janus Capital may do so if it reasonably believes that the
quality of the transaction and the associated commission are fair and reasonable
and if, overall, the associated transaction costs, net of any credits described
above under "Custodian, Transfer Agent and Certain Affiliations," are lower than
those that would otherwise be incurred.
The following table lists the total amount of brokerage commissions paid by
each Portfolio for the fiscal periods ending on December 31st of each year:
Portfolio Name 1995 1994 1993(1)
- --------------------------------------------------------------------------------
Growth Portfolio $355,523 $85,851 $5,847
Aggressive Growth Portfolio $574,631 $86,296 $1,552
Worldwide Growth Portfolio $345,216 $33,299 $1,232
International Growth Portfolio $ 14,394 $ 987(2) N/A
Balanced Portfolio $ 18,745 $ 4,171 $ 507
- --------------------------------------------------------------------------------
(1) September 13, 1993 (inception) to December 31, 1993.
(2) May 2, 1994 (inception) to December 31, 1994.
NOTE: Portfolios that are not included in the table did not pay brokerage
commissions because securities transactions for such Portfolios
involved dealers acting as principals.
Included in such brokerage commissions are the following amounts paid to
DSTS, which served to reduce each Portfolio's out-of-pocket expenses as follows:
<TABLE>
<CAPTION>
Commission
Paid through DSTS
for the Period Ended Reduction % of Total % of Total
Fund Name December 31, 1995* of Expenses* Commissions+ Transactions+
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $ 9,498 $ 7,123 2.67% 2.29%
Aggressive Growth Portfolio $17,564 $13,173 3.06% 3.00%
International Growth Portfolio $ 37 $ 28 0.26% 0.23%
Worldwide Growth Portfolio $ 4,499 $ 3,374 1.30% 1.71%
Balanced Portfolio $ 450 $ 337 2.40% 2.12%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The difference between commissions paid to DSTS and expenses reduced
constitute commissions paid to an unaffiliated clearing broker.
+ Differences in the percentage of total commissions versus the percentage of
total transactions are due, in part, to variations among share prices and
number of shares traded, while average price per share commission rates
were substantially the same.
NOTE: Portfolios that did not execute trades with DSTS during the periods
indicated are not included in the table.
20
<PAGE>
<TABLE>
<CAPTION>
Commission Commission Paid
Paid Through through DSTS
DSTS for the for the Period Reduction of
Period Ended Reduction of % of Total % of Total Ended Expenses for
Portfolio Name 12/31/94* Expenses* Commissions+ Transactions+ 12/31/93*(1) that Period*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $2,466 $1,850 2.9% 1.9% $24 $18
Aggressive Growth Portfolio $2,775 $2,081 3.2% 2.1% N/A N/A
Worldwide Growth Portfolio $ 201 $ 151 0.6% 0.1% N/A N/A
Balanced Portfolio $ 77 $ 57 1.8% 0.9% $12 $ 9
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The difference between commissions paid to DSTS and expenses reduced
constitute commissions paid to an unaffiliated clearing broker.
+ Differences in the percentage of total commissions versus the percentage of
total transactions are due, in part, to variations among share prices and
number of shares traded, while average price per share commission rates
were substantially the same.
(1) September 13, 1993 (inception) to December 31, 1993.
NOTE: Portfolios that did not execute trades with DSTS during the periods
indicated are not included in the table.
As of December 31, 1995, certain Portfolios owned securities of their
regular broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Portfolio Name Name of Broker-Dealer Value of Securities Owned
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Growth Portfolio HSBC Holdings PLC $ 18,158
Growth Portfolio Merrill Lynch and Co., Inc. $567,375
Growth Portfolio Morgan Stanley Group, Inc. $374,906
Worldwide Growth Portfolio HSBC Holdings PLC $278,427
</TABLE>
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations during the last
five years.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4923
Trustee, Chairman and President of Janus Investment Fund+. Chairman and
President of Janus Capital. Chairman and Director of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President, Trustee and Portfolio Manager of Janus Investment
Fund+. Chief Investment Officer, Vice President and Director of Janus
Capital.
James P. Goff* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund.
Vice President of Janus Capital. Formerly, securities analyst at Janus
Capital (1988 to 1992).
Warren B. Lammert* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund.
Vice President of Janus Capital. Formerly, securities analyst at Janus
Capital (1990 to 1992).
Ronald V. Speaker* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund+.
Vice President of Janus Capital. Formerly, securities analyst and research
associate at Janus Capital (1986 to 1992).
- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
21
<PAGE>
Helen Young Hayes* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund.
Vice President of Janus Capital. Formerly (1987 to 1993), securities
analyst at Janus Capital.
Blaine P. Rollins* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund.
Formerly, fixed-income trader and equity securities analyst at Janus
Capital (1990-1995).
Sandy R. Rufenacht* - Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President and Portfolio Manager of Janus Investment Fund.
Formerly, senior accountant, fixed-income trader and fixed-income research
analyst at Janus Capital (1990-1995).
David C. Tucker* - Vice President and General Counsel
100 Fillmore Street
Denver, CO 80206-4923
Vice President and General Counsel of Janus Investment Fund+. Vice
President, Secretary and General Counsel of Janus Capital. Vice President,
General Counsel and Director of Janus Service and Janus Distributors.
Director, Vice President and Secretary of Janus Capital International Ltd.
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4923
Vice President and Chief Financial Officer of Janus Investment Fund+. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service, Janus Distributors and Janus Capital. Director of IDEX and Janus
Distributors. Director, Treasurer and Vice President of Finance of Janus
Capital International Ltd. Formerly (1979 to 1992), with the accounting
firm of Price Waterhouse LLP, Denver, Colorado.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street, Suite 300
Denver, CO 80206-4923
Treasurer and Chief Accounting Officer of Janus Investment Fund. Director
of Fund Accounting of Janus Capital. Formerly (1990-1991), with The Boston
Company Advisors, Inc., Boston, Massachusetts (mutual fund administration
services).
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4923
Secretary of Janus Investment Fund. Associate Counsel of Janus Capital.
Formerly (1990 to 1994), with The Boston Company Advisors, Inc.
John W. Shepardson# - Trustee
910 16th Street, Suite 222
Denver, CO 80202
Trustee of Janus Investment Fund+. Historian.
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Investment Fund+. President of HPS Corporation, Boulder,
Colorado (manufacturer of vacuum fittings and valves).
Gary O. Loo - Trustee
102 N. Cascade, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Investment Fund+. President and a Director of High Valley
Group, Inc., Colorado Springs, Colorado (investments) since 1987.
- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
22
<PAGE>
Dennis B. Mullen - Trustee
1601 114th Avenue, SE
Alderwood Building, Suite 130
Bellevue, WA 98004
Trustee of Janus Investment Fund+. President and Chief Executive Officer of
BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue,
Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President
and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale,
Arizona (restaurant chain).
Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Investment Fund+. Private Consultant and Director of Run
Technologies, Inc., a software development firm, San Carlos, California.
Formerly (1989 to 1993), President and Chief Executive Officer of
Bridgecliff Management Services, Campbell, California (a condominium
association management company).
- --------------------------------------------------------------------------------
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
The Trustees are responsible for major decisions relating to each
Portfolio's objective, policies and techniques. The Trustees also supervise the
operation of the Portfolios by their officers and review the investment
decisions of the officers although they do not actively participate on a regular
basis in making such decisions.
The Executive Committee of the Trustees shall have and may exercise all the
powers and authority of the Board except for matters requiring action by the
whole Board pursuant to the Trust's Bylaws or Trust Instrument, Delaware law or
the 1940 Act.
The following table shows the aggregate compensation paid to each Trustee
by the Portfolios and all funds advised and sponsored by Janus Capital
(collectively, the "Janus Funds") for the periods indicated. None of the
Trustees receive pension or retirement benefits from the Portfolios or the Janus
Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Portfolios for from the Janus Funds
fiscal year ended for calendar year ended
Name of Person, Position December 31, 1995 December 31, 1995**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman* -- --
James P. Craig, III*+ -- --
John W. Shepardson, Trustee $645 $56,101
William D. Stewart, Trustee $611 $53,228
Gary O. Loo, Trustee $569 $50,365
Dennis B. Mullen, Trustee $611 $53,228
Martin H. Waldinger, Trustee $611 $53,228
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
** As of December 31, 1995, Janus Funds consisted of two registered investment
companies comprised of a total of 26 funds. +Mr. Craig became a Trustee as
of June 30, 1995.
SHARES OF THE TRUST
NET ASSET VALUE DETERMINATION
As stated in the Prospectus, the net asset value ("NAV") of Portfolio
shares is determined once each day on which the NYSE is open, at the close of
its regular trading session (normally 4:00 p.m., New York time, Monday through
Friday). The NAV of Portfolio shares is not determined on days the NYSE is
closed (generally, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas). The per share NAV of
each Portfolio is determined by dividing the total value of a Portfolio's
securities and other assets, less liabilities, by the total number of shares
outstanding. In determining NAV, securities listed on an Exchange, the NASDAQ
National Market and foreign markets are valued at the closing prices on such
markets, or if such price is lacking for the trading period immediately
preceding the time of determination, such securities are valued at their current
bid price. Municipal securities held by the Portfolios are traded primarily in
the over-the-counter market. Valuations of such securities are furnished by one
or more pricing services employed by the Portfolios and are based upon last
trade or closing sales prices or a computerized matrix system or appraisals
obtained by a pricing service, in each case in reliance upon information
concerning market transactions and quotations from recognized municipal
securities dealers. Other securities that are traded on the over-the-counter
market are valued at their closing bid prices. Foreign securities and currencies
are converted to U.S. dollars using the exchange rate in effect
23
<PAGE>
at the close of the NYSE. Each Portfolio will determine the market value of
individual securities held by it, by using prices provided by one or more
professional pricing services which may provide market prices to other funds,
or, as needed, by obtaining market quotations from independent broker-dealers.
Short-term securities maturing within 60 days are valued on the amortized cost
basis. Securities for which quotations are not readily available, and other
assets, are valued at fair values determined in good faith under procedures
established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the NYSE is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in Japanese markets on certain Saturdays
and in various foreign markets on days which are not business days in New York
and on which a Portfolio's NAV is not calculated. A Portfolio calculates its NAV
per share, and therefore effects sales, redemptions and repurchases of its
shares, as of the close of the NYSE once on each day on which the NYSE is open.
Such calculation may not take place contemporaneously with the determination of
the prices of the foreign portfolio securities used in such calculation.
PURCHASES
Shares of the Portfolios can be purchased only by i) the separate accounts
of participating insurance companies for the purpose of funding variable
insurance contracts and ii) certain qualified retirement plans. Shares of the
Portfolios are purchased at the NAV per share as determined at the close of the
regular trading session NYSE next occurring after a purchase order is received
and accepted by a Portfolio or its authorized agent. The prospectus for your
insurance company's separate account or your plan documents contain detailed
information about investing in the different Portfolios.
REDEMPTIONS
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified retirement plans.
Shares normally will be redeemed for cash, although each Portfolio retains the
right to redeem its shares in kind under unusual circumstances, in order to
protect the interests of remaining shareholders, by delivery of securities
selected from its assets at its discretion. However, the Portfolios are governed
by Rule 18f-1 under the 1940 Act, which requires each Portfolio to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the NAV of that Portfolio
during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, a Portfolio will have the option of
redeeming the excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities described under "Shares
of the Trust - Net Asset Value Determination" and such valuation will be made as
of the same time the redemption price is determined.
The right to require the Portfolios to redeem its shares may be suspended,
or the date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the SEC, or the NYSE is closed except for holidays
and weekends, (2) the SEC permits such suspension and so orders, or (3) an
emergency exists as determined by the SEC so that disposal of securities or
determination of NAV is not reasonably practicable.
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
It is a policy of the Portfolios to make distributions of substantially all
of their respective investment income and any net realized capital gains, if
any, in June and December of each year. The Portfolios intend to qualify as
regulated investment companies by satisfying certain requirements prescribed by
Subchapter M of the Code. In addition, each Portfolio intends to comply with the
diversification requirements of Code Section 817(h) related to the tax-deferred
status of insurance company separate accounts.
All income dividends and capital gains distributions, if any, on a
Portfolio's shares are reinvested automatically in additional shares of that
Portfolio at the NAV determined on the first business day following the record
date.
The Portfolios may purchase securities of certain foreign corporations
considered to be passive foreign investment companies by the IRS. In order to
avoid taxes and interest that must be paid by the Portfolios if these
instruments are profitable, the Portfolios may make various elections permitted
by the tax laws. However, these elections could require that the Portfolios
recognize taxable income, which in turn must be distributed, before the
securities are sold and before cash is received to pay the distributions.
24
<PAGE>
Some foreign securities purchased by the Portfolios may be subject to
foreign taxes which could reduce the yield on such securities. The amount of
such foreign taxes is expected to be insignificant. Accordingly, the Portfolios
do not intend to make the election permitted under section 853 of the Code to
pass through such taxes to shareholders as a foreign tax credit. As a result,
any foreign taxes paid or accrued will represent an expense to each Portfolio
which will reduce its investment company taxable income as this would increase
the taxable income reported to shareholders and require shareholders to take the
credit on their tax returns, complicating the preparation of such returns.
Because shares of the Portfolios can only be purchased through variable
insurance contracts or qualified plans, it is anticipated that any income
dividends or capital gains distributions will be exempt from current taxation if
left to accumulate within such contracts or plans. See the prospectus for the
separate account of the related insurance company or the plan documents for
additional information.
PRINCIPAL SHAREHOLDERS
The officers and Trustees of the Portfolios cannot directly own shares of
the Portfolios without purchasing an insurance contract through one of the
participating insurance companies. As a result, such officers and Trustees as a
group own less than 1% of the outstanding shares of each Portfolio. As of April
4, 1996, all of the outstanding shares of the Portfolios were owned by certain
insurance company separate accounts and by Janus Capital, which provided seed
capital for the Portfolios. The percentage ownership of each separate account
owning more than 5% of any Portfolio is as follows:
<TABLE>
<CAPTION>
Record Owners as of April 4, 1996
Life of Lincoln TransAmerica Western
Portfolio Name Aetna Kemper Virginia Benefit Occidental Life Reserve
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 13.77% * 61.48% 6.40% 6.39% 7.09%
Aggressive Growth Portfolio 59.47% * 26.97% 5.05% * 5.56%
Worldwide Growth Portfolio 34.63% * 46.52% 6.96% N/A 7.73%
International Growth Portfolio N/A N/A N/A N/A N/A 99.45%
Balanced Portfolio 43.31% 12.22% 18.03% 13.06% N/A 13.32%
Flexible Income Portfolio 55.08% N/A 14.80% 17.12% N/A 13.00%
Short-Term Bond Portfolio 66.32% 7.59% N/A N/A N/A 26.04%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Owned less than 5%.
The shares held by the separate accounts of each insurance company,
including shares for which no voting instructions have been received, will be
voted by each insurance company in proportion to instructions received from
contract owners.
MISCELLANEOUS INFORMATION
The Trust is an open-end management investment company registered under the
1940 Act and organized as a Delaware business trust, which was created on May
20, 1993. The Trust Instrument permits the Trustees to issue an unlimited number
of shares of beneficial interest from an unlimited number of series of shares.
Currently, the Trust is offering nine series of shares, known as "Portfolios."
Additional series may be created from time to time.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of $.001 per share for each series of the
Trust. Shares of each Portfolio are fully paid and nonassessable when issued.
All shares of a Portfolio participate equally in dividends and other
distributions by such Portfolio, and in residual assets of that Portfolio in the
event of liquidation. Shares of each Portfolio have no preemptive, conversion or
subscription rights.
VOTING RIGHTS
A participating insurance company issuing a variable insurance contract
will vote shares in the separate account as required by law and interpretations
thereof, as may be amended or changed from time to time. In accordance with
current law and interpretations, a participating insurance company is required
to request voting instructions from policy owners and must vote shares in the
separate account, including shares for which no instructions have been received,
in proportion to the voting instructions received. Additional information may be
found in the participating insurance company's separate account prospectus.
25
<PAGE>
The Portfolios' Trustees are responsible for major decisions relating to
each Portfolio's policies and objectives; the Trustees oversee the operation of
each Portfolio by its officers and review the investment decisions of the
officers.
The present Trustees were elected by the initial trustee of the Trust on
May 25, 1993, and were approved by the initial shareholder on May 25, 1993, with
the exception of Mr. Craig who was appointed by the Trustees as of June 30,
1995. Under the Trust Instrument, each Trustee will continue in office until the
termination of the Trust or his earlier death, resignation, bankruptcy,
incapacity or removal. Vacancies will be filled by a majority of the remaining
Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Trust
Instrument or the 1940 Act. Subject to the foregoing, shareholders have the
power to vote to elect or remove Trustees, to terminate or reorganize their
Portfolio, to amend the Trust Instrument, to bring certain derivative actions
and on any other matters on which a shareholder vote is required by the 1940
Act, the Trust Instrument, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series of the
Trust will vote separately only with respect to those matters that affect only
that series or if a portfolio's interest in the matter differs from the
interests of other portfolios of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Portfolios, audit the Portfolios' annual
financial statements and prepare their tax returns.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, D.C., a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities to which this SAI relates. If further information is desired with
respect to the Portfolios or such securities, reference is made to the
Registration Statement and the exhibits filed as a part thereof.
PERFORMANCE INFORMATION
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for a Portfolio will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in such Portfolio over periods of 1, 5, and 10 years (up to the life
of the Portfolio). These are the annual total rates of return that would equate
the initial amount invested to the ending redeemable value. These rates of
return are calculated pursuant to the following formula: P(1 + T)n = ERV (where
P = a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of a proportional share of Portfolio
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid. The average annual total return of each Portfolio,
computed as of December 31, 1995, is shown in the table below.
<TABLE>
<CAPTION>
Average Annual Total Return
Date Number of
Available Months in Five Ten Life of
Portfolio Name for Sale Lifetime One Year Years Years Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 9/13/93 27.5 30.17% N/A N/A 15.25%
Aggressive Growth Portfolio 9/13/93 27.5 27.48% N/A N/A 27.68%
Worldwide Growth Portfolio 9/13/93 27.5 27.37% N/A N/A 20.74%
International Growth Portfolio 5/2/94 20 23.15% N/A N/A 11.39%
Balanced Portfolio 9/13/93 27.5 24.79% N/A N/A 13.96%
Flexible Income Portfolio 9/13/93 27.5 23.86% N/A N/A 9.69%
Short-Term Bond Portfolio 9/13/93 27.5 9.54% N/A N/A 4.61%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Quotations of a Portfolio's yield are based on the investment income per
share earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following formula:
YIELD = 2 [(a-b + 1)6 - 1]
cd
where a = dividend and interest income
b = expenses accrued for the period
c = average daily number of shares outstanding during the period that
were entitled to receive dividends
d = maximum net asset value per share on the last day of the period
The yield for the 30-day period ending December 31, 1995, for the following
Portfolios is shown below:
Flexible Income Portfolio - 6.76%
Short-Term Bond Portfolio - 5.15%
From time to time in advertisements or sales material, the Portfolios may
discuss their performance ratings or other information as published by
recognized mutual fund statistical rating services, including, but not limited
to, Lipper Analytical Services, Inc., Ibbotson Associates, Micropal or
Morningstar or by publications of general interest such as Forbes or Money. The
Portfolios may also compare their performance to that of other selected mutual
funds, mutual fund averages or recognized stock market indicators, including,
but not limited to, the Standard & Poor's 500 Composite Stock Price Index, the
Standard & Poor's Midcap Index, the Dow Jones Industrial Average, the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers
Government/Corporate 1-3 Year Bond Index, the Lehman Brothers Long
Government/Corporate Bond Index, the Lehman Brothers Intermediate Government
Bond Index, the Lehman Brothers Municipal Bond Index, the Russell 2000 Index and
the NASDAQ composite. In addition, the Portfolios may compare their total return
or yield to the yield on U.S. Treasury obligations and to the percentage change
in the Consumer Price Index. Worldwide Growth Portfolio and International Growth
Portfolio may also compare their performance to the record of global market
indicators, such as the Morgan Stanley International World Index or Morgan
Stanley Capital International Europe, Australia, Far East Index (EAFE Index).
Such performance ratings or comparisons may be made with funds that may have
different investment restrictions, objectives, policies or techniques than the
Portfolios and such other funds or market indicators may be comprised of
securities that differ significantly from the Portfolios' investments.
FINANCIAL STATEMENTS
The following audited financial statements for the period ended December
31, 1995 are hereby incorporated into this Statement of Additional Information
by reference to the Portfolios' Annual Report dated December 31, 1995. A copy of
such report accompanies this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT:
Schedules of Investments as of December 31, 1995
Statements of Operations for the period ended December 31, 1995
Statements of Assets and Liabilities as of December 31, 1995
Statements of Changes in Net Assets for the periods ended December 31, 1995
and 1994
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this Statement of Additional Information
and are not part of the Registration Statement.
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<PAGE>
[LOGO]
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------
Statement of Additional Information
May 1, 1996
- --------------------------------------------------------------------------------
Money Market Portfolio
Money Market Portfolio (the "Portfolio") is a separate series of Janus
Aspen Series, a Delaware business trust (the "Trust"). Each series of the Trust
represents shares of beneficial interest in a separate portfolio of securities
and other assets with its own objective and policies. The Portfolio is managed
separately by Janus Capital Corporation ("Janus Capital").
Shares of the Portfolio may be purchased only by the separate accounts of
insurance companies for the purpose of funding variable life insurance policies
and variable annuity contracts (collectively "variable insurance contracts") and
by certain qualified retirement plans.
This Statement of Additional Information ("SAI") is not a Prospectus and
should be read in conjunction with the Prospectus dated May 1, 1996, which is
incorporated by reference into this SAI and may be obtained from your insurance
company. This SAI contains additional and more detailed information about the
Portfolio's operations and activities than the Prospectus.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
- --------------------------------------------------------------------------------
Investment Policies and Restrictions ................................... 3
Types of Securities and Investment Techniques .......................... 4
Performance Data ....................................................... 7
Determination of Net Asset Value ....................................... 8
Investment Adviser ..................................................... 8
Custodian, Transfer Agent and Certain Affiliations ..................... 9
Portfolio Transactions and Brokerage ................................... 10
Officers and Trustees .................................................. 10
Purchase of Shares ..................................................... 12
Redemption of Shares ................................................... 12
Dividends and Tax Status ............................................... 13
Principal Shareholders ................................................. 13
Miscellaneous Information .............................................. 13
The Trust ......................................................... 13
Shares of the Trust ............................................... 13
Voting Rights ..................................................... 14
Independent Accountants ........................................... 14
Registration Statement ............................................ 14
Financial Statements ................................................... 14
Appendix A - Description of Securities Ratings ......................... 15
Appendix B - Description of Municipal Securities ....................... 17
- --------------------------------------------------------------------------------
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<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
As discussed in the Prospectus, 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 maintain a stable net asset value of $1.00 per share. The
investment objective of the Portfolio is not fundamental and may be changed by
the Trustees of the Trust (the "Trustees") without shareholder approval.
INVESTMENT RESTRICTIONS
As indicated in the Prospectus, the Portfolio has adopted certain
fundamental investment restrictions that cannot be changed without shareholder
approval. Shareholder approval means approval by the lesser of (i) more than 50%
of the outstanding voting securities of the Trust (or the Portfolio if a matter
affects just the Portfolio), or (ii) 67% or more of the voting securities
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Trust (or the Portfolio) are present or represented by proxy.
As used in the restrictions set forth below and as used elsewhere in this
SAI, the term "U.S. Government Securities" shall have the meaning set forth in
the Investment Company Act of 1940, as amended (the "1940 Act"). The 1940 Act
defines U.S. government securities as securities issued or guaranteed by the
United States government, its agencies or instrumentalities and has been
interpreted to include repurchase agreements covered and municipal securities
refunded with escrowed U.S. government securities.
The Portfolio has adopted the following fundamental policies:
(1) With respect to 75% of its assets, the Portfolio may not purchase a
security other than a U.S. Government Security, if, as a result, more than 5% of
its total assets would be invested in the securities of a single issuer or the
Portfolio would own more than 10% of the outstanding voting securities of any
single issuer. (As noted in the Prospectus, the Portfolio is currently subject
to the greater diversification standards of Rule 2a-7, which are not
fundamental.)
(2) The Portfolio may not purchase securities if more than 25% of the value
of its total assets would be invested in the securities of issuers conducting
their principal business activities in the same industry; provided that: (i)
there is no limit on investments in U.S. Government Securities or in obligations
of domestic commercial banks (including U.S. branches of foreign banks subject
to regulations under U.S. laws applicable to domestic banks and, to the extent
that its parent is unconditionally liable for the obligation, foreign branches
of U.S. banks); (ii) this limitation shall not apply to the Portfolio's
investments in municipal securities; (iii) there is no limit on investment in
issuers domiciled in a single country; (iv) financial service companies are
classified according to the end users of their services (for example, automobile
finance, bank finance and diversified finance are each considered to be a
separate industry); and (v) utility companies are classified according to their
services (for example, gas, gas transmission, electric, and telephone are each
considered to be a separate industry).
(3) The Portfolio may not act as an underwriter of securities issued by
others, except to the extent that it may be deemed an underwriter in connection
with the disposition of its portfolio securities.
(4) The Portfolio may not lend any security or make any other loan if, as a
result, more than 25% of its total assets would be lent to other parties (but
this limitation does not apply to purchases of commercial paper, debt securities
or repurchase agreements).
(5) The Portfolio may not purchase or sell real estate or any interest
therein, except that the Portfolio may invest in debt obligations secured by
real estate or interests therein or securities issued by companies that invest
in real estate or interests therein.
(6) The Portfolio may borrow money for temporary or emergency purposes (not
for leveraging) in an amount not exceeding 25% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings). If
borrowings exceed 25% of the value of the Portfolio's total assets by reason of
a decline in net assets, it will reduce its borrowings within three business
days to the extent necessary to comply with the 25% limitation. Reverse
repurchase agreements or the segregation of assets in connection with such
agreements shall not be considered borrowing for the purposes of this limit.
(7) The Portfolio may, notwithstanding any other investment policy or
restriction (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and restrictions as the
Portfolio.
3
<PAGE>
The Portfolio has adopted the following nonfundamental investment
restrictions that may be changed by the Trustees without shareholder approval:
(1) The Portfolio may not invest in securities or enter into repurchase
agreements with respect to any securities if, as a result, more than 10% of its
net assets would be invested in repurchase agreements not entitling the holder
to payment of principal within seven days and in other securities that are not
readily marketable ("illiquid securities"). The Trustees, or the Portfolio's
investment adviser acting pursuant to authority delegated by the Trustees, may
determine that a readily available market exists for certain securities such as
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, or any successor to such rule, Section 4(2) commercial paper and municipal
lease obligations. Accordingly, such securities may not be subject to the
foregoing limitation.
(2) The Portfolio may not invest in the securities of another investment
company, except to the extent permitted by the 1940 Act.
(3) The Portfolio may not purchase securities on margin, or make short
sales of securities, except for short sales against the box and the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities.
(4) The Portfolio may not invest more than 5% of the value of its total
assets in the securities of any issuer that has conducted continuous operations
for less than three years, including operations of predecessors, except that
this shall not affect the Portfolio's ability to invest in U.S. Government
Securities, fully collateralized debt obligations, municipal obligations,
securities that are rated by at least one nationally recognized statistical
rating organization and securities guaranteed as to principal and interest by an
issuer in whose securities the Portfolio could invest.
(5) The Portfolio may not pledge, mortgage, hypothecate or encumber any of
its assets except to secure permitted borrowings or in connection with permitted
short sales.
(6) The Portfolio may not invest directly in interests in oil and gas or
interests in other mineral exploration or development programs or leases;
however, the Portfolio may own debt securities of companies engaged in those
businesses.
(7) The Portfolio may not invest in companies for the purpose of exercising
control of management.
For purposes of the Portfolio's restriction on investing in a particular
industry, the Portfolio will rely primarily on industry classifications as
published by Bloomberg L.P., subject to the exceptions noted in fundamental
restriction number two above. To the extent that such classifications are so
broad that the primary economic characteristics in a single class are materially
different, the Portfolio may further classify issuers in accordance with
industry classifications as published by the Securities and Exchange Commission.
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES
The Portfolio may invest only in "eligible securities" as defined in Rule
2a-7 adopted under the 1940 Act. Generally, an eligible security is a security
that (i) is denominated in U.S. dollars and has a remaining maturity of 397 days
or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is issued by an
issuer with short-term debt outstanding that is rated, in one of the two highest
rating categories by any two nationally recognized statistical rating
organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that
NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a
rated security, as determined by Janus Capital; and (iii) has been determined by
Janus Capital to present minimal credit risks pursuant to procedures approved by
the Trustees. In addition, the Portfolio will maintain a dollar-weighted average
portfolio maturity of 90 days or less. A description of the ratings of some
NRSROs appears in Appendix A.
Under Rule 2a-7, the Portfolio may not invest more than five percent of its
total assets in the securities of any one issuer other than U.S. Government
Securities, provided that in certain cases it may invest more than 5% of its
assets in a single issuer for a period of up to three business days.
Pursuant to Rule 2a-7, the Portfolio will invest at least 95% of its total
assets in "first-tier" securities. First-tier securities are eligible securities
that are rated, or are issued by an issuer with short-term debt outstanding that
is rated, in the highest rating category by the Requisite NRSROs or are unrated
and of comparable quality to a rated security. In addition, the Portfolio may
invest in "second-tier" securities which are eligible securities that are not
first-tier securities. However, the Portfolio may not invest in a second-tier
security if immediately after the acquisition thereof it would have invested
more than (i) the greater of one percent of its total assets or one million
dollars in second-tier securities issued by that issuer, or (ii) five percent of
its total assets in second-tier securities.
4
<PAGE>
The following discussion of types of securities in which the Portfolio may
invest supplements and should be read in conjunction with the Prospectus.
PARTICIPATION INTERESTS
The Portfolio may purchase participation interests in loans or securities
in which it may invest directly. Participation interests are generally sponsored
or issued by banks or other financial institutions. A participation interest
gives the Portfolio an undivided interest in the underlying loans or securities
in the proportion that the Portfolio's interest bears to the total principal
amount of the underlying loans or securities. Participation interests, which may
have fixed, floating or variable rates, may carry a demand feature backed by a
letter of credit or guarantee of a bank or institution permitting the holder to
tender them back to the bank or other institution. For certain participation
interests, the Portfolio will have the right to demand payment, on not more than
seven days' notice, for all or a part of the Portfolio's participation interest.
The Portfolio intends to exercise any demand rights it may have upon default
under the terms of the loan or security, to provide liquidity or to maintain or
improve the quality of the Portfolio's investment portfolio. The Portfolio will
only purchase participation interests that Janus Capital determines present
minimal credit risks.
VARIABLE AND FLOATING RATE NOTES
The Portfolio also may purchase variable and floating rate demand notes of
corporations, which are unsecured obligations redeemable upon not more than 30
days' notice. These obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangements with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days' notice.
These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid investment.
MORTGAGE- AND ASSET-BACKED SECURITIES
The Portfolio may invest in mortgage-backed securities, which represent an
interest in a pool of mortgages made by lenders such as commercial banks,
savings and loan institutions, mortgage bankers, mortgage brokers and savings
banks. Mortgage-backed securities may be issued by governmental or
government-related entities or by non-governmental entities such as banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. In
contrast, mortgage-backed securities provide periodic payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the periodic payments and optional prepayments made by the
individual borrowers on their mortgage loans, net of any fees paid to the issuer
or guarantor of such securities. Additional payments to holders of
mortgage-backed securities are caused by prepayments resulting from the sale of
the underlying residential property, refinancing or foreclosure, net of fees or
costs which may be incurred.
As prepayment rates of individual pools of mortgage loans vary widely, it
is not possible to predict accurately the average life of a particular security.
Although mortgage-backed securities are issued with stated maturities of up to
forty years, unscheduled or early payments of principal and interest on the
underlying mortgages may shorten considerably the effective maturities.
Mortgage-backed securities may have varying assumptions for average life. The
volume of prepayments of principal on a pool of mortgages underlying a
particular security will influence the yield of that security, and the principal
returned to the Portfolio may be reinvested in instruments whose yield may be
higher or lower than that which might have been obtained had the prepayments not
occurred. When interest rates are declining, prepayments usually increase, with
the result that reinvestment of principal prepayments will be at a lower rate
than the rate applicable to the original mortgage-backed security.
The Portfolio may invest in mortgage-backed securities that are issued by
agencies or instrumentalities of the U.S. government. The Government National
Mortgage Association ("GNMA") is the principal federal government guarantor of
mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. GNMA Certificates are
debt securities which represent an interest in one mortgage or a pool of
mortgages which are insured by the Federal Housing Administration or the Farmers
Home Administration or are guaranteed by the Veterans Administration. The
Portfolio may also invest in pools of conventional mortgages which are issued or
guaranteed by agencies of the U.S. government. GNMA pass-through securities are
considered to be riskless with respect to default in that (i) the underlying
mortgage loan portfolio is comprised entirely of government-backed loans and
(ii) the timely payment of both principal and interest on the securities is
guaranteed by the full faith and credit of the U.S. government, regardless of
whether or not payments have been made on the underlying mortgages. GNMA
pass-through
5
<PAGE>
securities are, however, subject to the same market risk as comparable debt
securities. Therefore, the market value of the Portfolio's GNMA securities can
be expected to fluctuate in response to changes in prevailing interest rate
levels.
Residential mortgage loans are pooled also by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered
agency created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. FHLMC issues
participation certificates ("PCs") which represent interests in mortgages from
FHLMC's national portfolio. The mortgage loans in FHLMC's portfolio are not U.S.
government backed; rather, the loans are either uninsured with loan-to-value
ratios of 80% or less, or privately insured if the loan-to-value ratio exceeds
80%. FHLMC guarantees the timely payment of interest and ultimate collection of
principal on FHLMC PCs; the U.S. government does not guarantee any aspect of
FHLMC PCs.
The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private shareholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved seller/servicers
which include savings and loan associations, savings banks, commercial banks,
credit unions and mortgage bankers. FNMA guarantees the timely payment of
principal and interest on the pass-through securities issued by FNMA; the U.S.
government does not guarantee any aspect of the FNMA pass-through securities.
The Portfolio may also invest in privately-issued mortgage-backed
securities to the extent permitted by their investment restrictions.
Mortgage-backed securities offered by private issuers include pass-through
securities comprised of pools of conventional residential mortgage loans;
mortgage-backed bonds which are considered to be debt obligations of the
institution issuing the bonds and which are collateralized by mortgage loans;
and collateralized mortgage obligations ("CMOs") which are collateralized by
mortgage-backed securities issued by GNMA, FHLMC or FNMA or by pools of
conventional mortgages.
Asset-backed securities represent direct or indirect participation in, or
are secured by and payable from, assets other than mortgage-backed assets such
as motor vehicle installment sales contracts, installment loan contracts, leases
of various types of real and personal property and receivables from revolving
credit agreements (credit cards). Asset-backed securities have yield
characteristics similar to those of mortgage-backed securities and, accordingly,
are subject to many of the same risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which 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. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate. The
Portfolio will use the proceeds of reverse repurchase agreements only to satisfy
unusually heavy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio securities or to earn additional
income on portfolio securities.
Generally, a reverse repurchase agreement enables the Portfolio to recover
for the term of the reverse repurchase agreement all or most of the cash
invested in the portfolio securities sold and to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Portfolio of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise. In addition,
interest costs on the money received in a reverse repurchase agreement may
exceed the return received on the investments made by the Portfolio with those
monies.
WHEN ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolio may purchase securities on a when-issued or delayed delivery
basis. The Portfolio will enter into such transactions only when it has the
intention of actually acquiring the securities. To facilitate such acquisitions,
the Portfolio's custodian will segregate cash or high quality liquid assets in
an amount at least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from maturities, sales of
the segregated securities or from other available sources of cash. If it chooses
to dispose of the right to acquire a when-issued security prior to its
acquisition, the Portfolio could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. At the time it makes
the commitment to purchase securities on a when-issued
6
<PAGE>
or delayed delivery basis, the Portfolio will record the transaction as a
purchase and thereafter reflect the value of such securities in determining its
net asset value.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases. Municipal leases frequently
have special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
government issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations of many
state constitutions and statutes are deemed to be inapplicable because of the
inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. The Portfolio
will only purchase municipal leases subject to a non-appropriation clause when
the payment of principal and accrued interest is backed by an unconditional
irrevocable letter of credit, or guarantee of a bank or other entity that meets
the criteria described in the Prospectus under "Taxable Investments."
In evaluating municipal lease obligations, Janus Capital will consider such
factors as it deems appropriate, including: (a) whether the lease can be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding for
the leased property in the event such property is no longer considered essential
by the municipality; (e) the legal recourse of the lease obligee in the event of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are imposed
on the lease obligor's ability to utilize substitute property or services other
than those covered by the lease obligation. If a lease is backed by an
unconditional letter of credit or other unconditional credit enhancement, then
Janus Capital may determine that a lease is an eligible security solely on the
basis of its evaluation of the credit enhancement.
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among federal,
state and local governmental units. Such non-payment would result in a reduction
of income to the Portfolio, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of the Portfolio.
PERFORMANCE DATA
As described in the Prospectus, the Portfolio may provide current
annualized and effective annualized yield quotations based on its daily
dividends. These quotations may from time to time be used in advertisements,
shareholder reports or other communications to shareholders. All performance
information supplied by the Portfolio in advertising is historical and is not
intended to indicate future returns.
In performance advertising, the Portfolio may compare any of its
performance information with data published by independent evaluators such as
Morningstar, Inc., Lipper Analytical Services, Inc., or CDC/Wiesenberger,
Donoghue's Money Fund Report or other companies which track the investment
performance of investment companies ("Fund Tracking Companies"). The Funds may
also compare their performance information with the performance of recognized
stock, bond and other indices, including but not limited to the Municipal Bond
Buyers Indices, the Salomon Brothers Bond Index, the Lehman Brothers Bond Index,
the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average, U.S. Treasury bonds, bills or notes and changes in the Consumer Price
Index as published by the U.S. Department of Commerce. The Portfolio may refer
to general market performance over past time periods such as those published by
Ibbotson Associates (for instance, its "Stocks, Bonds, Bills and Inflation
Yearbook"). The Portfolio may also refer in such materials to mutual fund
performance rankings and other data published by Fund Tracking Companies.
Performance advertising may also refer to discussions of the Portfolio and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.
Any current yield quotation of the Portfolio which is used in such a manner
as to be subject to the provisions of Rule 482(d) under the Securities Act of
1933, as amended, shall consist of an annualized historical yield, carried at
least to the nearest hundredth of one percent, based on a specific seven
calendar day period. The Portfolio's current yield shall be calculated by (a)
determining the net change during a seven calendar day period in the value of a
hypothetical account having a balance of one share at the beginning of the
period, (b) dividing the net change by the value of the account at the beginning
of the period to obtain a base period return, and (c) multiplying the quotient
by 365/7 (i.e., annualizing). For this purpose, the net change in account value
will reflect the value of additional shares purchased with dividends declared on
the original share and dividends declared on both the original share and any
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<PAGE>
such additional shares, but will not reflect any realized gains or losses from
the sale of securities or any unrealized appreciation or depreciation on
portfolio securities. In addition, the Portfolio may advertise effective yield
quotations. Effective yield quotations are calculated by adding 1 to the base
period return, raising the sum to a power equal to 365/7, and subtracting 1 from
the result (i.e., compounding).
Income calculated for the purpose of determining the Portfolio's yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for the Portfolio may differ from the rate
of distribution the Portfolio paid over the same period or the rate of income
reported in the Portfolio's financial statements.
Although published yield information is useful to investors in reviewing
the Portfolio's performance, investors should be aware that the Portfolio's
yield fluctuates from day to day and that the Portfolio's yield for any given
period is not an indication or representation by the Portfolio of future yields
or rates of return on the Portfolio's shares. Also, 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.
The Portfolio's yield is not fixed or guaranteed, and an investment in the
Portfolio is not insured. Accordingly, the Portfolio's yield information may not
necessarily be used to compare Portfolio shares with investment alternatives
which, like money market instruments or bank accounts, may provide a fixed rate
of interest. In addition, because investments in the Portfolio are not insured
or guaranteed, the Portfolio's yield information may not necessarily be used to
compare the Portfolio with investment alternatives which are insured or
guaranteed.
The Portfolio's current yield and effective yield for the seven day period
ended December 31, 1995, were 5.08% and 5.21%, respectively.
DETERMINATION OF NET ASSET VALUE
Pursuant to the rules of the Securities and Exchange Commission, the
Trustees have established procedures to stabilize the Portfolio's net asset
value at $1.00 per share. These procedures include a review of the extent of any
deviation of net asset value per share as a result of fluctuating interest
rates, based on available market rates, from the Portfolio's $1.00 amortized
cost price per share. Should that deviation exceed 1/2 of 1%, the Trustees will
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
redemption of shares in kind, selling portfolio securities prior to maturity,
reducing or withholding dividends and utilizing a net asset value per share as
determined by using available market quotations. The Portfolio i) will maintain
a dollar-weighted average portfolio maturity of 90 days or less; ii) will not
purchase any instrument with a remaining maturity greater than 397 days or
subject to a repurchase agreement having a duration of greater than 397 days;
iii) will limit portfolio investments, including repurchase agreements, to those
U.S. dollar-denominated instruments that Janus Capital has determined present
minimal credit risks pursuant to procedures established by the Trustees; and iv)
will comply with certain reporting and recordkeeping procedures. The Trust has
also established procedures to ensure that portfolio securities meet the
Portfolio's high quality criteria.
INVESTMENT ADVISER
As stated in the Prospectus, the Portfolio has an Investment Advisory
Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923.
The Advisory Agreement provides that Janus Capital will furnish continuous
advice and recommendations concerning the Funds' investments, provide office
space for the Portfolio, pay the salaries, fees and expenses of all Portfolio
officers and of those Trustees who are affiliated with Janus Capital, and pay
all expenses of promoting the sale of Portfolio shares other than the cost of
complying with applicable laws relating to the offer or sale of shares of the
Portfolio. Janus Capital also may make payments to selected broker-dealer firms
or institutions which were instrumental in the acquisition of shareholders for
the Funds or which performed services with respect to shareholder accounts. The
minimum aggregate size required for eligibility for such payments, and the
factors in selecting the broker-dealer firms and institutions to which they will
be made, are determined from time to time by Janus Capital. Janus Capital is
also authorized to perform the management and administrative services necessary
for the operation of the Portfolio.
The Portfolio pays custodian agent fees and expenses, brokerage commissions
and dealer spreads and other expenses in connection with the execution of
Portfolio transactions, legal and accounting expenses, interest and taxes,
registration fees, expenses of shareholders' meetings, and reports to
shareholders, fees and expenses of Trustees who are not affiliated with Janus
Capital, and other costs of complying with applicable laws regulating the sale
of Portfolio shares. Pursuant to the Advisory Agreement, Janus Capital furnishes
certain other services, including net asset value determination, portfolio
accounting and record keeping for which the Portfolio may reimburse Janus
Capital for its costs.
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The Portfolio has agreed to compensate Janus Capital for its advisory
services by the monthly payment of an advisory fee at the annual rate of .25% of
the Portfolio's average daily net assets. Janus Capital has agreed to reimburse
the Portfolio by the amount, if any, that the Portfolio's normal operating
expenses chargeable to its income account in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, exceed 0.50% of average daily net assets. Mortality
risk, expense risk and other charges imposed by participating insurance
companies are excluded from the above expense limitation.
For the period from the commencement of the Portfolio's operations (May 1,
1995) until December 31, 1995, the Portfolio paid no advisory fee, after
applicable fee waivers. Without the waiver, the advisory fee would have been
$2,590.
The Advisory Agreement became effective on March 10, 1995 and will continue
in effect until June 16, 1996, and thereafter from year to year so long as such
continuance is approved annually by a majority of the Portfolio's Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party, and by either a majority of the outstanding voting shares or the
Trustees. The Advisory Agreement i) may be terminated without the payment of any
penalty by the Portfolio or Janus Capital on 60 days' written notice; ii)
terminates automatically in the event of its assignment; and iii) generally, may
not be amended without the approval by vote of a majority of the Trustees,
including the Trustees who are not interested persons of the Portfolio or Janus
Capital and, to the extent required by the 1940 Act, the vote of a majority of
the outstanding voting securities of the Portfolio.
Janus Capital also performs investment advisory services for other mutual
funds, and for individual, charitable, corporate and retirement accounts.
Investment decisions for each account managed by Janus Capital, including the
Portfolio, are made independently from those for any other account that is or
may in the future become managed by Janus Capital or its affiliates. If,
however, a number of accounts managed by Janus Capital are contemporaneously
engaged in the purchase or sale of the same security, the orders may be
aggregated and/or the transactions may be averaged as to price and allocated
equitably to each account. In some cases, this policy might adversely affect the
price paid or received by an account or the size of the position obtained or
liquidated for an account.
Each account managed by Janus Capital has its own investment objective and
is managed in accordance with that objective by a particular portfolio manager
or team of portfolio managers. As a result, from time to time two or more
different managed accounts may pursue divergent investment strategies with
respect to investments or categories of investments.
As indicated in the Prospectus, Janus Capital permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a Janus Capital policy regarding personal investing by directors, officers
and employees of Janus Capital and the Portfolio. The policy requires investment
personnel and officers of Janus Capital, inside directors of Janus Capital and
the Portfolio and other designated persons deemed to have access to current
trading information to pre-clear all transactions in securities not otherwise
exempt under the policy. Requests for trading authority will be denied when,
among other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Portfolio.
In addition to the pre-clearance requirement described above, the policy
subjects investment personnel, officers and directors/Trustees of Janus Capital
and the Portfolio to various trading restrictions and reporting obligations. All
reportable transactions are reviewed for compliance with Janus Capital's policy.
Those persons also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to exceptions
authorized by Janus Capital.
Kansas City Southern Industries, Inc., a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services ("KCSI") owns approximately 83% of Janus Capital. Thomas
H. Bailey, the President and Chairman of the Board of Janus Capital, owns 12% of
its voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS
United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri
64141-6226, is the Portfolio's custodian. 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 ("Janus Service"), P.O. Box 173375, Denver,
Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the
Portfolio's transfer agent. In addition, Janus Service provides certain other
administrative, recordkeeping and shareholder relations services to the
Portfolio. Janus Service is not compensated for its services, except for
out-of-pocket costs.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions as to the assignment of portfolio business for the Portfolio and
negotiation of its commission rates are made by Janus Capital whose policy is to
obtain the "best execution" (prompt and reliable execution at the most favorable
security price) of all portfolio transactions.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the security being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; and research products or services provided. In recognition of
the value of the foregoing factors, Janus Capital may place portfolio
transactions with a broker or dealer with whom it has negotiated a commission
that is in excess of the commission another broker or dealer would have charged
for effecting that transaction if Janus Capital determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research provided by such broker or dealer viewed in terms of
either that particular transaction or of the overall responsibilities of Janus
Capital. These research and other services may include, but are not limited to,
general economic and security market reviews, industry and company reviews,
evaluations of securities, recommendations as to the purchase and sale of
securities, and access to third party publications, computer and electronic
equipment and software. Research received from brokers or dealers is
supplemental to Janus Capital's own research efforts.
For the fiscal period ended December 31, 1995, the Portfolio did not incur
any brokerage commissions. Brokerage commissions are not normally charged on the
purchase and sale of money market instruments.
Janus Capital may use research products and services in servicing other
accounts in addition to the Portfolio. If Janus Capital determines that any
research product or service has a mixed use, such that it also serves functions
that do not assist in the investment decision-making process, Janus Capital may
allocate the costs of such service or product accordingly. Only that portion of
the product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may consider sales of Portfolio shares or shares of other
Janus funds by a broker-dealer or the recommendation of a broker-dealer to its
customers that they purchase such shares as a factor in the selection of
broker-dealers to execute Portfolio transactions. 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. In placing
portfolio business with such broker-dealers, Janus Capital will seek the best
execution of each transaction.
When the Funds purchase or sell a security in the over-the-counter market,
the transaction takes place directly with a principal market-maker, without the
use of a broker, except in those circumstances where in the opinion of Janus
Capital better prices and executions will be achieved through the use of a
broker.
OFFICERS AND TRUSTEES
The following are the names of the Trustees and officers of Janus Aspen
Series, a Delaware business trust of which the Portfolio is a series, together
with a brief description of their principal occupations during the last five
years.
Thomas H. Bailey*# - Trustee, Chairman and President
100 Fillmore Street
Denver, CO 80206-4923
Trustee, Chairman and President of Janus Investment Fund+. Chairman,
Director and President of Janus Capital. Chairman of IDEX Management, Inc.,
Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a
group of mutual funds) ("IDEX").
James P. Craig, III*# - Trustee and Executive Vice President
100 Fillmore Street
Denver, CO 80206-4923
Trustee and Executive Vice President of Janus Investment Fund+. Chief
Investment Officer, Vice President and Director of Janus Capital. Portfolio
Manager of Janus Fund and Janus Balanced Fund series of Janus Investment
Fund.
- --------------------------------------------------------------------------------
* Interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
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Sharon S. Pichler* - Executive Vice President and Portfolio Manager
100 Fillmore Street
Denver, CO 80206-4923
Executive Vice President of Janus Money Market Fund, Janus Tax-Exempt Money
Market Fund and Janus Government Money Market Fund series of Janus
Investment Fund+. Vice President of Janus Capital. Formerly, Assistant Vice
President and portfolio manager at USAA Investment Management Co.
(1990-1994).
David C. Tucker* - Vice President and General Counsel
100 Fillmore Street
Denver, CO 80206-4923
Vice President and General Counsel of Janus Investment Fund+. Vice
President, Secretary and General Counsel of Janus Capital. Vice President,
General Counsel and Director of Janus Service and Janus Distributors.
Director, Vice President and Secretary of Janus Capital International Ltd.
Steven R. Goodbarn* - Vice President and Chief Financial Officer
100 Fillmore Street
Denver, CO 80206-4923
Vice President and Chief Financial Officer of Janus Investment Fund+. Vice
President of Finance, Treasurer and Chief Financial Officer of Janus
Service, Janus Distributors and Janus Capital. Director of IDEX and Janus
Distributors. Formerly (1979 to 1992), with the accounting firm of Price
Waterhouse LLP, Denver, Colorado.
Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer
100 Fillmore Street
Denver, CO 80206-4923
Treasurer and Chief Accounting Officer of Janus Investment Fund+. Director
of Fund Accounting of Janus Capital. Formerly (1990-1991), with The Boston
Company Advisors, Inc., Boston, Massachusetts (mutual fund administration
services).
Kelley Abbott Howes* - Secretary
100 Fillmore Street
Denver, CO 80206-4923
Secretary of Janus Investment Fund. Associate Counsel of Janus Capital.
Formerly (1990 to 1994), with The Boston Company Advisors, Inc.
John W. Shepardson# - Trustee
910 16th Street, Suite 222
Denver, CO 80202
Trustee of Janus Investment Fund+. Historian.
William D. Stewart# - Trustee
5330 Sterling Drive
Boulder, CO 80302
Trustee of Janus Investment Fund+. President of HPS Corporation, Boulder,
Colorado (manufacturer of vacuum fittings and valves).
Gary O. Loo - Trustee
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
Trustee of Janus Investment Fund+. President and a Director of High Valley
Group, Inc., Colorado Springs, Colorado (investments) since 1987.
Dennis B. Mullen - Trustee
1601 114th Avenue, SE
Alderwood Building, Suite 130
Bellevue, WA 98004
Trustee of Janus Investment Fund+. President and Chief Executive Officer of
BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue,
Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President
and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale,
Arizona (restaurant chain).
- --------------------------------------------------------------------------------
* An interested person of the Trust and of Janus Capital.
# Member of the Executive Committee.
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
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Martin H. Waldinger - Trustee
4940 Sandshore Court
San Diego, CA 92130
Trustee of Janus Investment Fund+. Private Consultant and Director of Run
Technologies, Inc., a software development firm, San Carlos, California.
Formerly (1989 to 1993), President and Chief Executive Officer of
Bridgecliff Management Services, Campbell, California (a condominium
association management company).
- --------------------------------------------------------------------------------
+ Includes comparable office with various Janus funds that were reorganized
into Janus Investment Fund on August 7, 1992.
The Trustees are responsible for major decisions relating to the
Portfolio's objective, policies and techniques. The Trustees also supervise the
operation of the Portfolio by its officers and review the investment decisions
of the officers although they do not actively participate on a regular basis in
making such decisions.
The Executive Committee of the Trustees shall have and may exercise all the
powers and authority of the Board except for matters requiring action by the
whole Board pursuant to the Trust's Bylaws or Trust Instrument, Delaware Law or
the 1940 Act.
The Money Market Funds Committee, consisting of Messrs. Craig, Shepardson,
Loo and Waldinger, monitors the compliance with policies and procedures adopted
particularly for money market funds.
The following table shows the aggregate compensation paid to each Trustee
by the Portfolio and all funds advised and sponsored by Janus Capital
(collectively, the "Janus Funds") for the periods indicated. None of the
Trustees receive pension or retirement benefits from the Portfolio or the Janus
Funds.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from the Portfolio for from the Janus Funds
fiscal year ended for calendar year ended
Name of Person, Position December 31, 1995 December 31, 1995**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman* -- --
James P. Craig, III, Trustee*,+ -- --
John W. Shepardson, Trustee *** $56,101
William D. Stewart, Trustee *** $53,228
Gary O. Loo, Trustee *** $50,365
Dennis B. Mullen, Trustee *** $53,228
Martin H. Waldinger, Trustee *** $53,228
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
** As of December 31, 1995, Janus Funds consisted of two registered investment
companies comprised of a total of 26 funds.
*** Aggregate compensation for the period was de minimis.
+ Mr. Craig became a Trustee as of June 30, 1995.
PURCHASE OF SHARES
Shares of the Portfolio can be purchased only by i) the separate accounts
of participating insurance companies for the purpose of funding variable
insurance contracts and ii) certain qualified retirement plans. Shares of the
Portfolio are purchased at the NAV per share as determined at the close of
regular trading session of the New York Stock Exchange next occurring after a
purchase order is received and accepted by the Portfolio or its authorized
agent. The prospectus for your insurance company's separate account or your plan
documents contain detailed information about investing in the Portfolio.
REDEMPTION OF SHARES
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified retirement plans.
Shares normally will be redeemed for cash, although the Portfolio retains the
right to redeem its shares in kind under unusual circumstances, in order to
protect the interests of remaining shareholders, by delivery of securities
selected from its assets at its discretion. However, the Portfolio is governed
by Rule 18f-1 under the 1940 Act, which requires the Portfolio to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Portfolio during any 90-day period for any one shareholder. Should redemptions
by any shareholder exceed such limitation, their Portfolio will have the option
of redeeming the excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities described under
"Determination of Net Asset Value" and such valuation will be made as of the
same time the redemption price is determined.
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The right to require the Portfolio to redeem its shares may be suspended,
or the date of payment may be postponed, whenever (1) trading on the NYSE is
restricted, as determined by the Securities and Exchange Commission, or the NYSE
is closed except for holidays and weekends, (2) the Securities and Exchange
Commission permits such suspension and so orders, or (3) an emergency exists as
determined by the Securities and Exchange Commission so that disposal of
securities or determination of NAV is not reasonably practicable.
DIVIDENDS AND TAX STATUS
Dividends representing substantially all of the net investment income and
any net realized gains on sales of securities are declared daily, Saturdays,
Sundays and holidays included, and distributed on the last business day of each
month. If a month begins on a Saturday, Sunday, or holiday, dividends for those
days are declared at the end of the preceding month and distributed on the first
business day of the month. The Portfolio intends to qualify as a "regulated
investment company" by satisfying certain requirements prescribed by Subchapter
M of the Internal Revenue Code of 1986. In addition, the Portfolio intends to
comply with the diversification requirements of Internal Revenue Code Section
817(h) related to the tax-deferred status of insurance company separate
accounts.
All income dividends and capital gains distributions, if any, on the
Portfolio's shares are reinvested automatically in additional shares of the
Portfolio at the NAV determined on the first business day following the record
date.
Because shares of the Portfolio can only be purchased through variable
insurance contracts or qualified plans, it is anticipated that any income
dividends or capital gains distributions will be exempt from current taxation if
left to accumulate within such contracts or plans. See the prospectus for the
separate account of the related insurance company or the plan documents for
additional information.
PRINCIPAL SHAREHOLDERS
The officers and Trustees of the Portfolio cannot directly own shares of
the Portfolio without purchasing an insurance contract through one of the
participating insurance companies. As a result, such officers and Trustees as a
group own less than 1% of the outstanding shares of the Portfolio. As of April
4, 1996, all of the outstanding shares of the Portfolio were owned by certain
insurance company separate accounts and by Janus Capital, which provided seed
capital for the Portfolio. The percentage ownership of each separate account
owning more than 5% of the Portfolio is as follows:
Western Reserve - 99.55%
The shares held by the separate accounts of each insurance company,
including shares for which no voting instructions have been received, will be
voted by each insurance company in proportion to instructions received from
contract owners.
MISCELLANEOUS INFORMATION
THE TRUST
The Portfolio is an open-end management investment company registered under
the 1940 Act as a series of the Trust, which was organized as a Delaware
business trust on May 20, 1993. The Trust Instrument permits the Trustees to
issue an unlimited number of shares of beneficial interest from an unlimited
number of series of shares. As of the date of this SAI, the Trust consists of
nine series of shares, known as "portfolios." The other eight series of the
Trust are offered by separate prospectuses. Additional series may be created
from time to time.
SHARES OF THE TRUST
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of $0.001 per share for each series of the
Trust. Shares of each series of the Trust are fully paid and nonassessable when
issued. All shares of the Portfolio participate equally in dividends and other
distributions by the Portfolio, and in residual assets of the Portfolio in the
event of liquidation. Shares of the Portfolio have no preemptive, conversion or
subscription rights.
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VOTING RIGHTS
A participating insurance company issuing a variable insurance contract
will vote shares in the separate account as required by law and interpretations
thereof, as may be amended or changed from time to time. In accordance with
current law and interpretations, a participating insurance company is required
to request voting instructions from policy owners and must vote shares in the
separate account, including shares for which no instructions have been received,
in proportion to the voting instructions received. Additional information may be
found in the participating insurance company's separate account prospectus.
The Portfolio's Trustees are responsible for major decisions relating to
the Portfolio's policies and objectives; the Trustees oversee the operation of
the Portfolio by its officers.
The present Trustees were elected by the initial trustee of the Trust on
May 25, 1993, and were approved by the initial shareholder on May 25, 1993 with
the exception of Mr. Craig who was appointed by the Trustees as of June 30,
1995. Under the Trust Instrument, each Trustee will continue in office until the
termination of the Trust or his earlier death, resignation, bankruptcy,
incapacity or removal. Vacancies will be filled by a majority of the remaining
Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders normally will be held, unless otherwise required by the Trust
Instrument or the 1940 Act. Subject to the foregoing, shareholders have the
power to vote to elect or remove Trustees, to terminate or reorganize the
Portfolio, to amend the Trust Instrument, to bring certain derivative actions
and on any other matters on which a shareholder vote is required by the 1940
Act, the Trust Instrument, the Trust's Bylaws or the Trustees.
Each share of each series of the Trust has one vote (and fractional votes
for fractional shares). Shares of all series of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the shares of
all series of the Trust voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any Trustees. Each series of the
Trust will vote separately only with respect to those matters that affect only
that series or if a portfolio's interest in the matter differs from the
interests of other portfolios of the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado
80202, independent accountants for the Portfolio, audit the Portfolio's annual
financial statements and prepare its tax returns.
REGISTRATION STATEMENT
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities to which this SAI relates. If further
information is desired with respect to the Portfolio or such securities,
reference is made to the Registration Statement and the exhibits filed as a part
thereof.
FINANCIAL STATEMENTS
The following audited financial statements for the period ended December
31, 1995 are hereby incorporated into this Statement of Additional Information
by reference to the Portfolio's Annual Report dated December 31, 1995. A copy of
such report accompanies this Statement of Additional Information.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedule of Investments as of December 31, 1995
Statement of Operations for the period May 1, 1995 to December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Changes in Net Assets for the period May 1, 1995 to December
31, 1995
Financial Highlights for the period May 1, 1995 to December 31, 1995
Notes to Financial Statements
The portions of such Annual Report that are not specifically listed above
are not incorporated by reference into this Statement of Additional Information
and are not part of the Registration Statement.
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S AND STANDARD & POOR'S
MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS
The two highest ratings of Standard & Poor's Ratings Services ("S&P") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest
rating assigned by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated issues only in a
small degree. The AA rating may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within that rating category.
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by
Moody's to be of the best quality. Bonds rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa bonds are rated
lower than the best bonds because margins of protection or other elements make
long-term risks appear somewhat larger than Aaa securities. The generic rating
Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of such rating category.
SHORT TERM MUNICIPAL LOANS
S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have a strong
capacity to pay principal and interest. Those issues rated SP-1 which are
determined to possess a very strong capacity to pay debt service will be given a
plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay
principal and interest with some vulnerability to adverse financial and economic
changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of
the best quality, enjoying strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are
of high quality, with margins of protection ample although not so large as in
the MIG-1/VMIG-1 group.
OTHER SHORT-TERM DEBT SECURITIES
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for
other short-term debt securities and commercial paper, and A-1 and A-2 are the
two highest ratings for commercial paper assigned by S&P. Moody's uses the
numbers 1, 2 and 3 to denote relative strength within its highest classification
of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength
within its highest classification of A. Issuers rated Prime-1 by Moody's have a
superior ability for repayment of senior short-term debt obligations and have
many of the following characteristics: leading market positions in
well-established industries, high rates of return on funds employed,
conservative capitalization structure with moderate reliance on debt and ample
asset protection, broad margins in earnings coverage of fixed financial charges
and high internal cash generation, and well established access to a range of
financial markets and assured sources of alternate liquidity. Issuers rated
Prime-2 by Moody's have a strong ability for repayment of senior short-term debt
obligations and display many of the same characteristics displayed by issuers
rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P carry a strong
degree of safety regarding timely repayment. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+) designation.
Issuers rated A-2 by S&P carry a satisfactory degree of safety regarding timely
repayment.
15
<PAGE>
Fitch
F-1+ Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues
rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is
not as great as the F-1+ and F-1 ratings.
Duff & Phelps Inc.
Duff 1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or ready access to alternative sources
of funds, is clearly outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
Duff 1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
Duff 2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
Thomson BankWatch, Inc.
TBW-1 The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated TBW-1.
TBW-3 The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
IBCA, Inc.
A1+ Obligations supported by the highest capacity for timely repayment.
Where issues possess a particularly strong credit feature, a rating of
A1+ is assigned.
A2 Obligations supported by a good capacity for timely repayment.
A3 Obligations supported by a satisfactory capacity for timely repayment.
B Obligations for which there is an uncertainty as to the capacity to
ensure timely repayment.
C Obligations for which there is a high risk of default or which are
currently in default.
16
<PAGE>
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the following:
1. Project Notes, which carry a U.S. government guarantee, are issued by
public bodies (called "local issuing agencies") created under the laws of a
state, territory, or U.S. possession. They have maturities that range up to one
year from the date of issuance. Project Notes are backed by an agreement between
the local issuing agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide range of financial
assistance programs for housing, redevelopment, and related needs (such as
low-income housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various seasonal
tax revenues, such as income, sales, use and business taxes, and are payable
from these specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of receipt of other
types of revenues, such as Federal revenues available under the Federal Revenue
Sharing Programs.
4. Bond Anticipation Notes are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds then
provide the money for the repayment of the Notes.
5. Construction Loan Notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal National
Mortgage Association ("Fannie Mae") or the Government National Mortgage
Association ("Ginnie Mae").
6. Tax-Exempt Commercial Paper is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term financing
in anticipation of longer term financing.
Municipal Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
2. Revenue Bonds in recent years have come to include an increasingly wide
variety of types of municipal obligations. As with other kinds of municipal
obligations, the issuers of revenue bonds may consist of virtually any form of
state or local governmental entity, including states, state agencies, cities,
counties, authorities of various kinds, such as public housing or redevelopment
authorities, and special districts, such as water, sewer or sanitary districts.
Generally, revenue bonds are secured by the revenues or net revenues derived
from a particular facility, group of facilities, or, in some cases, the proceeds
of a special excise or other specific revenue source. Revenue bonds are issued
to finance a wide variety of capital projects including electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of these bonds provide additional
security in the form of a debt service reserve fund to be used to make principal
and interest payments. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Housing authorities have a wide range of security, including
partially or fully insured mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. Private Activity Bonds are considered municipal bonds if the interest
paid thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing and health. These bonds are
also used to finance public facilities such as airports, mass transit systems
and ports. The payment of the principal and interest on such bonds
17
<PAGE>
is dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property as security
for such payment.
While, at one time, the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection with
virtually any type of commercial or industrial project (subject to various
restrictions as to authorized costs, size limitations, state per capita volume
restrictions, and other matters), the types of qualifying projects under the
Code have become increasingly limited, particularly since the enactment of the
Tax Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain privately
owned and operated rental multi-family housing facilities, nonprofit hospital
and nursing home projects, airports, docks and wharves, mass commuting
facilities and solid waste disposal projects, among others, and for the
refunding (that is, the tax-exempt refinancing) of various kinds of other
private commercial projects originally financed with tax-exempt bonds. In future
years, the types of projects qualifying under the Code for tax-exempt financing
are expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to as an
"industrial development bond," but more and more frequently revenue bonds have
become classified according to the particular type of facility being financed,
such as hospital revenue bonds, nursing home revenue bonds, multi-family housing
revenues bonds, single family housing revenue bonds, industrial development
revenue bonds, solid waste resource recovery revenue bonds, and so on.
Other Municipal Obligations, incurred for a variety of financing purposes,
include: municipal leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. To reduce this risk, the Fund will only purchase municipal
leases subject to a non-appropriation clause when the payment of principal and
accrued interest is backed by an unconditional irrevocable letter of credit, or
guarantee of a bank or other entity that meets the criteria described in the
Prospectus.
Tax-exempt bonds are also categorized according to whether the interest is
or is not includible in the calculation of alternative minimum taxes imposed on
individuals, according to whether the costs of acquiring or carrying the bonds
are or are not deductible in part by banks and other financial institutions, and
according to other criteria relevant for Federal income tax purposes. Due to the
increasing complexity of Internal Revenue Code and related requirements
governing the issuance of tax-exempt bonds, industry practice has uniformly
required, as a condition to the issuance of such bonds, but particularly for
revenue bonds, an opinion of nationally recognized bond counsel as to the
tax-exempt status of interest on the bonds.
18
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JANUS ASPEN SERIES
PART C - OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a)(1) Financial Statements Included in the Prospectus:
Financial Highlights for each of the following Portfolios (except
High-Yield Portfolio):
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Short-Term Bond Portfolio
International Growth Portfolio
Money Market Portfolio
(a)(2) Financial Statements included in the Statement of Additional
Information:
The Financial Statements for each of the following Portfolios
(except High-Yield Portfolio), dated December 31, 1995, are
incorporated by reference into the respective Statement of
Additional Information:
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Short-Term Bond Portfolio
International Growth Portfolio
Money Market Portfolio
(b) Exhibits:
Exhibit 1 (a) Trust Instrument dated May 19, 1993, is
incorporated herein by reference to
Registrant's Registration Statement on
Form N-1A filed with the Securities and
Exchange Commission on May 20, 1993.
C-1
<PAGE>
(b) Amendments to Trust Instrument are
incorporated herein by reference to
Exhibit 1(b) to Post-Effective Amendment
No. 7.
Exhibit 2 (a) Restated Bylaws are incorporated herein
by reference to Exhibit 2(a) to
Post-Effective Amendment No. 7.
(b) First Amendment to the Bylaws is
incorporated herein by reference to
Exhibit 2(b) to Post-Effective Amendment
No. 7.
Exhibit 3 Not Applicable
Exhibit 4 Not Applicable
Exhibit 5 (a) Form of Investment Advisory Agreement is
incorporated herein by reference to
Registrant's Registration Statement on
Form N-1A filed with the Securities and
Exchange Commission on May 20, 1993.
(b) Form of Investment Advisory Agreement
for International Growth Portfolio is
incorporated herein by reference to
Exhibit 5(b) to Post-Effective Amendment
No. 1.
(c) Form of Investment Advisory Agreement
for Money Market Portfolio is
incorporated herein by reference to
Exhibit 5(c) to Post-Effective Amendment
No. 5.
(d) Form of Investment Advisory Agreement
for High-Yield Portfolio is incorporated
herein by reference to Exhibit 5(d) to
Post-Effective Amendment No. 7.
Exhibit 6 Not Applicable
Exhibit 7 Not Applicable
Exhibit 8 (a) Form of Custody Agreement between Janus
Aspen Series and Investors Fiduciary
Trust Company is incorporated herein by
reference to Exhibit 8(a) to
Pre-Effective Amendment No. 2.
(b) Form of Custodian Contract between Janus
Aspen Series and State Street Bank and
Trust Company is incorporated
C-2
<PAGE>
herein by reference to Exhibit 8(b) to
Pre-Effective Amendment No. 2.
(c) Letter Agreement dated April 4, 1994
regarding State Street Custodian
Agreement is incorporated herein by
reference to Exhibit 8(c) to
Post-Effective Amendment No. 4.
(d) Form of Custodian Agreement between
Janus Aspen Series and United Missouri
Bank, N.A. is incorporated herein by
reference to Exhibit 8(d) to
Post-Effective Amendment No. 5.
(e) Amendment dated October 11, 1995 of
State Street Custodian Contract is
incorporated herein by reference to
Exhibit 8(e) to Post-Effective Amendment
No. 7.
Exhibit 9 (a) Transfer Agency Agreement with Janus
Service Corporation is incorporated
herein by reference to Registrant's
Registration Statement on Form N-1A
filed with the Securities and Exchange
Commission on May 20, 1993.
(b) Form of Model Participation Agreement is
incorporated herein by reference to
Exhibit 9(b) to Pre-Effective Amendment
No. 2.
Exhibit 10 (a) Opinion and Consent of Fund Counsel with
respect to shares of Growth Portfolio,
Aggressive Growth Portfolio, Worldwide
Growth Portfolio, Balanced Portfolio,
Flexible Income Portfolio and Short-Term
Bond Portfolio is incorporated herein by
reference to Exhibit 10 to Pre-
Effective Amendment No. 2.
(b) Opinion and Consent of Fund Counsel with
respect to shares of International
Growth Portfolio is incorporated herein
by reference to Exhibit 10(b) to
Post-Effective Amendment No. 1.
(c) Opinion and Consent of Fund Counsel with
respect to shares of Money Market
Portfolio is incorporated herein by
reference to Exhibit 10(c) to
Post-Effective Amendment No. 5.
C-3
<PAGE>
(d) Opinion and Consent of Fund Counsel with
respect to High-Yield Portfolio is
incorporated herein by reference to
Exhibit 10(d) to Post-Effective
Amendment No. 7.
Exhibit 11 Consent of Price Waterhouse LLP is filed
herein as Exhibit 11.
Exhibit 12 Not Applicable
Exhibit 13 Not Applicable
Exhibit 14 Not Applicable
Exhibit 15 Not Applicable
Exhibit 16 Computation of Current Yield and
Effective Yield is incorporated herein
by reference to Exhibit 16 to Post-
Effective Amendment No. 6.
Exhibit 17 Powers of Attorney dated June 30, 1995,
is incorporated herein by reference to
Exhibit 17 to Post-Effective Amendment
No. 6.
Exhibit 27 Financial Data Schedules for each of the
following Portfolios (except High-Yield
Portfolio) are filed herein as Exhibit
27:
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Short-Term Bond Portfolio
International Growth Portfolio
Money Market Portfolio
ITEM 25. Persons Controlled by or Under Common Control with Registrant
None
C-4
<PAGE>
ITEM 26. Number of Holders of Securities
The number of record holders of shares of the Registrant as of March 15,
1996, was as follows:
Number of
Title of Class Record Holders
Growth Portfolio 9
Aggressive Growth Portfolio 8
Worldwide Growth Portfolio 9
Balanced Portfolio 7
Flexible Income Portfolio 5
Short-Term Bond Portfolio 4
International Growth Portfolio 2
Money Market Portfolio 2
High-Yield Portfolio N/A
The number of record holders reflects the number of insurance companies
investing in each Portfolio. Janus Capital Corporation is also included as
a record holder for the International Growth Portfolio and Money Market
Portfolio.
ITEM 27. Indemnification
Article IX of Janus Aspen Series' Trust Instrument provides for
indemnification of certain persons acting on behalf of the Portfolios. In
general, Trustees and officers will be indemnified against liability and against
all expenses of litigation incurred by them in connection with any claim,
action, suit or proceeding (or settlement of the same) in which they become
involved by virtue of their office in connection with the Portfolios, unless
their conduct is determined to constitute willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties, or unless it has been
determined that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Portfolios. A determination that
a person covered by the indemnification provisions is entitled to
indemnification may be made by the court or other body before which the
proceeding is brought, or by either a vote of a majority of a quorum of Trustees
who are neither "interested persons" of the Trust nor parties to the proceeding
or by an independent legal counsel in a written opinion. The Portfolios also may
advance money for these expenses, provided that the Trustee or officer
undertakes to repay the Portfolios if his conduct is later determined to
preclude indemnification, and that either he provide security for the
undertaking, the Trust be insured against losses resulting from lawful advances
or a majority of a quorum of disinterested Trustees, or independent counsel in a
written opinion, determines that he
C-5
<PAGE>
ultimately will be found to be entitled to indemnification. The Trust also
maintains a liability insurance policy covering its Trustees and officers.
ITEM 28. Business and Other Connections of Investment Adviser
The only business of Janus Capital Corporation is to serve as the
investment adviser of the Registrant and as investment adviser or subadviser to
several other mutual funds, and for individual, charitable, corporate, private
and retirement accounts. Business backgrounds of the principal executive
officers and directors of the adviser that also hold positions with the
Registrant are included under "Officers and Trustees" in the currently effective
Statements of Additional Information of the Registrant. The remaining principal
executive officers of the investment adviser and their positions with the
adviser and affiliated entities are: Mark B. Whiston, Vice President and Chief
Marketing Officer of Janus Capital Corporation, Director and President of Janus
Capital International Ltd.; Marjorie G. Hurd, Vice President of Janus Capital
Corporation, Director and President of Janus Service Corporation; and Stephen L.
Stieneker, Assistant General Counsel, Chief Compliance Officer and Vice
President of Compliance of Janus Capital Corporation. Mr. Michael E. Herman, a
director of Janus Capital Corporation, is Chairman of the Finance Committee
(1990 to present) of Ewing Marion Kauffman Foundation, 4900 Oak, Kansas City,
Missouri 64112. Mr. Michael N. Stolper, a director of Janus Capital Corporation,
is President of Stolper & Company, Inc., 525 "B" Street, Suite 1080, San Diego,
California 92101, an investment performance consultant. Mr. Thomas A. McDonnell,
a director of Janus Capital Corporation, is President, Chief Executive Officer
and a Director of DST Systems, Inc., 1055 Broadway, 9th Floor, Kansas City,
Missouri 64105, provider of data processing and recordkeeping services for
various mutual funds, and is Executive Vice President and a director of Kansas
City Southern Industries, Inc., 114 W. 11th Street, Kansas City, Missouri 64105,
a publicly traded holding company whose primary subsidiaries are engaged in
transportation and financial services. Mr. Landon H. Rowland, a director of
Janus Capital Corporation, is President and Chief Executive Officer of Kansas
City Southern Industries, Inc.
ITEM 29. Principal Underwriters
Not applicable.
ITEM 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by Janus Capital Corporation and Janus Service
Corporation, both of which are located at 100 Fillmore Street, Denver, Colorado
80206-4923 and by Investors Fiduciary Trust Company, 127 W. 10th Street, Kansas
City, Missouri 64105 and State Street Bank and Trust Company, P.O. Box 351,
Boston, Massachusetts 02101 and United Missouri Bank, N.A., P.O. Box 419226,
Kansas City, Missouri 64141.
C-6
<PAGE>
ITEM 31. Management Services
The Registrant has no management-related service contract which is not
discussed in Part A or Part B of this form.
ITEM 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file one or more post-effective
amendments for High-Yield Portfolio, using financial statements
which need not be certified, within four to six months of the
later of the effective date of this amendment to its Registration
Statement or commencement of operations of the Registrant.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Denver, and State of
Colorado, on the 29th day of April, 1996.
JANUS ASPEN SERIES
By: /s/ Thomas H. Bailey
Thomas H. Bailey, President
Janus Aspen Series is organized under a Trust Instrument dated May 19,
1993. The obligations of the Registrant hereunder are not binding upon any of
the Trustees, shareholders, nominees, officers, agents or employees of the
Registrant personally, but bind only the trust property of the Registrant, as
provided in the Trust Instrument. The execution of this Amendment to the
Registration Statement has been authorized by the Trustees of the Registrant and
this Amendment to the Registration Statement has been signed by an authorized
officer of the Registrant, acting as such, and neither such authorization by
such Trustees nor such execution by such officer shall be deemed to have been
made by any of them personally, but shall bind only the trust property of the
Registrant as provided in its Trust Instrument.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Thomas H. Bailey President April 29, 1996
Thomas H. Bailey (Principal Executive
Officer) and Trustee
/s/ Steven R. Goodbarn Vice President and April 29, 1996
Steven R. Goodbarn Chief Financial Officer
(Principal Financial Officer)
/s/ Glenn P. O'Flaherty Treasurer and Chief April 29, 1996
Glenn P. O'Flaherty Accounting Officer
(Principal Accounting Officer)
<PAGE>
/s/ James P. Craig, III Trustee April 29, 1996
James P. Craig, III
Gary O. Loo* Trustee April 29, 1996
Gary O. Loo
Dennis B. Mullen* Trustee April 29, 1996
Dennis B. Mullen
John W. Shepardson* Trustee April 29, 1996
John W. Shepardson
William D. Stewart* Trustee April 29, 1996
William D. Stewart
Martin H. Waldinger* Trustee April 29, 1996
Martin H. Waldinger
/s/ Steven R. Goodbarn
*By Steven R. Goodbarn
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit Number Exhibit Title
Exhibit 11 Consent of Price Waterhouse LLP
EXHIBIT 11
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 8 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 30, 1996, relating to the financial
statements and financial highlights appearing in the December 31, 1995 Annual
Report to Shareholders of Janus Aspen Series, which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Denver, Colorado
April 26, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> ASPEN AGGRESSIVE GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 156,325
<INVESTMENTS-AT-VALUE> 185,339
<RECEIVABLES> 1,770
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 187,124
<PAYABLE-FOR-SECURITIES> 542
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 671
<TOTAL-LIABILITIES> 1,213
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 154,058
<SHARES-COMMON-STOCK> 10,885
<SHARES-COMMON-PRIOR> 3,031
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,829
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,024
<NET-ASSETS> 185,911
<DIVIDEND-INCOME> 846
<INTEREST-INCOME> 681
<OTHER-INCOME> 0
<EXPENSES-NET> (905)
<NET-INVESTMENT-INCOME> 622
<REALIZED-GAINS-CURRENT> 3,639
<APPREC-INCREASE-CURRENT> 26,665
<NET-CHANGE-FROM-OPS> 30,926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,143)
<DISTRIBUTIONS-OF-GAINS> (7)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,985
<NUMBER-OF-SHARES-REDEEMED> (1,270)
<SHARES-REINVESTED> 139
<NET-CHANGE-IN-ASSETS> 144,622
<ACCUMULATED-NII-PRIOR> 24
<ACCUMULATED-GAINS-PRIOR> 693
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 810
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 929
<AVERAGE-NET-ASSETS> 107,582
<PER-SHARE-NAV-BEGIN> 13.620
<PER-SHARE-NII> 0.240
<PER-SHARE-GAIN-APPREC> 3.470
<PER-SHARE-DIVIDEND> (0.250)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.080
<EXPENSE-RATIO> 0.860
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> ASPEN BALANCED PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.00
<INVESTMENTS-AT-COST> 13,591
<INVESTMENTS-AT-VALUE> 14,487
<RECEIVABLES> 437
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,926
<PAYABLE-FOR-SECURITIES> 824
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81
<TOTAL-LIABILITIES> 905
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,847
<SHARES-COMMON-STOCK> 1,076
<SHARES-COMMON-PRIOR> 296
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 277
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 897
<NET-ASSETS> 14,021
<DIVIDEND-INCOME> 46
<INTEREST-INCOME> 167
<OTHER-INCOME> 0
<EXPENSES-NET> (75)
<NET-INVESTMENT-INCOME> 138
<REALIZED-GAINS-CURRENT> 323
<APPREC-INCREASE-CURRENT> 903
<NET-CHANGE-FROM-OPS> 1,364
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (150)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 916
<NUMBER-OF-SHARES-REDEEMED> (148)
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 10,868
<ACCUMULATED-NII-PRIOR> 14
<ACCUMULATED-GAINS-PRIOR> (48)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 79
<AVERAGE-NET-ASSETS> 5,739
<PER-SHARE-NAV-BEGIN> 10.630
<PER-SHARE-NII> 0.170
<PER-SHARE-GAIN-APPREC> 2.450
<PER-SHARE-DIVIDEND> (0.220)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.030
<EXPENSE-RATIO> 1.370
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 005
<NAME> ASPEN FLEXIBLE INCOME PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 10,438
<INVESTMENTS-AT-VALUE> 10,803
<RECEIVABLES> 331
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,143
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 312
<TOTAL-LIABILITIES> 312
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,193
<SHARES-COMMON-STOCK> 975
<SHARES-COMMON-PRIOR> 203
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 265
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 373
<NET-ASSETS> 10,831
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 469
<OTHER-INCOME> 0
<EXPENSES-NET> (56)
<NET-INVESTMENT-INCOME> 414
<REALIZED-GAINS-CURRENT> 360
<APPREC-INCREASE-CURRENT> 407
<NET-CHANGE-FROM-OPS> 1,181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (439)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,097
<NUMBER-OF-SHARES-REDEEMED> (366)
<SHARES-REINVESTED> 41
<NET-CHANGE-IN-ASSETS> 8,907
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> (84)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60
<AVERAGE-NET-ASSETS> 5,556
<PER-SHARE-NAV-BEGIN> 9.480
<PER-SHARE-NII> 0.530
<PER-SHARE-GAIN-APPREC> 1.700
<PER-SHARE-DIVIDEND> (0.600)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.110
<EXPENSE-RATIO> 1.070
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> ASPEN GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 111,586
<INVESTMENTS-AT-VALUE> 125,930
<RECEIVABLES> 2,388
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,376
<PAYABLE-FOR-SECURITIES> 725
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 740
<TOTAL-LIABILITIES> 1,465
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 109,269
<SHARES-COMMON-STOCK> 9,436
<SHARES-COMMON-PRIOR> 4,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,241
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,401
<NET-ASSETS> 126,911
<DIVIDEND-INCOME> 731
<INTEREST-INCOME> 813
<OTHER-INCOME> 0
<EXPENSES-NET> (587)
<NET-INVESTMENT-INCOME> 957
<REALIZED-GAINS-CURRENT> 5,455
<APPREC-INCREASE-CURRENT> 13,625
<NET-CHANGE-FROM-OPS> 20,037
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,611)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,726
<NUMBER-OF-SHARES-REDEEMED> (608)
<SHARES-REINVESTED> 198
<NET-CHANGE-IN-ASSETS> 83,362
<ACCUMULATED-NII-PRIOR> 87
<ACCUMULATED-GAINS-PRIOR> (648)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 505
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 606
<AVERAGE-NET-ASSETS> 77,344
<PER-SHARE-NAV-BEGIN> 10.570
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 2.90
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.45
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> ASPEN INTERNATIONAL GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 1,257
<INVESTMENTS-AT-VALUE> 1,556
<RECEIVABLES> 28
<ASSETS-OTHER> 67
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,651
<PAYABLE-FOR-SECURITIES> 30
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13
<TOTAL-LIABILITIES> 43
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,219
<SHARES-COMMON-STOCK> 135
<SHARES-COMMON-PRIOR> 139
<ACCUMULATED-NII-CURRENT> 9
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 62
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 318
<NET-ASSETS> 1,608
<DIVIDEND-INCOME> 21
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> (45)
<NET-INVESTMENT-INCOME> (14)
<REALIZED-GAINS-CURRENT> 122
<APPREC-INCREASE-CURRENT> 303
<NET-CHANGE-FROM-OPS> 411
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 360
<NUMBER-OF-SHARES-REDEEMED> (364)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 255
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (34)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61
<AVERAGE-NET-ASSETS> 1,792
<PER-SHARE-NAV-BEGIN> 9.720
<PER-SHARE-NII> 0.090
<PER-SHARE-GAIN-APPREC> 2.160
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.950
<EXPENSE-RATIO> 2.690
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> Aspen Money Market Portfolio
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 1,744
<INVESTMENTS-AT-VALUE> 1,744
<RECEIVABLES> 1
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,750
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15
<TOTAL-LIABILITIES> 15
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,735
<SHARES-COMMON-STOCK> 1,735
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,735
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60
<OTHER-INCOME> 0
<EXPENSES-NET> (11)
<NET-INVESTMENT-INCOME> 55
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (55)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,036
<NUMBER-OF-SHARES-REDEEMED> (10,356)
<SHARES-REINVESTED> 55
<NET-CHANGE-IN-ASSETS> 1,735
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11
<AVERAGE-NET-ASSETS> 1,543
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.040)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.500
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> ASPEN SHORT TERM BOND PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 3,207
<INVESTMENTS-AT-VALUE> 3,231
<RECEIVABLES> 210
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,471
<PAYABLE-FOR-SECURITIES> 101
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 183
<TOTAL-LIABILITIES> 284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,142
<SHARES-COMMON-STOCK> 318
<SHARES-COMMON-PRIOR> 298
<ACCUMULATED-NII-CURRENT> 16
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24
<NET-ASSETS> 3,187
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 182
<OTHER-INCOME> 0
<EXPENSES-NET> (18)
<NET-INVESTMENT-INCOME> 164
<REALIZED-GAINS-CURRENT> 36
<APPREC-INCREASE-CURRENT> 54
<NET-CHANGE-FROM-OPS> 254
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (162)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752
<NUMBER-OF-SHARES-REDEEMED> (748)
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> 285
<ACCUMULATED-NII-PRIOR> 14
<ACCUMULATED-GAINS-PRIOR> (31)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 37
<AVERAGE-NET-ASSETS> 2,727
<PER-SHARE-NAV-BEGIN> 9.720
<PER-SHARE-NII> 0.600
<PER-SHARE-GAIN-APPREC> 0.310
<PER-SHARE-DIVIDEND> (0.600)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.030
<EXPENSE-RATIO> 0.700
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from financial
statements dated December 31, 1995 included in the Fund's Annual Report and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 003
<NAME> ASPEN WORLDWIDE GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 98,193
<INVESTMENTS-AT-VALUE> 111,141
<RECEIVABLES> 1,273
<ASSETS-OTHER> 596
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 113,010
<PAYABLE-FOR-SECURITIES> 3,776
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 671
<TOTAL-LIABILITIES> 4,447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,238
<SHARES-COMMON-STOCK> 7,090
<SHARES-COMMON-PRIOR> 3,125
<ACCUMULATED-NII-CURRENT> 445
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,539
<NET-ASSETS> 108,563
<DIVIDEND-INCOME> 551
<INTEREST-INCOME> 530
<OTHER-INCOME> 0
<EXPENSES-NET> (517)
<NET-INVESTMENT-INCOME> 564
<REALIZED-GAINS-CURRENT> 1,712
<APPREC-INCREASE-CURRENT> 13,136
<NET-CHANGE-FROM-OPS> 15,412
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (388)
<DISTRIBUTIONS-OF-GAINS> (8)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,494
<NUMBER-OF-SHARES-REDEEMED> (555)
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> 70,835
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (131)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 403
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 533
<AVERAGE-NET-ASSETS> 59,440
<PER-SHARE-NAV-BEGIN> 12.070
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 3.19
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.31
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
