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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre- Effective Amendment No. [ ]
Post-Effective Amendment No. 20 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [X]
Amendment No. 22 [X]
(Check appropriate box or boxes.)
JANUS ASPEN SERIES
(Exact Name of Registrant as Specified in Charter)
100 Fillmore Street, Denver, Colorado 80206-4928
Address of Principal Executive Offices (Zip Code)
Registrant's Telephone No., including Area Code: 303-333-3863
Thomas A. Early - 100 Fillmore Street, Denver, Colorado 80206-4928
(Name and Address of Agent for Service)
Approximate Date of Proposed Offering: December 31, 1999
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on (December 31, 1999) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
JANUS ASPEN SERIES
Cross Reference Sheet
Between the Prospectuses and Statements of
Additional Information and Form N-1A Item
This Post-Effective Amendment No. 20 contains the Service Shares Prospectus and
Statements of Additional Information, and supplements to the Prospectuses of the
Retirement Shares and Institutional Shares. The Retirement Shares Prospectus and
Statements of Additional Information are incorporated herein by reference to
Post-Effective Amendment No. 19, filed on June 21, 1999 and the Institutional
Shares Prospectus and Statements of Additional Information are incorporated
herein by reference to Post-Effective Amendment No. 18, filed on April 30, 1999.
FORM N-1A ITEM CAPTION IN PROSPECTUSES
PART A
1. Front and Back Cover Pages Cover Pages
2. Risk/Return Summary: Risk/Return Summary
Investments, Risks, and
Performance
3. Risk/Return Summary: Fee Risk/Return Summary
Table
4. Investment Objectives, Investment Objectives, Principal
Principal Investment Investment Strategies, and Risks;
Strategies, and Related Risks Rating Categories
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization, and Management of the Funds
Capital Structure
7. Shareholder Information Shareholder's Guide; Other
Information; Distributions and
Taxes
8. Distribution Arrangements Distributions and Taxes
9. Financial Highlights Financial Highlights
Information
<PAGE>
FORM N-1A ITEM CAPTION IN STATEMENTS OF
ADDITIONAL INFORMATION
PART B
10. Cover Page and Table of Cover Page; Table of Contents
Contents
11. Fund History Miscellaneous Information
12. Description of the Fund and Classification, Portfolio Turnover,
Its Investments and Risks Investment Policies and Restrictions,
Investment Strategies and Risks;
13. Management of the Fund Investment Adviser; Trustees and
Officers
14. Control Persons and Principal Principal Shareholders
Holders of Securities
15. Investment Advisory and Other Investment Adviser; Custodian,
Services Transfer Agent and Certain
Affiliations; Portfolio Transactions
and Brokerage; Trustees and Officers;
Miscellaneous Information
16. Brokerage Allocation and Portfolio Transactions and
Other Practices Brokerage
17. Capital Stock and Other Purchases; Redemptions; Miscellaneous
Securities Information
18. Purchase, Redemption, and Purchases; Redemptions; Miscellaneous
Pricing of Shares Information
19. Taxation of the Fund Income Dividends, Capital Gains
Distributions and Tax Status
20. Underwriters Custodian, Transfer Agent, and
Certain Affiliations
<PAGE>
21. Calculation of Performance Performance Information (Combined
Data Service Shares Statements of
Additional Information);
Performance Data (Money Market
Fund Statement of Additional
Information only)
22. Financial Statements Financial Statements
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
[JANUS LOGO]
Subject to Completion
Preliminary Prospectus Dated October 26, 1999
Janus Aspen Series
Service Shares
PROSPECTUS
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
Flexible Income Portfolio
High-Yield Portfolio
Money Market Portfolio
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
[JANUS LOGO]
This prospectus describes eleven mutual funds (the "Portfolios")
with a variety of investment objectives, including growth of
capital, current income and a combination of growth and income.
Each Portfolio of Janus Aspen Series currently offers three
classes of shares. The Service Shares, (the "Shares"), are
offered by this prospectus 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.
Janus Aspen Series sells and redeems its Shares at net asset
value without sales charges, commissions or redemption fees.
Each variable insurance contract involves fees and expenses that
are 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 that a prospective
purchaser of a variable insurance contract or plan participant
should consider in conjunction with the accompanying separate
account prospectus of the specific insurance company product
before allocating purchase payments or premiums to the
Portfolios.
<PAGE>
Table of contents
<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Growth Portfolios........................................ 2
Combination Portfolios................................... 7
Fixed-Income Portfolios.................................. 10
Money Market Portfolio................................... 12
Fees and expenses........................................ 14
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS
Growth Portfolios........................................ 16
Combination Portfolios................................... 18
Fixed-Income Portfolios.................................. 20
General portfolio policies of the Portfolios other than
Money Market Portfolio................................... 21
Risks for Growth, Global Growth and Combination
Portfolios............................................... 24
Risks for Fixed-Income Portfolios........................ 25
Risks Common to all Non-Money Market Portfolios.......... 25
Money Market Portfolio................................... 27
Investment techniques.................................... 28
MANAGEMENT OF THE PORTFOLIOS
Investment adviser....................................... 30
Management expenses and expense limits................... 30
Investment personnel..................................... 31
OTHER INFORMATION........................................... 34
DISTRIBUTIONS AND TAXES
Distributions............................................ 35
Taxes.................................................... 35
SHAREHOLDER'S GUIDE
Purchases................................................ 37
Redemptions.............................................. 38
Shareholder communications............................... 38
FINANCIAL HIGHLIGHTS........................................ 39
GLOSSARY
Glossary of investment terms............................. 40
RATING CATEGORIES
Explanation of rating categories......................... 44
</TABLE>
Table of contents 1
<PAGE>
Risk return summary
GROWTH PORTFOLIOS
The Growth Portfolios are designed for long-term investors who seek
growth of capital and who can tolerate the greater risks associated
with common stock investments.
1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE GROWTH PORTFOLIOS?
- --------------------------------------------------------------------------------
DOMESTIC GROWTH PORTFOLIOS
- GROWTH PORTFOLIO seeks long-term growth of capital in a manner
consistent with the preservation of capital.
- AGGRESSIVE GROWTH PORTFOLIO AND CAPITAL APPRECIATION PORTFOLIO
seek long-term growth of capital.
GLOBAL GROWTH PORTFOLIOS
- INTERNATIONAL GROWTH PORTFOLIO seeks long-term growth of capital.
- WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of capital in a
manner consistent with the preservation of capital.
The Portfolios' Trustees may change these objectives without a
shareholder vote and the Portfolios will notify you of any changes
that are material. If there is a material change to a Portfolio's
objective or policies, you should consider whether that Portfolio
remains an appropriate investment for you. There is no guarantee that
a Portfolio will meet its objective.
2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE GROWTH PORTFOLIOS?
The portfolio managers apply a "bottom up" approach in choosing
investments. In other words, they look for companies with earnings
growth potential one at a time. If a portfolio manager is unable to
find investments with earnings growth potential, a significant portion
of a Portfolio's assets may be in cash or similar investments.
GROWTH PORTFOLIO invests primarily in common stocks selected for their
growth potential. Although the Portfolio can invest in companies of
any size, it generally invests in larger, more established companies.
AGGRESSIVE GROWTH PORTFOLIO invests primarily in common stocks
selected for their growth potential, and normally invests at least 50%
of its equity assets in medium-sized companies.
CAPITAL APPRECIATION PORTFOLIO invests primarily in common stocks
selected for their growth potential. The Portfolio may invest in
companies of any size, from larger, well-established companies to
smaller, emerging growth companies.
INTERNATIONAL GROWTH 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 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.
WORLDWIDE GROWTH PORTFOLIO invests primarily in common stocks of
companies of any size throughout the world. The 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.
2 Janus Aspen Series
<PAGE>
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE GROWTH PORTFOLIOS?
The biggest risk is that the Portfolios' returns may vary, and you
could lose money. If you are considering investing in any of the
Growth Portfolios, remember that they are each designed for long-term
investors who can accept the risks of investing in a portfolio with
significant common stock holdings. Common stocks tend to be more
volatile than other investment choices.
The value of a Portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of a Portfolio could
also decrease if the stock market goes down. If the value of a
Portfolio decreases, its net asset value (NAV) will also decrease,
which means if you sell your shares in a Portfolio you would get back
less money.
INTERNATIONAL GROWTH PORTFOLIO AND WORLDWIDE GROWTH PORTFOLIO may have
significant exposure to foreign markets. As a result, their returns
and NAV may be affected to a large degree by fluctuations in currency
exchange rates or political or economic conditions in a particular
country.
AGGRESSIVE GROWTH PORTFOLIO AND CAPITAL APPRECIATION PORTFOLIO are
nondiversified. In other words, they may hold larger positions in a
smaller number of securities than a diversified fund. As a result, a
single security's increase or decrease in value may have a greater
impact on a Portfolio's NAV and total return.
An investment in these Portfolios is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
The following information provides some indication of the risks of
investing in the Growth Portfolios by showing how each of the Growth
Portfolios' performance has varied over time. The Portfolios' Service
Shares commenced operations on January 1, 2000. The returns shown for
the Service Shares of these Portfolios have been calculated based on
the historical performance of a different class of shares (the
Institutional Shares) prior to January 1, 2000 (adjusted for estimated
expenses of Service Shares). The bar charts depict the change in
performance from year-to-year during the period indicated but do not
include charges and expenses attributable to any insurance product
which would lower the performance illustrated. The Portfolios do not
impose any sales or other charges that would affect total return
computations. Total return figures include the effect of each
Portfolio's expenses. The tables compare the average annual returns
for the Service Shares of each Portfolio for the periods indicated to
a broad-based securities market index.
Risk return summary 3
<PAGE>
GROWTH PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
2.71% 29.96% 18.14% 22.49% 35.59%
Best Quarter 4th-1998 27.71% Worst Quarter 3rd-1998 (10.95%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Growth Portfolio - Service Shares 35.59% 21.24% 20.54%
S&P 500 Index* 28.74% 24.08% 23.06%
-----------------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
AGGRESSIVE GROWTH PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
16.33% 27.38% 7.72% 12.53% 34.19%
Best Quarter 4th-1998 34.65% Worst Quarter 3rd-1998 (15.00%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Aggressive Growth Portfolio - Service Shares 34.19% 19.27% 21.68%
S&P 400 Mid Cap Index* 18.25% 18.67% 18.06%
------------------------------------------
</TABLE>
* The S&P 400 Mid Cap Index is an unmanaged group of 400 domestic
stocks chosen for their market size, liquidity and industry group
representation.
4 Janus Aspen Series
<PAGE>
CAPITAL APPRECIATION PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1998
------
<S> <C>
57.91%
Best Quarter 4th-1998 33.93% Worst Quarter 3rd-1998 (9.99%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Capital Appreciation Portfolio - Service Shares 57.91% 51.65%
S&P 500 Index* 28.74% 31.38%
------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
INTERNATIONAL GROWTH PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1995 1996 1997 1998
------ ------ ------ ------
<S> <C> <C> <C>
23.15% 34.71% 18.36% 16.88%
Best Quarter 4th-1998 16.16% Worst Quarter 3rd-1998 (17.76%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/2/94)
<S> <C> <C>
International Growth Portfolio - Service Shares 16.88% 18.87%
Morgan Stanley Capital International EAFE Index* 20.00% 8.11%
-----------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE Index is a market
capitalization weighted index composed of companies representative
of the market structure of 20 Developed Market countries in Europe,
Australasia and the Far East.
Risk return summary 5
<PAGE>
WORLDWIDE GROWTH PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1.53% 27.29% 28.80% 21.91% 28.71%
Best Quarter 4th-1998 20.87% Worst Quarter 3rd-1998 (17.00%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Worldwide Growth Portfolio - Service Shares 28.71% 21.21% 23.76%
Morgan Stanley International Worldwide Index* 24.34% 15.68% 14.39%
------------------------------------------
</TABLE>
* The Morgan Stanley International Worldwide Index is a market
capitalization weighted index composed of countries representative
of the market structure of 47 Developed and Emerging Markets.
The Growth Portfolios' past performance does not necessarily indicate
how they will perform in the future.
6 Janus Aspen Series
<PAGE>
COMBINATION PORTFOLIOS
The Combination Portfolios are designed for investors who primarily
seek growth of capital with varying degrees of emphasis on income.
They are not designed for investors who desire a consistent level of
income.
1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE COMBINATION PORTFOLIOS?
- --------------------------------------------------------------------------------
- BALANCED PORTFOLIO seeks long-term capital growth, consistent
with preservation of capital and balanced by current income.
- EQUITY INCOME PORTFOLIO seeks current income and long-term growth
of capital.
- GROWTH AND INCOME PORTFOLIO seeks long-term capital growth and
current income.
The Trustees may change these objectives without a shareholder vote
and the Portfolios will notify you of any changes that are material.
If there is a material change to a Portfolio's objective or policies,
you should consider whether that Portfolio remains an appropriate
investment for you. There is no guarantee that a Portfolio will meet
its objective.
2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE COMBINATION PORTFOLIOS?
The portfolio managers apply a "bottom up" approach in choosing
investments. In other words, they look mostly for equity and
income-producing securities that meet their investment criteria one at
a time. If a portfolio manager is unable to find such investments,
much of a Portfolio's assets may be in cash or similar investments.
BALANCED 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. The
Portfolio will normally invest at least 25% of its assets in
fixed-income securities.
EQUITY INCOME PORTFOLIO normally emphasizes investments in common
stocks, and growth potential is a significant investment
consideration. Normally, it invests at least 65% of its assets in
income-producing equity securities.
GROWTH AND INCOME PORTFOLIO normally emphasizes investments in common
stocks. It will normally invest up to 75% of its assets in equity
securities selected primarily for their growth potential, and at least
25% of its assets in securities the portfolio manager believes have
income potential. Equity securities may make up part of this income
component if they currently pay dividends or the portfolio manager
believes they have potential for increasing or commencing dividend
payments.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE COMBINATION PORTFOLIOS?
The biggest risk is that the Portfolios' returns may vary, and you
could lose money. If you are considering investing in any of the
Combination Portfolios, remember that they are each designed for
long-term investors who can accept the risks of investing in a
portfolio with significant common stock holdings. Common stocks tend
to be more volatile than other investment choices.
The value of a Portfolio may decrease if the value of an individual
company in the portfolio decreases. The value of a Portfolio could
also decrease if the stock market goes down. If the value of a
Portfolio decreases, its NAV will also decrease, which means if you
sell your shares in a Portfolio you would get back less money.
Risk return summary 7
<PAGE>
The income component of the Portfolios' holdings includes fixed-income
securities. A fundamental risk to the income component is that the
value of these securities will fall if interest rates rise. Generally,
the value of a fixed-income portfolio will decrease when interest
rates rise, which means the Portfolio's NAV may likewise decrease.
Another fundamental risk associated with fixed-income securities is
credit risk, which is the risk that an issuer of a bond will be unable
to make principal and interest payments when due.
An investment in these Portfolios is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
The following information provides some indication of the risks of
investing in the Combination Portfolios by showing how each
Combination Portfolio's performance has varied over time. The
Portfolio's Service Shares commenced operations on January 1, 2000.
The returns shown for the Service Shares of the Portfolios have been
calculated based on the historical performance of a different class of
shares (the Institutional Shares) prior to January 1, 2000 (adjusted
for estimated expenses of Service Shares). The bar charts depict the
change in performance from year-to-year during the period indicated
but do not include charges and expenses attributable to any insurance
product which would lower the performance illustrated. The Portfolios
do not impose any sales or other charges that would affect total
return computations. Total return figures include the effect of each
Portfolio's expenses. The tables compare the average annual returns
for the Service Shares of each Portfolio for the period indicated to a
broad-based securities market index.
BALANCED PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
0.84% 24.79% 16.18% 21.96% 34.03%
Best Quarter 4th-1998 20.26% Worst Quarter 3rd-1998 (5.02%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Balanced Portfolio - Service Shares 34.03% 19.11% 19.49%
S&P 500 Index* 28.74% 24.08% 23.06%
Lehman Brothers Gov't/Corp Bond Index** 9.47% 7.30% 6.90%
------------------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
** Lehman Brothers Gov't/Corp Bond Index is composed of all bonds that
are of investment grade with at least one year until maturity.
8 Janus Aspen Series
<PAGE>
EQUITY INCOME PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1998
------
<S> <C>
45.99%
Best Quarter 4th-1998 28.47% Worst Quarter 3rd-1998 (7.23%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Janus Equity Income Portfolio - Service Shares 45.99% 49.78%
S&P 500 Index* 28.74% 31.38%
------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
GROWTH AND INCOME PORTFOLIO - SERVICE SHARES
Growth and Income Portfolio does not have a full calendar year return
because the Portfolio commenced operations on May 1, 1998.
The Combination Portfolios' past performance does not necessarily
indicate how they will perform in the future.
Risk return summary 9
<PAGE>
FIXED-INCOME PORTFOLIOS
The Fixed-Income Portfolios are designed for long-term investors who
primarily seek current income.
1. WHAT ARE THE INVESTMENT OBJECTIVES OF THE FIXED-INCOME PORTFOLIOS?
- --------------------------------------------------------------------------------
- FLEXIBLE INCOME PORTFOLIO seeks to obtain maximum total return,
consistent with preservation of capital.
- HIGH-YIELD PORTFOLIO seeks to obtain high current income. Capital
appreciation is a secondary objective when consistent with its
primary objective.
The Trustees may change these objectives without a shareholder vote
and the Portfolios will notify you of any changes that are material.
If there is a material change to a Portfolio's objective or policies,
you should consider whether it remains an appropriate investment for
you. There is no guarantee that a Portfolio will meet its objective.
2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE FIXED-INCOME PORTFOLIOS?
In addition to considering economic factors such as the effect of
interest rates on a Portfolio's investments, the portfolio managers
apply a "bottom up" approach in choosing investments. In other words,
they look mostly for income-producing securities that meet their
investment criteria one at a time. If a portfolio manager is unable to
find such investments, a Portfolio's assets may be in cash or similar
investments.
FLEXIBLE INCOME PORTFOLIO invests primarily in a wide variety of
income-producing securities such as corporate bonds and notes,
government securities and preferred stock. As a fundamental policy,
the Portfolio will invest at least 80% of its assets in
income-producing securities. The Portfolio may own an unlimited amount
of high-yield/high-risk fixed-income securities, and these securities
may be a big part of the portfolio.
HIGH-YIELD PORTFOLIO normally invests at least 65% of its assets in
high-yield/high-risk fixed-income securities, and may at times invest
all of its assets in these securities.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE FIXED-INCOME PORTFOLIOS?
Although the Fixed-Income Portfolios may be less volatile than funds
that invest most of their assets in common stocks, the Portfolios'
returns and yields will vary, and you could lose money.
The Portfolios invest in a variety of fixed-income securities. A
fundamental risk is that the value of these securities will fall if
interest rates rise. Generally, the value of a fixed-income portfolio
will decrease when interest rates rise, which means the Portfolio's
NAV will likewise decrease. Another fundamental risk associated with
fixed-income funds is credit risk, which is the risk that an issuer
will be unable to make principal and interest payments when due.
FLEXIBLE INCOME PORTFOLIO AND HIGH-YIELD PORTFOLIO may invest an
unlimited amount of their assets in high-yield/high-risk securities,
also known as "junk" bonds which may be sensitive to economic changes,
political changes, or adverse developments specific to the company
that issued the bond. These securities generally have a greater credit
risk than other types of fixed-income securities. Because of these
factors, the performance and NAV of the Fixed-Income Portfolios may
vary significantly, depending upon their holdings of junk bonds.
10 Janus Aspen Series
<PAGE>
An investment in these Portfolios is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
The following information provides some indication of the risks of
investing in the Fixed-Income Portfolios by showing how each
Fixed-Income Portfolio's performance has varied over time. The
Portfolio's Service Shares commenced operations on January 1, 2000.
The returns shown for the Service Shares of these Portfolios have been
calculated based on the historical performance of a different class of
shares (the Institutional Shares) prior to January 1, 2000 (adjusted
for estimated expenses of Service Shares). The bar charts depict the
change in performance from year-to-year during the period indicated
but do not include charges and expenses attributable to any insurance
product which would lower the performance illustrated. The Portfolios
do not impose any sales or other charges that would affect total
return computations. Total return figures include the effect of each
Portfolio's expenses. The tables compare the average annual returns
for the Service Shares of each Portfolio for the periods indicated to
a broad-based securities market index.
FLEXIBLE INCOME PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(0.91%) 23.86% 9.03% 11.52% 8.85%
Best Quarter 2nd-1995 6.71% Worst Quarter 1st-1996 (1.11%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Flexible Income Portfolio - Service Shares 8.85% 10.20% 9.75%
Lehman Brothers Gov't/Corp Bond Index* 9.47% 7.30% 6.90%
-----------------------------------------
</TABLE>
* Lehman Brothers Gov't/Corp Bond Index is composed of all bonds that
are of investment grade with at least one year until maturity.
Risk return summary 11
<PAGE>
HIGH-YIELD PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
15.98% 1.26%
Best Quarter 1st-1998 5.52% Worst Quarter 3rd-1998 (16.15%)
</TABLE>
Average annual total return for periods ended 12/31/98
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/96)
<S> <C> <C>
High-Yield Portfolio - Service Shares 1.26% 10.96%
Lehman Brothers High-Yield Bond Index* 1.60% 7.15%
-----------------------------
</TABLE>
* Lehman Brothers High-Yield Bond Index is composed of fixed-rate,
publicly issued, noninvestment grade debt.
The Fixed-Income Portfolios' past performance does not necessarily
indicate how they will perform in the future.
MONEY MARKET PORTFOLIO
Money Market Portfolio is designed for investors who seek current
income.
1. WHAT IS THE INVESTMENT OBJECTIVE OF MONEY MARKET PORTFOLIO?
- --------------------------------------------------------------------------------
- MONEY MARKET PORTFOLIO seeks maximum current income to the extent
consistent with stability of capital.
The Trustees may change this objective without a shareholder vote and
the Portfolio will notify you of any changes that are material. If
there is a material change in the Portfolio's objective or policies,
you should consider whether it remains an appropriate investment for
you. There is no guarantee that the Portfolio will meet its objective.
2. WHAT ARE THE MAIN INVESTMENT STRATEGIES OF MONEY MARKET PORTFOLIO?
MONEY MARKET PORTFOLIO will invest only in high-quality, short-term
money market instruments that present minimal credit risks, as
determined by Janus Capital. The Portfolio invests primarily in high
quality debt obligations and obligations of financial institutions.
Debt obligations may include commercial paper, notes and bonds, and
variable amount master demand notes. Obligations of financial
institutions include certificates of deposit and time deposits.
12 Janus Aspen Series
<PAGE>
3. WHAT ARE THE MAIN RISKS OF INVESTING IN MONEY MARKET PORTFOLIO?
The Portfolio's yields will vary as the short-term securities in the
portfolio mature and the proceeds are reinvested in securities with
different interest rates. Over time, the real value of the Portfolio's
yield may be eroded by inflation. Although Money Market Portfolio
invests only in high-quality, short-term money market instruments,
there is a risk that the value of the securities it holds will fall as
a result of changes in interest rates, an issuer's actual or perceived
credit-worthiness or an issuer's ability to meet its obligations.
An investment in Money Market Portfolio is not a deposit of a bank and
is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Portfolio
seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in Money Market Portfolio.
The following information provides some indication of the risks of
investing in Money Market Portfolio by showing how Money Market
Portfolio's performance has varied over time. The Money Market
Portfolio Service Shares commenced operations on January 1, 2000. The
returns shown for the Service Shares of this Portfolio have been
calculated based on the historical performance of a different class of
shares (the Institutional Shares) prior to January 1, 2000 (adjusted
for estimated expenses of Service Shares). The bar chart depicts the
change in performance from year to year, but does not include charges
and expenses attributable to any insurance product which would lower
the performance illustrated. The Portfolio does not impose any sales
or other charges that would affect total return computations. Total
return figures include the effect of the Portfolio's expenses.
MONEY MARKET PORTFOLIO - SERVICE SHARES
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
4.95% 5.08% 5.10%
Best Quarter 3rd-1995 1.31% Worst Quarter 2nd-1996 1.19%
</TABLE>
For the Portfolio's current yield, call the Janus XpressLine(TM) at
1-888-979-7737.
Money Market Portfolio's past performance does not necessarily
indicate how it will perform in the future.
Risk return summary 13
<PAGE>
FEES AND EXPENSES
SHAREHOLDER FEES, such as sales loads, redemption fees or exchange
fees, are charged directly to an investor's account. All Janus funds
are no-load investments, so you will not pay any shareholder fees when
you buy or sell shares of the Portfolios. However, each variable
insurance contract involves fees and expenses not described in this
prospectus. See the accompanying contract prospectus for information
regarding contract fees and expenses and any restrictions on purchases
or allocations.
ANNUAL FUND OPERATING EXPENSES are paid out of a Portfolio's assets
and include fees for portfolio management, maintenance of shareholder
accounts, shareholder servicing, accounting and other services. You do
not pay these fees directly but, as the example on the next page
shows, these costs are borne indirectly by all shareholders.
14 Janus Aspen Series
<PAGE>
This table and example are designed to assist participants in
qualified plans that invest in the Shares of the Portfolios in
understanding the fees and expenses that you may pay as an investor in
the Shares. The information shown is based upon estimated gross
expenses (without the effect of expense offset arrangements) the
Shares expect to incur in their initial fiscal year. OWNERS OF
VARIABLE INSURANCE CONTRACTS THAT INVEST IN THE SHARES SHOULD REFER TO
THE VARIABLE INSURANCE CONTRACT PROSPECTUS FOR A DESCRIPTION OF FEES
AND EXPENSES, AS THE TABLE AND EXAMPLE DO NOT REFLECT DEDUCTIONS AT
THE SEPARATE ACCOUNT LEVEL OR CONTRACT LEVEL FOR ANY CHARGES THAT MAY
BE INCURRED UNDER A CONTRACT.
<TABLE>
<CAPTION>
Total Annual Fund Total Annual Fund
Operating Operating
Distribution Expenses Total Expenses
Management (12b-1) Other Without Waivers Waivers With Waivers
Fee Fees(1) Expenses or Reductions(2) and Reductions or Reductions(2)
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 0.67% 0.25% 0.01% 0.93% 0.01% 0.92%
Aggressive Growth Portfolio 0.67% 0.25% 0.01% 0.03% N/A 0.93%
Capital Appreciation
Portfolio 0.73% 0.25% 0.04% 1.02% 0.07% 0.95%
International Growth
Portfolio 0.72% 0.25% 0.09% 1.06% 0.06% 1.00%
Worldwide Growth Portfolio 0.66% 0.25% 0.05% 0.96% 0.01% 0.95%
Balanced Portfolio 0.67% 0.25% 0.01% 0.93% N/A 0.93%
Equity Income Portfolio 0.75% 0.25% 0.48% 1.48% 0.03% 1.45%
Growth and Income Portfolio 0.75% 0.25% 0.13% 1.13% 0.09% 1.04%
Flexible Income Portfolio 0.65% 0.25% 0.07% 0.97% N/A 0.97%
High-Yield Portfolio 0.75% 0.25% 4.33% 5.33% 4.08% 1.26%
Money Market Portfolio 0.25% 0.25% 0.16% 0.66% N/A 0.66%
</TABLE>
- --------------------------------------------------------------------------------
(1) Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc.
(2) All expenses are based on the estimated gross expenses the Shares
expect to incur in their initial fiscal year and are stated both with
and without contractual waivers and fee reductions by Janus Capital.
Fee reductions for Growth, Aggressive Growth, Capital Appreciation,
International Growth, Worldwide Growth, Balanced, Equity Income and
Growth and Income 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. Janus Capital has agreed to continue the waivers and fee
reductions until at least the next annual renewal of the advisory
agreements.
- --------------------------------------------------------------------------------
EXAMPLE:
THE FOLLOWING EXAMPLE IS BASED ON EXPENSES WITHOUT WAIVERS OR
REDUCTIONS. This example is intended to help you compare the cost of
investing in the Portfolios with the cost of investing in other mutual
funds. The example assumes that you invest $10,000 in each of the
Portfolios for the time periods indicated then redeem all of your shares
at the end of those periods. The example also assumes that your
investment has a 5% return each year, and that the Portfolios' operating
expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------------------
<S> <C> <C>
Growth Portfolio $ 95 $ 296
Aggressive Growth Portfolio $ 95 $ 296
Capital Appreciation Portfolio $104 $ 325
International Growth Portfolio $108 $ 337
Worldwide Growth Portfolio $ 98 $ 306
Balanced Portfolio $ 95 $ 296
Equity Income Portfolio $151 $ 468
Growth and Income Portfolio $115 $ 359
Flexible Income Portfolio $ 99 $ 309
High-Yield Portfolio $532 $1,591
Money Market Portfolio $ 67 $ 211
</TABLE>
Risk return summary 15
<PAGE>
Investment objectives, principal investment
strategies and risks
Each of the Portfolios has a similar investment objective and similar
principal investment strategies to a Janus retail fund:
<TABLE>
<S> <C>
Growth Portfolio Janus Fund
Aggressive Growth Portfolio Janus Enterprise Fund
Capital Appreciation Portfolio Janus Twenty Fund*
International Growth Portfolio Janus Overseas Fund
Worldwide Growth Portfolio Janus Worldwide Fund
Balanced Portfolio Janus Balanced Fund
Equity Income Portfolio Janus Equity Income Fund
Growth and Income Portfolio Janus Growth and Income Fund
Flexible Income Portfolio Janus Flexible Income Fund
High-Yield Portfolio Janus High-Yield Fund
Money Market Portfolio Janus Money Market Fund
</TABLE>
* Prior to May 1, 1999 Capital Appreciation Portfolio was managed in a
similar manner to Janus Olympus Fund.
Although it is anticipated that each Portfolio and its corresponding
retail fund will hold similar securities, differences in asset size,
cash flow needs and other factors may result in differences in
investment performance. The 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 fees and expenses.
GROWTH PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Growth Portfolios, their principal investment strategies and
certain risks of investing in the Growth Portfolios. Strategies and
policies that are noted as "fundamental" cannot be changed without a
shareholder vote.
Please carefully review the "Risks" section of this Prospectus on
pages 24-27 for a discussion of risks associated with certain
investment techniques. We've also included a Glossary with
descriptions of investment terms used throughout this Prospectus.
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
DOMESTIC GROWTH PORTFOLIOS
GROWTH PORTFOLIO
Growth Portfolio seeks long-term growth of capital in a manner
consistent with the preservation of capital. It pursues its objective
by investing primarily in common stocks selected for their growth
potential. Although the Portfolio can invest in companies of any size,
it generally invests in larger, more established companies.
AGGRESSIVE GROWTH PORTFOLIO
Aggressive Growth Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks selected
for their growth potential, and normally invests at least 50% of its
equity assets in medium-sized companies. Medium-sized companies are
those whose market capitalizations fall within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly
16 Janus Aspen Series
<PAGE>
used measure of the size and value of a company. The market
capitalizations within the Index will vary, but as of December 31,
1998, they ranged from approximately $142 million to $73 billion.
CAPITAL APPRECIATION PORTFOLIO
Capital Appreciation Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks selected
for their growth potential. The Portfolio may invest in companies of
any size, from larger, well-established companies to smaller, emerging
growth companies.
GLOBAL GROWTH PORTFOLIOS
INTERNATIONAL GROWTH PORTFOLIO
International Growth Portfolio seeks long-term growth of capital.
Normally, the Portfolio pursues its objective by investing at least
65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the
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.
WORLDWIDE GROWTH PORTFOLIO
Worldwide Growth Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital. It pursues its
objective by investing primarily in common stocks of companies of any
size throughout the world. The 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.
The following questions and answers are designed to help you better understand
the Growth Portfolios' principal investment strategies.
1. HOW ARE COMMON STOCKS SELECTED?
Each of the Portfolios may invest substantially all of its assets in
common stocks if its portfolio manager believes that common stocks
will appreciate in value. The portfolio managers generally take a
"bottom up" approach to selecting companies. In other words, they seek
to identify individual companies with earnings growth potential that
may not be recognized by the market at large. They make this
assessment by looking at companies one at a time, regardless of size,
country of organization, place of principal business activity, or
other similar selection criteria. Realization of income is not a
significant consideration when choosing investments for the
Portfolios. Income realized on the Portfolios' investments will be
incidental to their objectives.
2. ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES?
Generally, yes. The portfolio managers seek companies that meet their
selection criteria, regardless of where a company is located. Foreign
securities are generally selected on a stock-by-stock basis without
regard to any defined allocation among countries or geographic
regions. However, certain factors such as expected levels of
inflation, government policies influencing business conditions, the
outlook for currency relationships, and prospects for economic growth
among countries, regions or geographic areas may warrant greater
consideration in selecting foreign securities. There are no
limitations on the countries in which the Portfolios may invest and
the Portfolios may at times have significant foreign exposure.
Investment objectives, principal investment strategies and risks 17
<PAGE>
3. WHAT DOES "MARKET CAPITALIZATION" MEAN?
Market capitalization is the most commonly used measure of the size
and value of a company. It is computed by multiplying the current
market price of a share of the company's stock by the total number of
its shares outstanding. As noted previously, market capitalization is
an important investment criteria for Aggressive Growth Portfolio.
Although the other Growth Portfolios offered by this Prospectus do not
emphasize companies of any particular size, Portfolios with a larger
asset base are more likely to invest in larger, more established
issuers.
COMBINATION PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Combination Portfolios, their principal investment strategies
and certain risks of investing in the Combination Portfolios.
Strategies and policies that are noted as "fundamental" cannot be
changed without a shareholder vote.
Please carefully review the "Risks" section of this Prospectus on
pages 24-27 for a discussion of risks associated with certain
investment techniques. We've also included a Glossary with
descriptions of investment terms used throughout this Prospectus.
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
BALANCED PORTFOLIO
Balanced Portfolio seeks long-term capital growth, consistent with
preservation of capital and balanced by current income. It pursues its
objective by normally investing 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its assets
in securities selected primarily for their income potential. This
Portfolio normally invests at least 25% of its assets in fixed-income
securities.
EQUITY INCOME PORTFOLIO
Equity Income Portfolio seeks current income and long-term growth of
capital. It pursues its objective by normally emphasizing investments
in common stock, and growth potential is a significant investment
consideration. The Portfolio tries to provide a lower level of
volatility than the S&P 500 Index. Normally, it invests at least 65%
of its assets in income-producing equity securities including common
and preferred stocks, warrants and securities that are convertible to
common or preferred stocks.
GROWTH AND INCOME PORTFOLIO
Growth and Income Portfolio seeks long-term capital growth and current
income. It normally emphasizes investments in common stocks. It will
normally invest up to 75% of its assets in equity securities selected
primarily for their growth potential, and at least 25% of its assets
in securities the portfolio manager believes have income potential.
Because of this investment strategy, the Portfolio is not designed for
investors who need consistent income.
The following questions and answers are designed to help you better understand
the Combination Portfolios' principal investment strategies.
1. HOW DO THE COMBINATION PORTFOLIOS DIFFER FROM EACH OTHER?
Growth and Income Portfolio places a greater emphasis on aggressive
growth stocks and may derive a greater portion of its income from
dividend-paying common stocks. Because of these factors, its NAV can
be expected to fluctuate more than the other Combination Portfolios.
Although Equity Income Portfolio
18 Janus Aspen Series
<PAGE>
invests substantially all of its assets in common stocks, it
emphasizes investments in dividend-paying common stocks and other
equity securities characterized by relatively greater price stability,
and thus may be expected to be less volatile than Growth and Income
Portfolio, as discussed in more detail below. Balanced Portfolio
places a greater emphasis on the income component of its portfolio and
invests to a greater degree in securities selected primarily for their
income potential. As a result it is expected to be the least volatile
of the Combination Portfolios.
2. HOW DOES EQUITY INCOME PORTFOLIO TRY TO LIMIT PORTFOLIO VOLATILITY?
Equity Income Portfolio seeks to provide a lower level of volatility
than the stock market at large, as measured by the S&P 500. The lower
volatility sought by this Portfolio is expected to result primarily
from investments in dividend-paying common stocks and other equity
securities characterized by relatively greater price stability. The
greater price stability sought by Equity Income Portfolio may be
characteristic of companies that generate above average free cash
flows. A company may use free cash flows for a number of purposes
including commencing or increasing dividend payments, repurchasing its
own stock or retiring outstanding debt. The portfolio manager also
considers growth potential in selecting this Portfolio's securities
and may hold securities selected solely for their growth potential.
3. HOW ARE COMMON STOCKS SELECTED FOR THE COMBINATION PORTFOLIOS IN COMPARISON
TO THE GROWTH PORTFOLIOS?
Because income is a part of the investment objective of the
Combination Portfolios, a portfolio manager may consider
dividend-paying characteristics to a greater degree in selecting
common stocks for these Portfolios.
4. HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME COMPONENTS OF BALANCED
PORTFOLIO'S AND GROWTH AND INCOME PORTFOLIO'S HOLDINGS?
Balanced Portfolio and Growth and Income Portfolio shift assets
between the growth and income components of their holdings based on
the portfolio managers' analysis of relevant market, financial and
economic conditions. If a portfolio manager believes that growth
securities will provide better returns than the yields then available
or expected on income-producing securities, that Portfolio will place
a greater emphasis on the growth component.
5. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE COMBINATION
PORTFOLIOS' INVESTMENTS?
The growth component of the Combination Portfolios' investments is
expected to consist primarily of common stocks, but may also include
warrants, preferred stocks or convertible securities selected
primarily for their growth potential.
6. WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT OF BALANCED PORTFOLIO'S
AND GROWTH AND INCOME PORTFOLIO'S HOLDINGS?
The income component of Balanced Portfolio and Growth and Income
Portfolio will consist of securities that the portfolio managers
believe have income potential. Such securities may include equity
securities, convertible securities and all types of debt securities.
Equity securities may be included in the income component of a
Portfolio if they currently pay dividends or the portfolio manager
believes they have the potential for either increasing their dividends
or commencing dividends, if none are currently paid.
Investment objectives, principal investment strategies and risks 19
<PAGE>
FIXED-INCOME PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Fixed-Income Portfolios, their principal investment strategies
and certain risks of investing in the Fixed-Income Portfolios.
Strategies and policies that are noted as "fundamental" cannot be
changed without a shareholder vote.
Please carefully review the "Risks" section of this Prospectus on
pages 24-27 for a discussion of risks associated with certain
investment techniques. We've also included a Glossary with
descriptions of investment terms used throughout this Prospectus.
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
In addition to considering economic factors such as the effect of
interest rates on a Portfolio's investments, the portfolio managers
apply a "bottom up" approach in choosing investments. In other words,
they look mostly for income-producing securities that meet their
investment criteria one at a time. If a portfolio manager is unable to
find such investments, much of a Portfolio's assets may be in cash or
similar investments.
FLEXIBLE INCOME PORTFOLIO
Flexible Income Portfolio seeks to obtain maximum total return,
consistent with preservation of capital. It pursues its objective by
primarily investing in a wide variety of income-producing securities
such as corporate bonds and notes, government securities and preferred
stock. As a fundamental policy, the Portfolio will invest at least 80%
of its assets in income-producing securities. The Portfolio may own an
unlimited amount of high-yield/high-risk securities, and these may be
a big part of the portfolio. This Portfolio generates total return
from a combination of current income and capital appreciation, but
income is usually the dominant portion.
HIGH-YIELD PORTFOLIO
High-Yield Portfolio seeks to obtain high current income. Capital
appreciation is a secondary objective when consistent with its primary
objective. It pursues its objectives by normally investing 65% of its
assets in high-yield/high-risk fixed-income securities, and may at
times invest all of its assets in these securities.
The following questions and answers are designed to help you better understand
the Fixed-Income Portfolios' principal investment strategies.
1. HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
Generally, a fixed-income security will increase in value when
interest rates fall and decrease in value when interest rates rise.
Longer-term securities are generally more sensitive to interest rate
changes than shorter-term securities, but they generally offer higher
yields to compensate investors for the associated risks. High-yield
bond prices are generally less directly responsive to interest rate
changes than investment grade issues and may not always follow this
pattern. A bond fund's average-weighted effective maturity and its
duration are measures of how the fund may react to interest rate
changes.
2. HOW DO THE FIXED-INCOME PORTFOLIOS MANAGE INTEREST RATE RISK?
Each Fixed-Income Portfolio may vary the average-weighted effective
maturity of its assets to reflect its portfolio manager's analysis of
interest rate trends and other factors. A Portfolio's average-weighted
effective maturity will tend to be shorter when the portfolio manager
expects interest rates to rise and longer when its portfolio manager
expects interest rates to fall. The Portfolios may also use futures,
options and other derivatives to manage interest rate risks.
20 Janus Aspen Series
<PAGE>
3. WHAT IS MEANT BY A PORTFOLIO'S "AVERAGE-WEIGHTED EFFECTIVE MATURITY"?
The stated maturity of a bond is the date when the issuer must repay
the bond's entire principal value to an investor. Some types of bonds
may also have an "effective maturity" that is shorter than the stated
date due to prepayment or call provisions. Securities without
prepayment or call provisions generally have an effective maturity
equal to their stated maturity. Dollar-weighted effective maturity is
calculated by averaging the effective maturity of bonds held by a
Portfolio with each effective maturity "weighted" according to the
percentage of net assets that it represents.
4. WHAT IS MEANT BY A PORTFOLIO'S "DURATION"?
A bond's duration indicates the time it will take an investor to
recoup his investment. Unlike average maturity, duration reflects both
principal and interest payments. Generally, the higher the coupon rate
on a bond, the lower its duration will be. The duration of a bond
portfolio is calculated by averaging the duration of bonds held by a
fund with each duration "weighted" according to the percentage of net
assets that it represents. Because duration accounts for interest
payments, a Portfolio's duration is usually shorter than its average
maturity.
5. WHAT IS A HIGH-YIELD/HIGH-RISK SECURITY?
A high-yield/high-risk security (also called a "junk" bond) is a debt
security rated below investment grade by major rating agencies (i.e.,
BB or lower by Standard & Poor's or Ba or lower by Moody's) or an
unrated bond of similar quality. It presents greater risk of default
(the failure to make timely interest and principal payments) than
higher quality bonds.
GENERAL PORTFOLIO POLICIES OF THE PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO
Unless otherwise stated, each of the following policies applies to all
of the Portfolios other than Money Market Portfolio. The percentage
limitations included in these policies and elsewhere in this
Prospectus apply at the time of purchase of the security. So, for
example, if a 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 manager believes that market conditions are
unfavorable for profitable investing, or when he or she is otherwise
unable to locate attractive investment opportunities, the Portfolios'
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 generally are a residual - they represent the
assets that remain after a portfolio manager has committed available
assets to desirable investment opportunities. However, a portfolio
manager may also temporarily increase a Portfolio's cash position to
protect its assets or maintain liquidity. Partly because the portfolio
managers act independently of each other, the cash positions of the
Portfolios may vary significantly.
When a Portfolio's investments in cash or similar investments
increase, it may not participate in market advances or declines to the
same extent that it would if the Portfolio remained more fully
invested in stocks or bonds.
OTHER TYPES OF INVESTMENTS
The Growth and Global Growth Portfolios invest primarily in domestic
and foreign equity securities, which may include preferred stocks,
common stocks, warrants and securities convertible into common or
preferred stocks. The Combination Portfolios also invest in domestic
and foreign equity securities with
Investment objectives, principal investment strategies and risks 21
<PAGE>
varying degrees of emphasis on income. The Portfolios may also invest
to a lesser degree in other types of securities. These securities
(which are described in the Glossary) may include:
- debt securities
- indexed/structured securities
- high-yield/high-risk securities (less than 35% of each Portfolio's
assets)
- options, futures, forwards and other types of derivatives for
hedging purposes or for non-hedging purposes such as seeking to
enhance return
- securities purchased on a when-issued, delayed delivery or forward
commitment basis
The Fixed-Income Portfolios invest primarily in fixed-income
securities which may include corporate bonds and notes, government
securities, preferred stock, high-yield/high-risk fixed-income
securities and municipal obligations. The Portfolios may also invest
to a lesser degree in other types of securities. These securities
(which are described in the Glossary) may include:
- common stocks
- mortgage- and asset-backed securities
- zero coupon, pay-in-kind and step coupon securities
- options, futures, forwards and other types of derivatives for
hedging purposes or for non-hedging purposes such as seeking to
enhance return
- securities purchased on a when-issued, delayed delivery or forward
commitment basis
ILLIQUID INVESTMENTS
Each Portfolio may invest up to 15% of its net assets in illiquid
investments. An illiquid investment is a security or other position
that cannot be disposed of quickly in the normal course of business.
For example, some securities are not registered under U.S. securities
laws and cannot be sold to the U.S. public because of SEC regulations
(these are known as "restricted securities"). Under procedures adopted
by the Portfolios' Trustees, certain restricted securities may be
deemed liquid, and will not be counted toward this 15% limit.
FOREIGN SECURITIES
The Portfolios may 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.
SPECIAL SITUATIONS
Each Portfolio may invest in special situations. 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. A Portfolio's performance could
suffer if the anticipated development in a "special situation"
investment does not occur or does not attract the expected attention.
22 Janus Aspen Series
<PAGE>
PORTFOLIO TURNOVER
The Portfolios generally intend to purchase securities for long-term
investment although, to a limited extent, a Portfolio may purchase
securities in anticipation of relatively short-term price gains.
Short-term transactions may also result from liquidity needs,
securities having reached a price or yield objective, changes in
interest rates or the credit standing of an issuer, or by reason of
economic or other developments not foreseen at the time of the
investment decision. A Portfolio may also sell one security and
simultaneously purchase the same or a comparable security to take
advantage of short-term differentials in bond yields or securities
prices. Changes are made in a Portfolio's holdings whenever its
portfolio manager believes such changes are desirable. Portfolio
turnover rates are generally not a factor in making buy and sell
decisions.
Increased portfolio turnover may result in higher costs for brokerage
commissions, dealer mark-ups and other transaction costs and may also
result in taxable capital gains. Higher costs associated with
increased portfolio turnover may offset gains in a Portfolio's
performance.
Investment objectives, principal investment strategies and risks 23
<PAGE>
RISKS FOR GROWTH, GLOBAL GROWTH AND COMBINATION PORTFOLIOS
Because the Portfolios may invest substantially all of their assets in
common stocks, the main risk is the risk that the value of the stocks
they hold might decrease in response to the activities of an
individual company or in response to general market and/or economic
conditions. If this occurs, a Portfolio's share price may also
decrease. A Portfolio's performance may also be affected by risks
specific to certain types of investments, such as foreign securities,
derivative investments, non-investment grade debt securities or
companies with relatively small market capitalizations.
The following questions and answers are designed to help you better understand
some of the risks of investing in the Growth, Global Growth and Combination
Portfolios.
1. THE PORTFOLIOS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS?
Smaller or newer companies may suffer more significant losses as well
as realize more substantial growth than larger or more established
issuers because they may lack depth of management, be unable to
generate funds necessary for growth or potential development, or be
developing or marketing new products or services for which markets are
not yet established and may never become established. In addition,
such companies may be insignificant factors in their industries and
may become subject to intense competition from larger or more
established companies. Securities of smaller or newer companies may
have more limited trading markets than the markets for securities of
larger or more established issuers, and may be subject to wide price
fluctuations. Investments in such companies tend to be more volatile
and somewhat more speculative.
2. HOW DOES THE NONDIVERSIFIED STATUS OF AGGRESSIVE GROWTH PORTFOLIO AND CAPITAL
APPRECIATION PORTFOLIO AFFECT THEIR RISK?
Diversification is a way to reduce risk by investing 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. This fluctuation, if significant, may affect the
performance of a Portfolio.
24 Janus Aspen Series
<PAGE>
RISKS FOR FIXED-INCOME PORTFOLIOS
Because the Portfolios invest substantially all of their assets in
fixed-income securities, they are subject to risks such as credit or
default risks, and decreased value due to interest rate increases. A
Portfolio's performance may also be affected by risks to certain types
of investments, such as foreign securities and derivative instruments.
The following questions and answers are designed to help you better understand
some of the risks of investing in the Fixed-Income Portfolios.
1. HOW DO THE FIXED-INCOME PORTFOLIOS DIFFER FROM EACH OTHER IN TERMS OF PRIMARY
INVESTMENT TYPE, CREDIT RISK AND INTEREST RATE RISK?
Flexible Income Portfolio and High-Yield Portfolio invest primarily in
corporate bonds. High-Yield Portfolio's credit risk is generally
higher than Flexible Income Portfolio. Flexible Income Portfolio's
interest rate risk is generally higher than High-Yield Portfolio.
2. WHAT IS MEANT BY "CREDIT QUALITY" AND WHAT ARE THE RISKS ASSOCIATED WITH IT?
Credit quality measures the likelihood that the issuer will meet its
obligations on a bond. One of the fundamental risks associated with
all fixed-income funds is credit risk, which is the risk that an
issuer will be unable to make principal and interest payments when
due. U.S. government securities are generally considered to be the
safest type of investment in terms of credit risk. Municipal
obligations generally rank between U.S. government securities and
corporate debt securities in terms of credit safety. Corporate debt
securities, particularly those rated below investment grade, present
the highest credit risk.
3. HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized statistical rating agencies
such as Standard & Poor's Ratings Service and Moody's Investors
Service, Inc. 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
"Explanation of Rating Categories" on page 46 for a description of
rating categories.
RISKS COMMON TO ALL NON-MONEY MARKET PORTFOLIOS
The following questions and answers discuss risks that apply to all Portfolios
other than Money Market Portfolio.
1. HOW COULD THE PORTFOLIOS' INVESTMENTS IN FOREIGN SECURITIES AFFECT THEIR
PERFORMANCE?
The Portfolios may invest without limit in foreign securities either
indirectly (e.g., depositary receipts) or directly in foreign markets.
Investments in foreign securities, including those of foreign
governments, may involve greater risks than investing in domestic
securities because the Portfolios' performance may depend on issues
other than the performance of a particular company. These issues
include:
- CURRENCY RISK. 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 denominated
security, its value may be worth less in U.S. dollars even if the
security increases in value in its home country. U.S. dollar
denominated securities of foreign issuers may also be affected by
currency risk.
- POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to
heightened political and economic risks, particularly in emerging
markets which may have relatively unstable governments, immature
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based on only a
few industries. In some countries, there is the risk that the
government may
Investment objectives, principal investment strategies and risks 25
<PAGE>
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.
- REGULATORY RISK. There may be less government supervision of foreign
markets. As a result, foreign issuers may not be subject to the
uniform accounting, auditing and financial reporting standards and
practices applicable to domestic issuers and there may be less
publicly available information about foreign issuers.
- MARKET RISK. Foreign securities markets, particularly those of
emerging market countries, may be less liquid and more volatile than
domestic markets. Certain markets may require payment for securities
before delivery and delays may be encountered in settling securities
transactions. In some foreign markets, there may not be protection
against failure by other parties to complete transactions.
- TRANSACTION COSTS. Costs of buying, selling and holding foreign
securities, including brokerage, tax and custody costs, may be
higher than those involved in domestic transactions.
2. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH-YIELD/HIGH-RISK
SECURITIES?
High-yield/high-risk securities (or "junk" bonds) are securities rated
below investment grade by the primary rating agencies such as Standard
& Poor's and Moody's. The value of lower quality securities generally
is more dependent on credit risk, or the ability of the issuer to meet
interest and principal payments, than investment grade debt
securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings and are
more vulnerable to real or perceived economic changes, political
changes or adverse developments specific to the issuer.
The junk bond market can experience sudden and sharp price swings.
Because Flexible Income Portfolio and High-Yield Portfolio may invest
a significant portion of their assets in high-yield/high-risk
securities, investors should be willing to tolerate a corresponding
increase in the risk of significant and sudden changes in NAV.
Please refer to "Explanation of Rating Categories" on page 46 for a
description of bond rating categories.
3. HOW DO THE PORTFOLIOS TRY TO REDUCE RISK?
The Portfolios may use futures, options and other derivative
instruments to "hedge" or protect their portfolios from adverse
movements in securities prices and interest rates. The Portfolios may
also use a variety of currency hedging techniques, including forward
currency contracts, to manage exchange rate risk. The portfolio
managers believe the use of these instruments will benefit the
Portfolios. However, a Portfolio's performance could be worse than if
the Portfolio had not used such instruments if a portfolio manager's
judgement proves incorrect. Risks associated with the use of
derivative instruments are described in the SAI.
4. I'VE HEARD A LOT ABOUT HOW THE CHANGE TO THE YEAR 2000 COULD AFFECT COMPUTER
SYSTEMS. DOES THIS CREATE ANY SPECIAL RISKS?
The portfolio managers carefully research each potential investment
before making an investment decision and, among other things, consider
Year 2000 readiness when selecting portfolio holdings. However, there
is no guarantee that the information a portfolio manager receives
regarding a company's Year 2000 readiness is completely accurate. If a
company has not satisfactorily addressed Year 2000 issues, the
Portfolio's performance could suffer.
26 Janus Aspen Series
<PAGE>
MONEY MARKET PORTFOLIO
This section takes a closer look at the investment objective of Money
Market Portfolio, its principal investment strategies and certain
risks of investing in the Portfolio. Strategies and policies that are
noted as "fundamental" cannot be changed without a shareholder vote.
Money Market Portfolio is subject to certain specific SEC rule
requirements. Among other things, the Portfolio is limited to
investing in U.S. dollar-denominated instruments with a remaining
maturity of 397 days or less (as calculated pursuant to Rule 2a-7
under the 1940 Act).
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
Money Market Portfolio seeks maximum current income to the extent
consistent with stability of capital. It pursues its objective by
investing primarily in high quality debt obligations and obligations
of financial institutions. Debt obligations may include commercial
paper, notes and bonds, and variable amount master demand notes.
Obligations of financial institutions include certificates of deposit
and time deposits.
Money Market Portfolio will:
- invest in high quality, short-term money market instruments that
present minimal credit risks, as determined by Janus Capital
- invest only in U.S. dollar-denominated instruments that have a
remaining maturity of 397 days or less (as calculated pursuant to
Rule 2a-7 under the 1940 Act)
- maintain a dollar-weighted average portfolio maturity of 90 days or
less
TYPES OF INVESTMENTS
Money Market Portfolio invests primarily in:
- high quality debt obligations
- obligations of financial institutions
The Portfolio may also invest (to a lesser degree) in:
- U.S. Government Securities (securities issued or guaranteed by the
U.S. government, its agencies and instrumentalities)
- municipal securities
DEBT OBLIGATIONS
The Portfolio may invest in debt obligations of domestic issuers. Debt
obligations include:
- commercial paper
- notes and bonds
- variable amount master demand notes (the payment obligations on
these instruments may be backed by securities, swap agreements or
other assets, by a guarantee of a third party or solely by the
unsecured promise of the issuer to make payments when due)
- privately issued commercial paper or other securities that are
restricted as to disposition under the federal securities laws
Investment objectives, principal investment strategies and risks 27
<PAGE>
OBLIGATIONS OF FINANCIAL INSTITUTIONS
Examples of obligations of financial institutions include:
- negotiable certificates of deposit, bankers' acceptances, time
deposits and other obligations of U.S. banks (including savings and
loan associations) having total assets in excess of one billion
dollars and U.S. branches of foreign banks having total assets in
excess of ten billion dollars
- Eurodollar and Yankee bank obligations (Eurodollar bank obligations
are dollar-denominated certificates of deposit or time deposits
issued outside the U.S. capital markets by foreign branches of U.S.
banks and by foreign banks. Yankee bank obligations are
dollar-denominated obligations issued in the U.S. capital markets by
foreign banks)
- other U.S. dollar-denominated obligations of foreign banks having
total assets in excess of ten billion dollars that Janus Capital
believes are of an investment quality comparable to obligations of
U.S. banks in which the Portfolio may invest
Foreign, Eurodollar (and to a limited extent, Yankee) bank obligations
are subject to certain sovereign risks. One such risk is the
possibility that a foreign government might prevent dollar-denominated
funds from flowing across its borders. Other risks include: adverse
political and economic developments in a foreign country; the extent
and quality of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
INVESTMENT TECHNIQUES
The following is a description of other investment techniques that
Money Market Portfolio may use:
PARTICIPATION INTERESTS
A participation interest gives Money Market Portfolio a proportionate,
undivided interest in underlying debt securities and sometimes carries
a demand feature.
DEMAND FEATURES
Demand features give Money Market Portfolio the right to resell
securities at specified periods prior to their maturity dates. Demand
features may shorten the life of a variable or floating rate security,
enhance the instrument's credit quality and provide a source of
liquidity.
Demand features are often issued by third party financial
institutions, generally domestic and foreign banks. Accordingly, the
credit quality and liquidity of Money Market Portfolio's investments
may be dependent in part on the credit quality of the banks supporting
Money Market Portfolio's investments. This will result in exposure to
risks pertaining to the banking industry, including the foreign
banking industry. Brokerage firms and insurance companies also provide
certain liquidity and credit support.
VARIABLE AND FLOATING RATE SECURITIES
Money Market Portfolio may invest in securities which have variable or
floating rates of interest. These securities pay interest at rates
that are adjusted periodically according to a specified formula,
usually with reference to an interest rate index or market interest
rate. Variable and floating rate securities are subject to changes in
value based on changes in market interest rates or changes in the
issuer's or guarantor's creditworthiness.
28 Janus Aspen Series
<PAGE>
MORTGAGE- AND ASSET-BACKED SECURITIES
Money Market Portfolio may purchase fixed or variable rate
mortgage-backed securities issued by the Government National Mortgage
Association, Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, or other governmental or government-related
entity. The Portfolio may purchase other mortgage- and asset-backed
securities including securities backed by automobile loans, equipment
leases or credit card receivables.
Unlike traditional debt instruments, payments on these securities
include both interest and a partial payment of principal. Prepayments
of the principal of underlying loans may shorten the effective
maturities of these securities and may result in the Portfolio having
to reinvest proceeds at a lower interest rate.
REPURCHASE AGREEMENTS
Money Market Portfolio may enter into collateralized repurchase
agreements. 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 repurchase price reflects a market rate
of interest and is collateralized by cash or securities.
If the seller of the securities underlying a repurchase agreement
fails to pay the agreed resale price on the agreed delivery date,
Money Market Portfolio may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do
so.
Investment objectives, principal investment strategies and risks 29
<PAGE>
Management of the portfolios
INVESTMENT ADVISER
Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, 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 began serving as investment adviser to Janus Fund in
1970 and currently serves as investment adviser to all of the Janus
retail funds, acts as sub-adviser for a number of private-label mutual
funds and provides separate account advisory services for
institutional accounts.
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 administrative services relating to the Portfolios and
Janus Capital or the Portfolios may pay those companies for such
services.
MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Portfolio pays Janus Capital a management fee which is calculated
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). In addition, the Shares of each
Portfolio incur expenses not assumed by Janus Capital, including the
distribution fee, 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.
<TABLE>
<CAPTION>
Average Daily
Net Assets Annual Rate Expense Limit
Fee Schedule of Portfolio Percentage (%) Percentage (%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio
Aggressive Growth Portfolio First $300 Million 0.75 N/A(1)
Capital Appreciation Portfolio Next $200 Million 0.70
International Growth Portfolio Over $500 Million 0.65
Worldwide Growth Portfolio
Balanced Portfolio
- ------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio First $300 Million 0.75
Growth and Income Portfolio Next $200 Million 0.70 1.25(1)(2)
Over $500 Million 0.65
- ------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio First $300 Million 0.65 1.00(2)
Over $300 Million 0.55
- ------------------------------------------------------------------------------------------------------------------
High-Yield Portfolio First $300 Million 0.75 1.00(2)
Over $300 Million 0.65
- ------------------------------------------------------------------------------------------------------------------
Money Market Portfolio All Asset Levels 0.25 0.50(2)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Janus Capital has agreed to reduce Growth, Aggressive Growth, Capital
Appreciation, International Growth, Worldwide Growth, Balanced, Equity
Income and Growth and Income Portfolio's management fee to the extent that
such fee exceeds the effective rate of the Janus retail fund corresponding
to such Portfolio. Janus Capital has agreed to continue such waivers until
at least the next annual renewal of the advisory agreements. The effective
rate is the management fee calculated by the corresponding retail fund as of
the last day of each calendar quarter (expressed as an annual rate). The
effective rates of Janus Fund, Janus Enterprise Fund, Janus Twenty Fund,
Janus Overseas Fund, Janus Worldwide Fund, Janus Balanced Fund, Janus Equity
Income Fund, and Janus Growth and Income Fund were 0.65%, 0.67%, 0.65%,
0.66%, 0.65%, 0.67%, 0.71% and 0.66%, respectively, for the quarter ended
September 30, 1999.
(2) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory contracts. The
distribution fee described on page 34 is not included in the expense limit.
30 Janus Aspen Series
<PAGE>
INVESTMENT PERSONNEL
PORTFOLIO MANAGERS
LAURENCE J. CHANG
- --------------------------------------------------------------------------------
is Executive Vice President and co-manager of International
Growth Portfolio and Worldwide Growth Portfolio which he has
co-managed since May 1998 and December 31, 1999, respectively. He
has also co-managed Janus Overseas Fund and Janus Worldwide Fund
since April 1998 and September 1999, respectively. He served as
assistant portfolio manager for these funds since 1996. Mr. Chang
joined Janus Capital in 1993 after receiving a Masters Degree in
Political Science from Stanford University. He is a Chartered
Financial Analyst.
DAVID J. CORKINS
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Growth and
Income Portfolio which he has managed since its inception. He is
Executive Vice President and portfolio manager of Janus Growth
and Income Fund which he has managed since August 1997. He
previously served as an assistant portfolio manager of Janus
Mercury Fund. He joined Janus in 1995 as a research analyst
specializing in domestic financial services companies and a
variety of foreign industries. Prior to joining Janus, he was the
Chief Financial Officer of Chase U.S. Consumer Services, Inc., a
Chase Manhattan mortgage business. He holds a Bachelor of Arts in
English and Russian from Dartmouth and received his Master of
Business Administration from Columbia University in 1993.
JAMES P. GOFF
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Aggressive
Growth Portfolio, which he has managed since inception. Mr. Goff
joined Janus Capital in 1988 and has managed Janus Enterprise
Fund since its inception. Mr. Goff co-managed or managed Janus
Venture Fund from December 1993 to February 1, 1997. He holds a
Bachelor of Arts in Economics from Yale University and is a
Chartered Financial Analyst.
HELEN YOUNG HAYES
- --------------------------------------------------------------------------------
is Executive Vice President and co-manager of Worldwide Growth
Portfolio and International Growth Portfolio, which she has
managed or co-managed since inception. 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.
Management of the portfolios 31
<PAGE>
SHARON S. PICHLER
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Money Market
Portfolio, which she has managed since inception. She also has
managed Janus Money Market Fund, Janus Government Money Market
Fund and Janus Tax-Exempt Money Market Fund since inception. She
holds a Bachelor of Arts in Economics from Michigan State
University and a Master of Business Administration from the
University of Texas at San Antonio. Ms. Pichler is a Chartered
Financial Analyst.
KAREN L. REIDY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Balanced
Portfolio and Equity Income Portfolio as of January 2000. She
also manages Janus Balanced Fund and Equity Income Fund as of
January 2000. She is also assistant portfolio manager of Janus
Fund. Prior to joining Janus Capital in 1995, she worked for
Price Waterhouse in the Mergers and Acquisitions area, performing
corporate due diligence, and as an audit senior, analyzing
financials for corporate clients. She received an undergraduate
degree in Accounting from the University of Colorado. She is a
Chartered Financial Analyst.
BLAINE P. ROLLINS
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Growth
Portfolio as of January 2000. He previously managed Balanced
Portfolio from May 1996 to December 1999 and Equity Income
Portfolio from its inception to December 1999. Mr. Rollins joined
Janus Capital in 1990 and has managed Janus Fund since January
2000, Janus Balanced Fund from January 1996 until December 1999
and Janus Equity Income Fund from inception until December 1999.
He was an assistant portfolio manager of Janus Fund from January
1994 until December 1999. He gained experience as a fixed-income
trader and equity research analyst prior to managing Balanced
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 High-Yield
Portfolio, which he has managed or co-managed since October 1996.
He previously co-managed Flexible Income Portfolio from January
1997 to May 1998. Mr. Rufenacht joined Janus Capital in 1990 and
has managed Janus Short-Term Bond Fund since January 1996. He is
also the portfolio manager of Janus High-Yield Fund. He
previously co-managed Janus Flexible Income Fund from June 1996
to February 1998. He holds a Bachelor of Arts in Business from
the University of Northern Colorado.
SCOTT W. SCHOELZEL
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Capital
Appreciation Portfolio, which he has managed since its inception.
He is portfolio manager of Janus Twenty Fund, which he has
managed since August 1997. He previously managed Janus Olympus
Fund from its inception to August 1997. Mr. Schoelzel joined
Janus Capital in January 1994. He holds a Bachelor of Arts in
Business from Colorado College.
32 Janus Aspen Series
<PAGE>
RONALD V. SPEAKER
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Flexible
Income Portfolio which he has managed or co-managed since its
inception. He previously served as co-manager of High-Yield
Portfolio, from its inception to May 1998. He managed Short-Term
Bond Portfolio from its inception through April 1996. Mr. Speaker
joined Janus Capital in 1986. He has managed or co-managed Janus
Flexible Income Fund since December 1991 and previously managed
both Janus Short-Term Bond Fund and Janus Federal Tax-Exempt Fund
from inception through December 1995. He previously managed or
co-managed Janus High-Yield Fund from its inception to February
1998. He holds a Bachelor of Arts in Finance from the University
of Colorado and is a Chartered Financial Analyst.
In January 1997, Mr. Speaker settled an SEC administrative action
involving two personal trades made by him in January of 1993.
Without admitting or denying the allegations, Mr. Speaker agreed
to civil money penalty, disgorgement, and interest payments
totaling $37,199 and to a 90-day suspension which ended on April
25, 1997.
ASSISTANT PORTFOLIO MANAGERS
DAVID C. DECKER
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Growth Portfolio. He is also
an assistant portfolio manager of Janus Fund. He is Executive
Vice President and portfolio manager of Janus Special Situations
Fund. Mr. Decker received a Masters of Business Administration in
Finance from the Fuqua School of Business at Duke University and
a Bachelor's Degree in Economics and Political Science from Tufts
University. He is a Chartered Financial Analyst.
RON SACHS
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Aggressive Growth Portfolio.
Mr. Sachs joined Janus Capital in 1996 as a research analyst.
Prior to coming to Janus, he worked as a consultant for Bain &
Company and as an attorney for Willkie, Farr & Gallagher. Mr.
Sachs graduated from Princeton cum laude with an undergraduate
degree in economics. He obtained his law degree from the
University of Michigan. Mr. Sachs is a Chartered Financial
Analyst.
JOHN H. SCHREIBER
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Growth Portfolio, Balanced
Portfolio and Equity Income Portfolio. Mr. Schreiber joined Janus
in 1997 as an equity research analyst. Prior to coming to Janus
he was an equity analyst with Fidelity Investments. Mr. Schreiber
holds a Bachelor of Science degree in mechanical engineering from
the University of Washington and a Master of Business
Administration from Harvard University. He is a Chartered
Financial Analyst.
Management of the portfolios 33
<PAGE>
Other information
CLASSES OF SHARES
Each Portfolio offers three classes of shares, one of which, the
Service Shares, are offered pursuant to this prospectus. The Shares
offered by this prospectus are available only in connection with
investment in and payments under variable insurance contracts as well
as certain qualified retirement plans. Because the expenses of each
class may differ, the performance of each class is expected to differ.
If you would like additional information about either the
Institutional Shares or the Retirement Shares, please call
1-800-525-0020.
DISTRIBUTION FEE
Under a distribution and service plan adopted in accordance with Rule
12b-1 under the 1940 Act, the Shares may pay Janus Distributors, Inc.,
the Trust's distributor, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares of a Portfolio. Under the terms
of the Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified plan
service providers as compensation for distribution and shareholder
servicing performed by such entities. Because 12b-1 fees are paid out
of the Service Shares' assets on an ongoing basis, they will increase
the cost of your investment and may cost you more than paying other
types of sales charges.
CONFLICTS OF INTEREST
The Trust'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. Although
the Portfolios do not currently anticipate any disadvantages to owners
of variable insurance contracts because each Portfolio offers its
shares to such entities, there is a possibility that a material
conflict may arise. The Trustees monitor events in order to identify
any disadvantages or material irreconcilable conflicts and to
determine what action, if any, should be taken in response. If a
material disadvantage or conflict occurs, the Trustees may require one
or more insurance company separate accounts or qualified plans to
withdraw its investments in one or more Portfolios or substitute
Shares of another Portfolio. If this occurs, a Portfolio may be forced
to sell its securities at disadvantageous prices. In addition, the
Trustees may refuse to sell Shares of any Portfolio to any separate
account or qualified plan 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. It is possible that a qualified plan investing in the
Portfolios could lose its qualified plan status under the Internal
Revenue Code, which could have adverse tax consequences on insurance
company separate accounts investing in the Shares. Janus Capital
intends to monitor such qualified plans and the Portfolios may
discontinue sales to a qualified plan and require plan participants
with existing investments in the Shares to redeem those investments if
a plan loses (or in the opinion of Janus Capital is at risk of losing)
its qualified plan status.
YEAR 2000
Preparing for Year 2000 is a high priority for Janus Capital, which
has established a dedicated group to address this issue. Janus Capital
has devoted considerable internal resources and has engaged one of the
foremost experts in the field to help achieve Year 2000 readiness.
Janus Capital does not anticipate that Year 2000-related issues will
have a material impact on its ability to continue to provide the
Portfolios with service at current levels; however, Janus Capital
cannot make any assurances that the steps it has taken to ensure Year
2000 readiness will be successful. In addition, there can be no
assurance that Year 2000 issues will not affect the companies in which
the Portfolios invest or worldwide markets and economies.
34 Janus Aspen Series
<PAGE>
Distributions and taxes
DISTRIBUTIONS
To avoid taxation of the Portfolios, the Internal Revenue Code
requires each Portfolio to distribute net income and any net gains
realized on its investments annually. A Portfolio's income from
dividends and interest and any net realized short-term gains are paid
to shareholders as ordinary income dividends. Net realized long-term
gains are paid to shareholders as capital gains distributions.
PORTFOLIOS OTHER THAN MONEY MARKET PORTFOLIO
Each class of each Portfolio, other than Money Market Portfolio,
distributes substantially all of its investment income at least
semi-annually and its net realized gains, if any, at least annually.
All dividends and capital gains distributions from Shares of a
Portfolio will automatically be reinvested into additional Shares of
that Portfolio.
HOW DISTRIBUTIONS AFFECT NAV
Distributions, other than daily income dividends, are paid to
shareholders as of the record date of the distribution of a Portfolio,
regardless of how long the shares have been held. Undistributed income
and realized gains are included in the daily NAV of a Portfolio's
Shares. The Share price of a Portfolio drops by the amount of the
distribution, net of any subsequent market fluctuations. For example,
assume that on December 31, the Shares of Growth Portfolio declared a
dividend in the amount of $0.25 per share. If the price of Growth
Portfolio's Shares was $10.00 on December 30, the share price on
December 31 would be $9.75, barring market fluctuations.
MONEY MARKET PORTFOLIO
For the Shares of Money Market Portfolio, 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.
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 the
Shares of 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 or plans may be subject to
ordinary income tax and, if made before age 59 1/2, a 10% penalty tax.
The tax status of your investment depends on the features of your
qualified plan or variable insurance contract. Further information may
be found in your plan documents or in the prospectus of the separate
account offering such contract.
TAXATION OF THE PORTFOLIOS
Dividends, interest and some gains received by the Portfolios on
foreign securities may be subject to withholding of foreign taxes. The
Portfolios may from year to year make the election permitted under
Section 853 of the Internal Revenue Code to pass through such taxes to
shareholders. If such election is not made, any foreign taxes paid or
accrued will represent an expense to the Portfolios which will reduce
their investment income.
Distributions and taxes 35
<PAGE>
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, because a class of shares of each Portfolio
are sold in connection with variable annuity contracts and variable
life insurance contracts, 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.
36 Janus Aspen Series
<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. CERTAIN
PORTFOLIOS MAY NOT BE AVAILABLE IN CONNECTION WITH A PARTICULAR
CONTRACT AND CERTAIN CONTRACTS MAY LIMIT ALLOCATIONS AMONG THE
PORTFOLIOS. 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.
PRICING OF PORTFOLIO SHARES
Investments will be processed at the NAV next determined after an
order is received and accepted by a Portfolio or its agent. In order
to receive a day's price, your order must be received by the close of
the regular trading session of the New York Stock Exchange any day
that the NYSE is open. Securities of the Portfolios other than Money
Market Portfolio are valued at market value or, if a market quotation
is not readily available, at their fair value determined in good faith
under procedures established by and under the supervision of the
Trustees. Short-term instruments maturing within 60 days are valued at
amortized cost, which approximates market value. See the SAI for more
detailed information.
To the extent a Portfolio holds securities that are primarily listed
on foreign exchanges that trade on weekends or other days when the
Portfolios do not price their shares, the NAV of a Portfolio's shares
may change on days when shareholders will not be able to purchase or
redeem the Portfolio's shares.
Money Market Portfolio's 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 Share's NAV to reflect current market conditions,
should be initiated to prevent any material dilutive effect on
shareholders.
PURCHASES
Purchases of 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 the Shares of each Portfolio.
Participating insurance companies and certain other designated
organizations are authorized to receive purchase orders on the
Portfolios' behalf.
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.
Although there is no present intention to do so, the Portfolios may
discontinue sales of their shares if management and the Trustees
believe that continued sales may adversely affect a Portfolio's
ability to achieve its investment objective. If sales of a Portfolio's
Shares are discontinued, it is expected that existing participants
invested in that Portfolio would be permitted to continue to authorize
investment in that Portfolio and to reinvest any dividends or capital
gains distributions, absent highly unusual circumstances. The
Portfolios may discontinue sales to a qualified plan and require plan
participants with existing investments in the Shares to redeem those
investments if the plan loses (or in the opinion of Janus Capital, is
at risk of losing) its qualified plan status.
Shareholder's guide 37
<PAGE>
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 or its agent.
Redemption proceeds will normally be wired the business day following
receipt of the redemption order, but in no event later than seven days
after receipt of such order.
SHAREHOLDER COMMUNICATIONS
Shareholders will receive annual and semiannual reports including the
financial statements of the Shares 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.
38 Janus Aspen Series
<PAGE>
Financial highlights
No Financial Highlights are presented for the Service Shares because
the Shares did not commence operations until January 1, 2000.
Financial highlights 39
<PAGE>
Glossary of investment terms
This glossary provides a more detailed description of some of the
types of securities and other instruments in which the Portfolios may
invest. The Portfolios may invest in these instruments to the extent
permitted by their investment objectives 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 of the bond) at a
specified maturity and to make scheduled interest payments.
COMMERCIAL PAPER is a short-term debt obligation with a maturity
ranging from 1 to 270 days issued by banks, corporations and other
borrowers to investors seeking to invest idle cash. The Portfolios may
purchase commercial paper issued in private placements under Section
4(2) of the Securities Act of 1933.
COMMON STOCKS are equity securities representing shares of ownership
in a company and usually carry voting rights and earns dividends.
Unlike preferred stock, dividends on common stock are not fixed but
are declared at the discretion of the issuer's board of directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed
dividend or interest payment and are convertible into common stock at
a specified price or conversion ratio.
DEBT SECURITIES are securities representing money borrowed that must
be repaid at a later date. Such securities have specific maturities
and usually a specific rate of interest or an original purchase
discount.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based
corporation that entitle the holder to dividends and capital gains on
the underlying security. Receipts include those issued by domestic
banks (American Depositary Receipts), foreign banks (Global or
European Depositary Receipts) and broker-dealers (depositary shares).
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
40 Janus Aspen Series
<PAGE>
income includes dividends, interest, royalties, rents and annuities.
To avoid taxes and interest that the Portfolios must pay if these
investments are profitable, the Portfolios may make various elections
permitted by the tax laws. 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.
PAY-IN-KIND BONDS are debt securities that normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value
equal to the amount of the coupon payment that would have been made.
PREFERRED STOCKS are equity securities that generally pay dividends at
a specified rate and have preference over common stock in the payment
of dividends and liquidation. Preferred stock generally does not carry
voting rights.
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 will be used primarily to
provide cash to satisfy unusually high redemption requests, or for
other temporary or emergency purposes.
RULE 144A SECURITIES are securities that are not registered for sale
to the general public under the Securities Act of 1933, but that may
be resold to certain institutional investors.
STANDBY COMMITMENTS are obligations purchased by a Portfolio from a
dealer that give the Portfolio the option to sell a security to the
dealer at a specified price.
STEP COUPON BONDS are debt securities that trade at a discount from
their face value and pay coupon interest. The discount from the face
value depends on the time remaining until cash payments begin,
prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer.
STRIP BONDS are debt securities that are stripped of their interest
(usually by a financial intermediary) after the securities are issued.
The market value of these securities generally fluctuates more in
response to changes in interest rates than interest-paying securities
of comparable maturity.
TENDER OPTION BONDS are generally long-term securities that are
coupled with an option to tender the securities to a bank,
broker-dealer or other financial institution at periodic intervals and
receive the face value of the bond. This type of security is commonly
used as a means of enhancing the security's liquidity.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S.
government that are supported by its full faith and credit. Treasury
bills have initial maturities of less than one year, Treasury notes
have initial maturities of one to ten years and Treasury bonds may be
issued with any maturity but generally have maturities of at least ten
years. U.S. government securities also include indirect obligations of
the U.S. government that are issued by federal agencies and government
sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S.
government. Some agency securities are supported by the right of the
issuer to borrow from the Treasury, others are supported by the
discretionary authority of the U.S. government to purchase the
agency's obligations and others are supported only by the credit of
the sponsoring agency.
Glossary of investment terms 41
<PAGE>
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 in between the purchase and
settlement dates. New issues of stocks and bonds, private placements
and U.S. government securities may be sold in this manner.
ZERO COUPON BONDS are debt securities that do not pay regular interest
at regular intervals, but are issued at a discount from face value.
The discount approximates the total amount of interest the security
will accrue from the date of issuance to maturity. The market value of
these securities generally fluctuates more in response to changes in
interest rates than interest-paying securities.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
FORWARD CONTRACTS are contracts to purchase or sell a specified amount
of a financial instrument for an agreed upon price at a specified
time. Forward contracts are not currently exchange traded and are
typically negotiated on an individual basis. The Portfolios may enter
into forward currency contracts to hedge against declines in the value
of securities denominated in, or whose value is tied to, a currency
other than the U.S. dollar or to reduce the impact of currency
appreciation on purchases of such securities. They may also enter into
forward contracts to purchase or sell securities or other financial
indices.
FUTURES CONTRACTS are contracts that obligate the buyer to receive and
the seller to deliver an instrument or money at a specified price on a
specified date. The 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
42 Janus Aspen Series
<PAGE>
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.
Glossary of investment terms 43
<PAGE>
Explanation of rating categories
The following is a description of credit ratings issued by two of the
major credit ratings agencies. Credit ratings evaluate only the safety
of principal and interest payments, not the market value risk of lower
quality securities. Credit rating agencies may fail to change credit
ratings to reflect subsequent events on a timely basis. Although Janus
Capital considers security ratings when making investment decisions,
it also performs its own investment analysis and does not rely solely
on the ratings assigned by credit agencies.
STANDARD & POOR'S
RATINGS SERVICES
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
Investment Grade
AAA......................... Highest rating; extremely strong capacity to pay principal
and interest.
AA.......................... High quality; very strong capacity to pay principal and
interest.
A........................... Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changing circumstances
and economic conditions.
BBB......................... Adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters, but adverse economic
conditions or changing circumstances more likely to lead to
a weakened capacity to pay principal and interest than for
higher rated bonds.
Non-Investment Grade
BB, B, CCC, CC, C........... Predominantly speculative with respect to the issuer's
capacity to meet required interest and principal payments.
BB - lowest degree of speculation; C - the highest degree of
speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk exposure to
adverse conditions.
D........................... In default.
</TABLE>
44 Janus Aspen Series
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
Investment Grade
Aaa......................... Highest quality, smallest degree of investment risk.
Aa.......................... High quality; together with Aaa bonds, they compose the
high-grade bond group.
A........................... Upper-medium grade obligations; many favorable investment
attributes.
Baa......................... Medium-grade obligations; neither highly protected nor
poorly secured. Interest and principal appear adequate for
the present but certain protective elements may be lacking
or may be unreliable over any great length of time.
Non-Investment Grade
Ba.......................... More uncertain, with speculative elements. Protection of
interest and principal payments not well safeguarded during
good and bad times.
B........................... Lack characteristics of desirable investment; potentially
low assurance of timely interest and principal payments or
maintenance of other contract terms over time.
Caa......................... Poor standing, may be in default; elements of danger with
respect to principal or interest payments.
Ca.......................... Speculative in a high degree; could be in default or have
other marked shortcomings.
C........................... Lowest-rated; extremely poor prospects of ever attaining
investment standing.
</TABLE>
Unrated securities will be treated as noninvestment grade securities
unless a portfolio manager determines that such securities are the
equivalent of investment grade securities. Securities that have
received ratings from more than one agency are considered investment
grade if at least one agency has rated the security investment grade.
Explanation of rating categories 45
<PAGE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended June 30, 1999, the percentage of
securities holdings for the following Portfolios by rating category
based upon a weighted monthly average was:
<TABLE>
<CAPTION>
FLEXIBLE INCOME PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C>
BONDS-S&P RATING:
AAA 11%
AA 3%
A 12%
BBB 19%
BB 12%
B 20%
CCC 1%
CC 0%
C 0%
Not Rated 7%
Preferred Stock 1%
Cash and Options 14%
TOTAL 100%
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C>
BONDS-S&P RATING:
AAA 1%
AA 0%
A 0%
BBB 1%
BB 7%
B 67%
CCC 9%
CC 0%
C 0%
Not Rated 13%
Preferred Stock 0%
Cash and Options 2%
TOTAL 100%
----------------------------------------------------------------------------------------
</TABLE>
No other Portfolio described in this Prospectus held 5% or more of its
assets in bonds rated below investment grade for the fiscal period
ended December 31, 1998.
46 Janus Aspen Series
<PAGE>
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<PAGE>
[JANUS LOGO]
1-800-29JANUS
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
You can request other information, including a Statement of
Additional Information, Annual Report or Semiannual Report, free of
charge, by contacting your plan sponsor or visiting our Web site at
janus.com. In the Portfolios' Annual Report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Portfolios' performance during their last
fiscal year. Other information is also available from financial
intermediaries that sell Shares of the Portfolios.
The Statement of Additional Information provides detailed
information about the Portfolios and is incorporated into this
Prospectus by reference. You may review the Portfolios' Statement of
Additional Information at the Public Reference Room of the SEC or
get text only copies for a fee, by writing to or calling the Public
Reference Room, Washington, D.C. 20549-6009 (1-800-SEC-0330). You
may obtain the Statement of Additional Information for free from the
SEC's Web site at http://www.sec.gov.
Investment Company Act File No. 811-7736
<PAGE>
Janus Aspen Series
Institutional Shares
Supplement Dated December 31, 1999 to Prospectus Dated May 1, 1999
THIS INFORMATION SUPPLEMENTS THE PROSPECTUS FOR THE INSTITUTIONAL SHARES OF
JANUS ASPEN SERIES DATED MAY 1, 1999. THIS SUPPLEMENT, TOGETHER WITH THE
PROSPECTUS, CONSTITUTE A CURRENT PROSPECTUS. TO REQUEST ANOTHER COPY OF THE
PROSPECTUS PLEASE CONTACT YOUR INSURANCE COMPANY OR PLAN SPONSOR.
The following information should be added to the INVESTMENT
PERSONNEL/PORTFOLIO MANAGERS' biographies on page 33 of the Prospectus.
Effective December 31, 1999, Laurence J. Chang will be co-manager of
Worldwide Growth Portfolio. Prior to serving as co-manager of Worldwide Growth
Portfolio, he served as assistant portfolio manager of Worldwide Growth
Portfolio since 1996 and has co-managed Janus Worldwide Fund since September
1999. Currently, he is also Executive Vice President and co-manager of
International Growth Portfolio and Janus Overseas Fund which he has co-managed
since May 1998 and April 1998, respectively. He served as assistant portfolio
manager for these funds since 1996. Mr. Chang joined Janus Capital in 1993 after
receiving an undergraduate degree with honors in Religion and Philosophy from
Dartmouth College and a Master's Degree in Political Science from Stanford
University. Mr. Chang is a Chartered Financial Analyst.
Effective January 1, 2000, Karen L. Reidy will be Executive Vice President
and portfolio manager of Balanced Portfolio and Equity Income Portfolio
replacing Blaine Rollins who previously managed Balanced Portfolio and Equity
Income Portfolio. Prior to joining Janus Capital in 1995, she worked for Price
Waterhouse in the Mergers and Acquisitions area, performing corporate due
diligence, and as an audit senior, analyzing financials for corporate clients.
She received an undergraduate degree in Accounting from the University of
Colorado. She is a Chartered Financial Analyst.
Effective January 1, 2000, Blaine P. Rollins will be Executive Vice
President and portfolio manager of Growth Portfolio replacing Jim Craig who
previously managed Growth Portfolio from inception to December 1999. Prior to
serving as manager of Growth Portfolio, Mr. Rollins served as Executive Vice
President and portfolio manager of Balanced Portfolio from May 1996 to December
1999, Equity Income Portfolio from inception to December 1999 and assistant
portfolio manager of Growth Portfolio. Mr. Rollins joined Janus Capital in 1990
and gained experience as a fixed-income trader and equity research analyst prior
to managing Balanced Portfolio. He holds a Bachelor of Science in Finance from
the University of Colorado and is a Chartered Financial Analyst.
Effective January 1, 2000, John Schreiber will be assistant portfolio
manager of Growth Portfolio, Balanced Portfolio and Equity Income Portfolio. Mr.
Schreiber joined Janus in 1997 as an equity research analyst. Prior to coming to
Janus, he was an equity analyst with Fidelity Investments. Mr. Schreiber holds a
Bachelor of Science degree in mechanical engineering from the University of
Washington and a Master of Business Administration from Harvard University. He
is a Chartered Financial Analyst.
The following replaces CLASSES OF SHARES on page 36 of the Prospectus:
Each Portfolio currently offers three classes of Shares, one of which, the
Institutional Shares, are offered pursuant to this Prospectus and are sold under
the name Janus Aspen Series. The Shares offered by this Prospectus are available
only in connection with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans. Retirement Shares of
each Portfolio are offered by separate prospectus and are available only to
qualified plans using plan service providers that are compensated for providing
distribution and/or recordkeeping and other administrative services. Service
Shares of each Portfolio are offered by separate prospectus and are available
only in connection with variable insurance contracts and certain qualified
retirement plans offered by entities that require payment for distribution and
shareholder servicing. Because the expenses of each class may differ, the
performance of each class is expected to differ. If you would like additional
information about either Retirement Shares or Service Shares, please call
1-800-525-0200.
A15UP1299
<PAGE>
Janus Aspen Series
Retirement Shares
Supplement Dated December 31, 1999 to Prospectus Dated August 20, 1999
THIS INFORMATION SUPPLEMENTS THE PROSPECTUS FOR THE RETIREMENT SHARES OF
JANUS ASPEN SERIES DATED AUGUST 20, 1999. THIS SUPPLEMENT, TOGETHER WITH THE
PROSPECTUS, CONSTITUTE A CURRENT PROSPECTUS. TO REQUEST ANOTHER COPY OF THE
PROSPECTUS PLEASE CONTACT YOUR PLAN SPONSOR.
The following information should be added to the INVESTMENT
PERSONNEL/PORTFOLIO MANAGERS' biographies on page 31 of the Prospectus.
Effective December 31, 1999, Laurence J. Chang will be co-manager of
Worldwide Growth Portfolio. Prior to serving as co-manager of Worldwide Growth
Portfolio, he served as assistant portfolio manager of Worldwide Growth
Portfolio since 1996 and has co-managed Janus Worldwide Fund since September
1999. Currently, he is, also, Executive Vice President and co-manager of
International Growth Portfolio and Janus Overseas Fund which he has co-managed
since May 1998 and April 1998, respectively. He served as assistant portfolio
manager for these funds since 1996. Mr. Chang joined Janus Capital in 1993 after
receiving an undergraduate degree with honors in Religion and Philosophy from
Dartmouth College and a Master's Degree in Political Science from Stanford
University. Mr. Chang is a Chartered Financial Analyst.
Effective January 1, 2000, Karen L. Reidy will be Executive Vice President
and portfolio manager of Balanced Portfolio and Equity Income Portfolio
replacing Blaine Rollins who previously managed Balanced Portfolio and Equity
Income Portfolio. Prior to joining Janus Capital in 1995, she worked for Price
Waterhouse in the Mergers and Acquisitions area, performing corporate due
diligence, and as an audit senior, analyzing financials for corporate clients.
She received an undergraduate degree in Accounting from the University of
Colorado. She is a Chartered Financial Analyst.
Effective January 1, 2000, Blaine P. Rollins will be Executive Vice
President and portfolio manager of Growth Portfolio replacing Jim Craig who
previously managed Growth Portfolio from inception to December 1999. Prior to
serving as manager of Growth Portfolio, Mr. Rollins served as Executive Vice
President and portfolio manager of Balanced Portfolio from May 1996 to December
1999, Equity Income Portfolio from inception to December 1999 and assistant
portfolio manager of Growth Portfolio. Mr. Rollins joined Capital in 1990 and
gained experience as a fixed-income trader and equity research analyst prior to
managing Balanced Portfolio. He holds a Bachelor of Science in Finance from the
University of Colorado and is a Chartered Financial Analyst.
Effective January 1, 2000, John Schreiber will be assistant portfolio
manager of Growth Portfolio, Balanced Portfolio and Equity Income Portfolio. Mr.
Schreiber joined Janus in 1997 as an equity research analyst. Prior to coming to
Janus, he was an equity analyst with Fidelity Investments. Mr. Schreiber holds a
Bachelor of Science degree in mechanical engineering from the University of
Washington and a Master of Business Administration from Harvard University. He
is a Chartered Financial Analyst.
The following replaces CLASSES OF SHARES on page 34 of the Prospectus:
Each Portfolio currently offers three classes of Shares, one of which, the
Retirement Shares, are offered pursuant to this Prospectus. The Shares offered
by this Prospectus are available only to qualified retirement plans using plan
service providers that are compensated for providing distribution and/or
recordkeeping and other administrative services provided to plan participants.
Institutional Shares of each Portfolio are offered by separate prospectus and
are available only in connection with and payments under variable insurance
contracts as well as certain qualified retirement plans. Service Shares of each
Portfolio are offered by separate prospectus and are available only in
connection with variable insurance contracts and certain qualified retirement
plans offered by entities that require payment for distribution and shareholder
servicing. Because the expenses of each class may differ, the performance of
each class is expected to differ. If you would like additional information about
either Institutional Shares or Service Shares, please call 1-800-525-0200.
ARSUP1299
<PAGE>
The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
is not permitted.
LOGO
Subject to Completion
Preliminary Statement of Additional Information Dated October 26, 1999
Janus Aspen Series
Service Shares
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
Flexible Income Portfolio
High-Yield Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 29JANUS
Statement of Additional Information
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus
for the Retirement Shares (the "Shares") of the portfolios
listed above, each of which is a separate series of Janus Aspen
Series, a Delaware business 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. Each Portfolio is managed separately by Janus
Capital Corporation.
The Service Shares of the Portfolios may be purchased only by
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 Portfolios' Prospectus dated December 31, 1999, which
is incorporated by reference into this SAI and may be obtained
from your insurance company or plan sponsor. This SAI contains
additional and more detailed information about the Portfolios'
operations and activities than the Prospectus. The Annual
Reports, which contain important financial information about
the Portfolios, are incorporated by reference into this SAI and
are also available, without charge from your insurance company
or plan sponsor.
<PAGE>
LOGO
<PAGE>
Table of contents
<TABLE>
<S> <C>
Classification, Portfolio Turnover, Investment Policies and
Restrictions, and Investment Strategies and Risks........... 2
Investment Adviser.......................................... 22
Custodian, Transfer Agent and Certain Affiliations.......... 25
Portfolio Transactions and Brokerage........................ 26
Trustees and Officers....................................... 30
Shares of the Trust......................................... 35
Net Asset Value Determination............................ 35
Purchases................................................ 35
Distribution and Shareholder Servicing Plan.............. 35
Redemptions.............................................. 36
Income Dividends, Capital Gains Distributions and Tax
Status...................................................... 38
Miscellaneous Information................................... 39
Shares of the Trust...................................... 39
Shareholder Meetings..................................... 39
Voting Rights............................................ 39
Independent Accountants.................................. 40
Registration Statement................................... 40
Performance Information..................................... 41
Financial Statements........................................ 43
Appendix A.................................................. 44
Explanation of Rating Categories......................... 44
</TABLE>
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Classification, portfolio turnover, investment policies and restrictions, and
investment strategies and risks
CLASSIFICATION
Each Portfolio is a series of the Trust, an open-end, management
investment company. The Investment Company Act of 1940 ("1940 Act")
classifies mutual funds as either diversified or nondiversified.
Aggressive Growth Portfolio and Capital Appreciation Portfolio are
nondiversified funds. Each of these Portfolios reserves the right to
become a diversified fund by limiting the investments in which more
than 5% of its total assets are invested. Growth Portfolio,
International Growth Portfolio, Worldwide Growth Portfolio, Balanced
Portfolio, Equity Income Portfolio, Growth and Income Portfolio,
Flexible Income Portfolio and High-Yield Portfolio are diversified
funds.
PORTFOLIO TURNOVER
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.
<TABLE>
<CAPTION>
Portfolio Name 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio............................................ 73% 122%
Aggressive Growth Portfolio................................. 132% 130%
Capital Appreciation Portfolio.............................. 91% 101%(1)
International Growth Portfolio.............................. 93% 86%
Worldwide Growth Portfolio.................................. 77% 80%
Balanced Portfolio.......................................... 70% 139%
Equity Income Portfolio..................................... 79% 128%(1)
Growth and Income Portfolio................................. 62%(2) N/A
Flexible Income Portfolio................................... 145% 119%
High-Yield Portfolio........................................ 301% 299%
</TABLE>
(1) May 1, 1997 (inception) to December 31, 1997, annualized.
(2) May 1, 1998 (inception) to December 31, 1998, annualized.
INVESTMENT POLICIES AND RESTRICTIONS APPLICABLE TO ALL PORTFOLIOS
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 or particular class of shares if a matter affects just that
Portfolio or that class of shares), or (ii) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Trust (or a particular Portfolio
or class of shares) 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 Capital Appreciation 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, 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 and Capital
Appreciation Portfolio may invest in the securities of as few as two
issuers.
(2) Invest 25% or more of the value of their respective total assets
in any particular industry (other than U.S. government securities).
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(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 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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
3
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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.
(f) 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.
(g) The Portfolios may not invest in companies for the purpose of
exercising control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), each of the Portfolios may borrow money
from or lend money to other funds that permit such transactions and
for which Janus Capital serves as investment adviser. All such
borrowing and lending will be subject to the above limits. A Portfolio
will borrow money through the program only when the costs are equal to
or lower than the cost of bank loans. Interfund loans and borrowings
normally extend overnight, but can have a maximum duration of seven
days. A Portfolio will lend through the program only when the returns
are higher than those available from other short-term instruments
(such as repurchase agreements). A Portfolio may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending Portfolio could result in
a lost investment opportunity or additional borrowing costs.
For the purposes of these investment restrictions, the identification
of the issuer of a municipal obligation depends on the terms and
conditions of the security. When assets and revenues of a political
subdivision are separate from those of the government that created the
subdivision and the security is backed only by the assets and revenues
of the subdivision, the subdivision is deemed to be the sole issuer.
Similarly, in the case of an industrial development bond, if the bond
is backed only by assets and revenues of a nongovernmental user, then
the nongovernmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity
guarantees the security, the guarantee would be considered a separate
security that would be treated as an issue of the guaranteeing entity.
For purposes of the Portfolios' restriction on investing in a
particular industry, the Portfolios will rely primarily on industry
classifications as published by Bloomberg L.P. To the extent that
Bloomberg L.P. classifications are so broad that the primary economic
characteristics in a single class are materially different, the
Portfolios may further classify issuers in accordance with industry
classifications as published by the 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
securities.
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
4
<PAGE>
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).
INVESTMENT STRATEGIES AND RISKS
Cash Position
As discussed in the Prospectus, when a portfolio manager believes that
market conditions are unfavorable for profitable investing, or when he
or she is otherwise unable to locate attractive investment
opportunities, the Portfolio's investment in cash and similar
investments may increase. Securities that the Portfolios may invest in
as a means of receiving a return on idle cash include commercial
paper, certificates of deposit, repurchase agreements or other
short-term debt obligations. The Portfolios may also invest in money
market funds, including funds managed by Janus Capital. (See
"Investment Company Securities" on page 8).
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 have authorized Janus Capital to make liquidity
determinations with respect to certain securities, including Rule 144A
Securities, commercial paper and municipal lease obligations purchased
by the Portfolios. 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"). A
foreign security that may be freely traded on or through the
facilities of an offshore exchange or other established offshore
securities market is not deemed to be a restricted security subject to
these procedures.
If illiquid securities exceed 15% of a Portfolio's net assets after
the time of purchase the Portfolio will take steps to reduce in an
orderly fashion its holdings of illiquid securities. Because illiquid
securities may not be readily marketable, a portfolio manager may not
be able to dispose of them in a timely manner. As a result, a
Portfolio may be forced to hold illiquid securities while their price
depreciates. Depreciation in the price of illiquid securities may
cause the net asset value of a Portfolio to decline.
Securities Lending
The Portfolios may lend securities to qualified parties (typically
brokers or other financial institutions) who need to borrow securities
in order to complete certain transactions such as covering short
sales, avoiding failures to deliver securities or completing arbitrage
activities. The Portfolios may seek to earn additional income through
securities lending. Since there is the risk of delay in recovering a
loaned security or the risk of loss in collateral rights if the
borrower fails financially, securities lending will only be made to
parties that Janus Capital deems creditworthy and in good standing. In
addition, such loans will only be made if Janus Capital believes the
benefit from granting such loans justifies the risk. The Portfolios
will not have the right to vote on securities while they are being
lent, but they will call a loan in anticipation of any important vote.
All loans will be continuously secured by collateral which consists of
cash, U.S. government securities, letters of credit and such other
collateral permitted by the Securities and Exchange Commission and
policies approved by the Trustees. Cash collateral may be invested in
money
5
<PAGE>
market funds advised by Janus Capital to the extent consistent with
exemptive relief obtained from the SEC.
Short Sales
Each Portfolio may engage in "short sales against the box." This
technique involves selling either a security that a Portfolio owns, or
a security equivalent in kind and amount to the security sold short
that the Portfolio has the right to obtain, for delivery at a
specified date in the future. A Portfolio may enter into a short sale
against the box to hedge against anticipated declines in the market
price of portfolio securities. If the value of the securities sold
short increases prior to the scheduled delivery date, a Portfolio
loses the opportunity to participate in the gain.
Zero Coupon, Step Coupon and Pay-In-Kind Securities
Each Portfolio may invest up to 10% (without limit for High-Yield
Portfolio and Flexible Income Portfolio) of its assets in zero coupon,
pay-in-kind and step coupon securities. Zero coupon bonds are issued
and traded at a discount from their face value. They do not entitle
the holder to any periodic payment of interest prior to maturity. Step
coupon bonds trade at a discount from their face value and pay coupon
interest. The coupon rate is low for an initial period and then
increases to a higher coupon rate thereafter. The discount from the
face amount or par value depends on the time remaining until cash
payments begin, prevailing interest rates, liquidity of the security
and the perceived credit quality of the issuer. Pay-in-kind bonds
normally give the issuer an option to pay cash at a coupon payment
date or give the holder of the security a similar bond with the same
coupon rate and a face value equal to the amount of the coupon payment
that would have been made. For the purposes of any Portfolio's
restriction on investing in income-producing securities,
income-producing securities include securities that make periodic
interest payments as well as those that make interest payments on a
deferred basis or pay interest only at maturity (e.g., Treasury bills
or zero coupon bonds).
Current federal income tax law requires holders of zero coupon
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 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.
6
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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.
7
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Asset-backed securities represent interests in pools of consumer loans
and are backed by paper or accounts receivables originated by banks,
credit card companies or other providers of credit. Generally, the
originating bank or credit provider is neither the obligor nor the
guarantor of the security, and interest and principal payments
ultimately depend upon payment of the underlying loans by individuals.
Tax-exempt asset-backed securities include units of beneficial
interests in pools of purchase contracts, financing leases, and sales
agreements that may be created when a municipality enters into an
installment purchase contract or lease with a vendor. Such securities
may be secured by the assets purchased or leased by the municipality;
however, if the municipality stops making payments, there generally
will be no recourse against the vendor. The market for tax-exempt
asset-backed securities is still relatively new. These obligations are
likely to involve unscheduled prepayments of principal.
Investment Company Securities
From time to time, the Portfolios may invest in securities of other
investment companies, subject to the provisions of Section 12(d)(1) of
the 1940 Act. The Portfolios may invest in securities of money market
funds managed by Janus Capital in excess of the limitations of Section
12(d)(1) under the terms of an SEC exemptive order obtained by Janus
Capital and the Janus funds.
Depositary Receipts
The 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 underlying securities
issued by a foreign issuer. ADRs, in registered form, are designed for
use in U.S. securities markets. Unsponsored ADRs may be created
without the participation of the foreign issuer. Holders of these ADRs
generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depositary of an unsponsored ADR may be under no
obligation to distribute shareholder communications received from the
foreign issuer or to pass through voting rights. The 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. Depositary Receipts are
generally subject to the same sort of risks as direct investments in a
foreign country, such as, currency risk, political and economic risk,
and market risk, because their values depend on the performance of a
foreign security denominated in its home currency. The risks of
foreign investing are addressed in some detail in the Portfolios'
prospectus.
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.
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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 have
variable or floating rates of interest and, under certain limited
circumstances, may have varying principal amounts. These securities
pay interest at rates that are adjusted periodically according to a
specified formula, usually with reference to some interest rate index
or market interest rate. The floating rate tends to decrease the
security's price sensitivity to changes in interest rates. These types
of securities are relatively long-term instruments that often carry
demand features permitting the holder to demand payment of principal
at any time or at specified intervals prior to maturity. In order to
most effectively use these investments, a portfolio manager must
correctly assess probable movements in interest rates. This involves
different skills than those used to select most portfolio securities.
If the portfolio manager incorrectly forecasts such movements, a
Portfolio could be adversely affected by the use of variable or
floating rate obligations.
STANDBY COMMITMENTS. These instruments, which are similar to a put,
give a 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. No Portfolio will invest more than 5% of its assets in
inverse floaters. Similar to variable and floating rate obligations,
effective use of inverse floaters requires skills different from those
needed to select most portfolio securities. If movements in interest
rates are incorrectly anticipated, a fund could lose money or its NAV
could decline by the use of inverse floaters.
STRIP BONDS. Strip bonds are debt securities that are stripped of
their interest (usually by a financial intermediary) after the
securities are issued. The market value of these securities generally
fluctuates more in response to changes in interest rates than
interest-paying securities of comparable maturity.
The Portfolios will purchase standby commitments, tender option bonds
and instruments with demand features primarily for the purpose of
increasing the liquidity of their holdings.
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 consists of the purchase price plus an agreed upon incremental
amount that is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of
the seller to pay the agreed upon price, which obligation is in effect
secured by the value (at least equal to the amount of the agreed upon
resale price and marked-to-market daily) of the underlying security or
"collateral." A risk associated with repurchase agreements is the
failure of the seller to repurchase the securities as agreed, which
may cause a 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
are subject to the 15% limit on illiquid investments. While it is not
possible to eliminate all risks from these transactions, it
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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 obtain cash to
satisfy unusually heavy redemption requests or for other temporary or
emergency purposes without the necessity of selling portfolio
securities, or to earn additional income on portfolio securities, such
as Treasury bills or notes. In a reverse repurchase agreement, a
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. Using reverse repurchase agreements to earn
additional income involves the risk that the interest earned on the
invested proceeds is less than the expense of the reverse repurchase
agreement transaction. This technique may also have a leveraging
effect on the Portfolio, although the Portfolio's intent to segregate
assets in the amount of the reverse repurchase agreement minimizes
this effect.
High-Yield/High-Risk Securities
Flexible Income Portfolio and High-Yield Portfolio may invest without
limit in securities that are rated below investment grade (e.g.,
securities rated BB or lower by Standard & Poor's Ratings Services or
Ba or lower by Moody's Investors Service, Inc.). No other Portfolio
intends to invest 35% or more of its net assets in such securities.
Lower rated securities involve a higher degree of credit risk, which
is the risk that the issuer will not make interest or principal
payments when due. In the event of an unanticipated default, a
Portfolio would experience a reduction in its income, and could expect
a decline in the market value of the securities so affected.
Any 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
of the size and perceived demand of the issue, among other factors,
certain municipalities may not incur the costs of obtaining a rating.
A Portfolio's manager will analyze the creditworthiness of the issuer,
as well as any financial institution or other party responsible for
payments on the security, in determining whether to purchase unrated
municipal bonds. Unrated debt securities will be included in the 35%
limit of each Portfolio unless its manager deems such securities to be
the equivalent of investment grade securities.
Subject to the above limits, each Portfolio may purchase defaulted
securities only when its portfolio manager believes, based upon
analysis of the financial condition, results of operations and
economic outlook of an issuer, that there is potential for resumption
of income payments and that the securities offer an unusual
opportunity for capital appreciation. Notwithstanding the portfolio
manager's belief about the resumption of income, however, the purchase
of any security on which payment of interest or dividends is suspended
involves a high degree of risk. Such risk includes, among other
things, the following:
Financial and Market Risks. Investments in securities that are in
default involve a high degree of financial and market risks that can
result in substantial or, at times, even total losses. Issuers of
defaulted securities may have substantial capital needs and may become
involved in bankruptcy or reorganization proceedings. Among the
problems involved in investments in such issuers is the fact that it
may be difficult to obtain information about the condition of such
issuers. The market prices of such securities also are subject to
abrupt and erratic movements and above average price volatility, and
the spread between the bid and asked prices of such securities may be
greater than normally expected.
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Disposition of Portfolio Securities. Although these Portfolios
generally will purchase securities for which their portfolio managers
expect an active market to be maintained, defaulted securities may be
less actively traded than other securities and it may be difficult to
dispose of substantial holdings of such securities at prevailing
market prices. The Portfolios will limit holdings of any such
securities to amounts that the portfolio managers believe could be
readily sold, and holdings of such securities would, in any event, be
limited so as not to limit the Portfolios' ability to readily dispose
of securities to meet redemptions.
Other. Defaulted securities require active monitoring and may, at
times, require participation in bankruptcy or receivership proceedings
on behalf of the Portfolios.
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 other 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.
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
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Portfolio's cash that may otherwise be invested would be held
uninvested or invested in other liquid assets so long as the futures
position remains open, such 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 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.
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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
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
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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.
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
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also may hedge some or all of its investments denominated in a foreign
currency or exposed to foreign currency fluctuations against a decline
in the value of that currency relative to the U.S. dollar by entering
into forward currency contracts to sell an amount of that currency (or
a proxy currency whose performance is expected to replicate or exceed
the performance of that currency relative to the U.S. dollar)
approximating the value of some or all of its portfolio securities
denominated in that currency ("position hedge") or by participating in
options or futures contracts with respect to the currency. A 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 or whose value
is tied to 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 other
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 other 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
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Portfolio may buy put options on the foreign currency. 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 projected, 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, should 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 other 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 other liquid assets in an amount not less than the
value of the underlying foreign currency in U.S. dollars
marked-to-market daily.
OPTIONS ON SECURITIES. In an effort to increase current income and to
reduce fluctuations in net asset value, the Portfolios may write
covered put and call options and buy put and call options on
securities
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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 other 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 other liquid assets in a segregated account
with its custodian.
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 other 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
17
<PAGE>
extent that the exercise price is secured by deposited 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. 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.
18
<PAGE>
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 other liquid assets having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated
account by the 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
NRSRO at the time of entering into such transaction. Janus Capital
will monitor the creditworthiness of all counterparties on an ongoing
basis. If there is a default by the other party to such a transaction,
a 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
19
<PAGE>
will segregate cash or other liquid assets having an aggregate net
asset value at least equal to the full amount, accrued on a daily
basis, of its obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions
that may be entered into by a 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. 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.
20
<PAGE>
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.
21
<PAGE>
Investment adviser
As stated in the Prospectus, each Portfolio has an Investment Advisory
Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado
80206-4928. Each Advisory Agreement provides that Janus Capital will
furnish continuous advice and recommendations concerning the
Portfolios' investments, provide office space for the Portfolios, and
pay the salaries, fees and expenses of all Portfolio officers and of
those Trustees who are affiliated with Janus Capital. Janus Capital
also may make payments to selected broker-dealer firms or institutions
which 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.
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, Capital Appreciation
Portfolio, International Growth Portfolio, Worldwide Growth Portfolio,
Balanced Portfolio, Equity Income Portfolio and Growth and Income
Portfolio have each agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of 0.75%
of the first $300 million of the average daily net assets of each
Portfolio, 0.70% of the next $200 million of the average daily net
assets of each Portfolio and 0.65% on 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,
Capital Appreciation Portfolio, International Growth Portfolio,
Worldwide Growth Portfolio, Balanced Portfolio, Equity Income
Portfolio and Growth and Income Portfolio at the effective rate of
Janus Fund, Janus Enterprise Fund, Janus Olympus Fund, Janus Overseas
Fund, Janus Worldwide Fund, Janus Balanced Fund, Janus Equity Income
Fund and Janus Growth and Income 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 Twenty Fund, Janus Overseas Fund, Janus Worldwide Fund, Janus
Balanced Fund, Janus Equity Income Fund and Janus Growth and Income
Fund were 0.65%, 0.67%, 0.65%, 0.66%, 0.65%, 0.67%, 0.71% and 0.66%,
respectively, for the quarter ended September 30, 1999. Janus Capital
has agreed to continue such reductions until at least the next annual
renewal of the advisory agreements.
In addition, Janus Capital has agreed to reimburse Equity Income
Portfolio and Growth and Income Portfolio by the amount, if any, that
such Portfolio's normal operating expenses in any fiscal year,
including the investment advisory fee but excluding the distribution
fee described below, brokerage commissions, interest, taxes and
extraordinary expenses, exceed an annual rate of 1.25% of the average
daily net assets of the Portfolio until at least the next annual
renewal of the advisory agreements. Mortality risk, expense risk and
other charges imposed by participating insurance companies are also
excluded from the above expense limitation.
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<PAGE>
High-Yield Portfolio has agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of .75% of
the first $300 million of average daily net assets of the Portfolio
and .65% of the average daily net assets in excess of $300 million.
Flexible Income Portfolio has 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 each of
these Portfolios in an amount equal to the amount, if any, that such
Portfolio's normal operating expenses in any fiscal year, including
the investment advisory fee but excluding the distribution fee
described below, brokerage commissions, interest, taxes and
extraordinary expenses, exceed 1% of the average daily net assets for
a fiscal year for Flexible Income Portfolio and High-Yield Portfolio.
Mortality risk, expense risk and other charges imposed by
participating insurance companies are also excluded from the above
expense limitation. Janus Capital has agreed to continue such waivers
until at least the next annual renewal of the advisory agreements.
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>
1998 1997 1996
-------------------------- -------------------------- --------------------------
Portfolio Name Advisory Fees Waivers(1) Advisory Fees Waivers(1) Advisory Fees Waivers(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $ 5,144,931 $3,119,619 -- $1,410,362 --
Aggressive Growth Portfolio $ 4,159,741 $3,036,239 -- $2,102,177 --
Capital Appreciation Portfolio $ 181,285 $ 12,832(2) $ 9,172(2) -- --
International Growth Portfolio $ 1,547,572 $ 645,307 -- $ 55,211 $51,880
Worldwide Growth Portfolio $14,485,092 $7,532,715 -- $2,015,059 --
Balanced Portfolio $ 4,020,954 $1,348,363 -- $ 344,791 --
Equity Income Portfolio $ 42,337 $34,357 $ 5,959(2) $ 5,959(2,3) -- --
Growth and Income Portfolio $ 12,900 $12,900(3,4) -- -- -- --
Flexible Income Portfolio $ 563,148 $ 237,601 -- $ 116,279 --
High-Yield Portfolio $ 24,691 $24,691(3) $ 11,790 $11,790(3) $ 2,304(5) $ 2,304(3)(5)
</TABLE>
(1) In addition to these fee waivers, Janus Capital has agreed to reduce the
advisory fee of the Growth, Aggressive Growth, Capital Appreciation,
International Growth, Worldwide Growth, Balanced, Equity Income Growth and
Income Portfolios to the extent that such fee exceeds the effective rate of
the Janus retail fund corresponding to such Portfolio.
(2) May 1, 1997 (inception) to December 31, 1997.
(3) Fee waiver by Janus Capital exceeded the advisory fee.
(4) May 1, 1998 (inception) to December 31, 1998.
(5) May 1, 1996 (inception) to December 31, 1996.
The Advisory Agreement for each of the Portfolios is dated July 1,
1997 and will continue in effect 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 acts as sub-adviser for a number of private-label mutual
funds and provides separate account advisor services for institutional
accounts. Investment decisions for each account managed by Janus
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<PAGE>
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.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 82%
of the outstanding voting stock of Janus Capital, most of which it
acquired in 1984. KCSI is a publicly traded holding company whose
primary subsidiaries are engaged in transportation, information
processing and financial services. Thomas H. Bailey, President and
Chairman of the Board of Janus Capital, owns approximately 12% of its
voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
[TO BE UPDATED] KCSI has announced its intention to separate its
transportation and financial services businesses. KCSI is currently
studying alternatives for completion of the separation that meet its
business objectives without risking adverse tax consequences. KCSI
expects completion of the separation to be contemplated in 1999.
Each account managed by Janus Capital has its own investment objective
and policies and is managed accordingly by a particular portfolio
manager or team of portfolio managers. As a result, from time to time
two or more different managed accounts may pursue divergent investment
strategies with respect to investments or categories of investments.
Janus Capital does not permit the Portfolios' portfolio managers to
purchase and sell securities for their own accounts except under the
limited exceptions contained in Janus Capital's policy regarding
personal investing by directors/Trustees, officers and employees of
Janus Capital and the Trust. The policy requires investment personnel
and officers of Janus Capital, inside directors/Trustees of Janus
Capital and the 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 Trust to various trading restrictions and
reporting obligations. All reportable transactions are required to be
reviewed for compliance with Janus Capital's policy. Those persons
also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to
exceptions authorized by Janus Capital.
24
<PAGE>
Custodian, transfer agent and certain affiliations
State Street Bank and Trust Company, P.O. Box 0351, Boston,
Massachusetts 02117-0351 is the custodian of the domestic securities
and cash of the Portfolios. State Street and the foreign subcustodians
it selects, have custody of the assets of the Portfolios held outside
the U.S. and cash incidental thereto. 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, 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 Corporation is not
compensated for its services related to the Shares, except for
out-of-pocket costs.
The Portfolios pay DST Systems, Inc., a subsidiary of KCSI, license
fees at the rate of $3.06 per shareholder account for the growth and
combination portfolios and $3.98 per shareholder account for the
fixed-income portfolios for the use of DST's shareholder accounting
system. The Portfolios also pay DST $1.10 per closed shareholder
account. The Portfolios pay DST for the use of its portfolio and fund
accounting system a monthly base fee of $250 to $1,250 per month based
on the number of Janus funds using the system and an asset charge of
$1 per million dollars of net assets (not to exceed $500 per month).
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 credits 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."
Janus Distributors, Inc., 100 Fillmore Street, Denver, Colorado
80206-4928, a wholly-owned subsidiary of Janus Capital, is the Trust's
distributor. Janus Distributors is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc.
25
<PAGE>
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.
26
<PAGE>
For the year ended December 31, 1998, 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:
<TABLE>
<CAPTION>
Portfolio Name Commissions Transactions
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio $413,532 $417,034,639
Aggressive Growth Portfolio $486,104 $392,999,344
Capital Appreciation Portfolio $ 6,456 $ 8,627,008
International Growth Portfolio $ 67,747 $ 21,378,002
Worldwide Growth Portfolio $650,580 $258,735,559
Balanced Portfolio $ 91,836 $ 76,576,730
Equity Income Portfolio $ 1,272 $ 1,058,786
Growth and Income Portfolio $ 642 $ 627,984
</TABLE>
Note: Portfolios that are not included in the table did not pay any commissions
related to research for the stated period.
Janus Capital may use research products and services in servicing
other accounts in addition to the 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.
27
<PAGE>
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:
<TABLE>
<CAPTION>
Portfolio Name 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio $1,062,104 $1,249,908 $ 415,247
Aggressive Growth Portfolio $1,157,439 $ 974,825 $ 616,051
Capital Appreciation Portfolio $ 39,464 $ 2,570(2) N/A
International Growth Portfolio $ 810,115 $ 512,690 $ 49,472
Worldwide Growth Portfolio $5,334,034 $4,223,192 $1,332,024
Balanced Portfolio $ 337,008 $ 408,226 $ 86,264
Equity Income Portfolio $ 6,415 $ 1,055(2) N/A
Growth and Income Portfolio $ 3,844(1) N/A N/A
Flexible Income Portfolio $ 4,050 $ 2,841 $ 0
High-Yield Portfolio $ 679 $ 103 $ 186(3)
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998.
(2) May 1, 1997 (inception) to December 31, 1997.
(3) May 1, 1996 (inception) to December 31, 1996.
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 % of Total % of Total
Portfolio Name December 31, 1998* Expenses* Commissions+ Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $6,937 $5,203 0.65% 0.49%
Aggressive Growth Portfolio $9,626 $7,219 0.83% 0.60%
Capital Appreciation Portfolio $ 0 $ 0 0% 0%
International Growth Portfolio $ 0 $ 0 0% 0%
Worldwide Growth Portfolio $ 0 $ 0 0% 0%
Balanced Portfolio $ 0 $ 0 0% 0%
Equity Income Portfolio $ 7 $ 6 0.12% 0.08%
Growth and Income Portfolio $ 0 $ 0 0% 0%
</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.
<TABLE>
<CAPTION>
Commission Paid through
DSTS for the Commission
Period Paid through DSTS
May 1, 1997 (inception) - Reduction of for the Period Ended Reduction
Portfolio Name December 31, 1997* Expenses* October 31, 1996* of Expenses*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $2,819 $2,114 $4,645 $3,484
Aggressive Growth Portfolio $6,780 $5,085 $1,929 $1,447
International Growth Portfolio $ 0 $ 0 $ 67 $ 51
Worldwide Growth Portfolio $6,697 $5,023 $6,189 $4,642
Balanced Portfolio $ 391 $ 293 $2,565 $1,924
Equity Income Portfolio $ 15 $ 11 $ 0 $ 0
</TABLE>
* The difference between commissions paid through DSTS and expenses reduced
constitute commissions paid to an unaffiliated clearing broker.
NOTE: Portfolios that did not execute trades with DSTS during the periods
indicated are not included in the table.
28
<PAGE>
As of December 31, 1998, certain Portfolios owned securities of their
regular broker-dealers (or parents), as shown below:
<TABLE>
<CAPTION>
Value of
Name of Securities
Portfolio Name Broker-Dealer Owned
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio Charles Schwab Corporation $30,555,043
Aggressive Growth Portfolio Charles Schwab Corporation $13,697,389
Balanced Portfolio Charles Schwab Corporation $24,251,649
Equity Income Portfolio Charles Schwab Corporation $379,659
Growth and Income Portfolio Charles Schwab Corporation $63,211
</TABLE>
29
<PAGE>
Trustees and officers
The following are the names of the Trustees and officers of the Trust,
together with a brief description of their principal occupations
during the last five years.
Thomas H. Bailey, Age 62 - Trustee, Chairman and President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee, Chairman and President of Janus Investment Fund. Chairman,
Chief Executive Officer, Director and President of Janus Capital.
Director of Janus Distributors, Inc.
James P. Craig, III, Age 43 - Trustee and Executive Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and Executive Vice President of Janus Investment Fund. Chief
Investment Officer, Director of Research, Vice Chairman and Director
of Janus Capital. Formerly Executive Vice President and Portfolio
Manager of Growth Portfolio and Janus Fund (from inception and 1986,
respectively, until December 1999). Formerly Executive Vice President
and Co-Manager of Janus Venture Fund (from inception until December
1999).
Gary O. Loo, Age 59 - Trustee#
102 N. Cascade, Suite 500
Colorado Springs, CO 80903
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. President and Director of High
Valley Group, Inc., Colorado Springs, CO (investments).
Dennis B. Mullen, Age 56 - Trustee
7500 E. McCormick Parkway, #24
Scottsdale, AZ 85258
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. Private Investor. Formerly
(1997-1998), Chief Financial Officer-Boston Market Concepts, Boston
Chicken, Inc., Golden, CO (restaurant chain); (1993-1997), President
and Chief Executive Officer of BC Northwest, L.P., a franchise of
Boston Chicken, Inc., Bellevue, WA (restaurant chain).
James T. Rothe, Age 56 - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. Professor of Business, University of
Colorado, Colorado Springs, CO. Principal, Phillips-Smith Retail
Group, Colorado Springs, CO (a venture capital firm). Formerly (1986-
1994), Dean of the College of Business, University of Colorado,
Colorado Springs, CO.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
30
<PAGE>
William D. Stewart, Age 55 - Trustee#
5330 Sterling Drive
Boulder, CO 80302
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. President of HPS Division of MKS
Instruments, Boulder, CO (manufacturer of vacuum fittings and valves).
Martin H. Waldinger, Age 61 - Trustee
4940 Sandshore Court
San Diego, CA 92130
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. Private Consultant. Formerly
(1993-1996), Director of Run Technologies, Inc., a software
development firm, San Carlos, CA.
Laurence J. Chang, Age 34 - Executive Vice President, Co-Manager Worldwide
Growth Portfolio and International Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Co-Manager of Janus Investment Fund+.
David J. Corkins, Age 33 - Executive Vice President, Portfolio Manager Growth
and Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President of Janus Investment Fund. Formerly,
(1995-1997), research analyst at Janus Capital and (1993-1995), Chief
Financial Officer of Chase U.S. Consumer Services, Inc., a Chase
Manhattan mortgage business.
James P. Goff, Age 35 - Executive Vice President, Portfolio Manager of
Aggressive Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital.
Helen Young Hayes, Age 37 - Executive Vice President, Co-Manager Worldwide
Growth and International Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President, Co-Manager of Janus Investment Fund. Vice
President of Janus Capital.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+Includes comparable office with various Janus funds that were reorganized into
Janus Investment Fund on August 7, 1992.
31
<PAGE>
Karen L. Reidy, Age 32 - Executive Vice President and Portfolio Manager of
Balanced Portfolio and Equity Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4648
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager and Assistant Manager
of Janus Investment Fund.
Blaine P. Rollins, Age 32 - Executive Vice President, Portfolio Manager of
Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4648
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital.
Sandy R. Rufenacht, Age 34 - Executive Vice President, Portfolio Manager of
High-Yield Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly, senior accountant,
fixed-income trader and fixed-income research analyst at Janus Capital
(1990-1995).
Ronald V. Speaker, age 35 - Executive Vice President, Portfolio Manager of
Flexible Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund+. Vice President of Janus Capital.
Scott W. Schoelzel, Age 41 - Executive Vice President, Portfolio Manager of
Capital Appreciation Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital.
- --------------------------------------------------------------------------------
+Includes comparable office with various Janus funds that were reorganized into
Janus Investment Fund on August 7, 1992.
*Interested person of the Trust and of Janus Capital.
32
<PAGE>
Thomas A. Early, Age 45 - Vice President and General Counsel*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and General Counsel of Janus Investment Fund. Vice
President, General Counsel and Secretary of Janus Capital. Vice
President and General Counsel of Janus Service Corporation, Janus
Distributors, Inc. and Janus Capital International, Ltd. Director of
Janus World Funds Plc. Formerly (1997 to 1998), Executive Vice
President and General Counsel of Prudential Investments Fund
Management LLC, Newark, New Jersey. Formerly (1994 to 1997), Vice
President and General Counsel of Prudential Retirement Services,
Newark, New Jersey. Formerly (1988 to 1994), Associate General Counsel
and Chief Financial Services Counsel, Frank Russell Company, Tacoma,
Washington.
Steven R. Goodbarn, Age 42 - Vice President and Chief Financial Officer*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Chief Financial Officer of Janus Investment Fund+.
Vice President of Finance, Treasurer and Chief Financial Officer of
Janus Capital, Janus Service Corporation, and Janus Distributors, Inc.
Director of Janus Service Corporation, Janus Distributors, Inc. and
Janus World Funds Plc. Director, Treasurer and Vice President of
Finance of Janus Capital International Ltd. Formerly (1992-1996),
Treasurer of Janus Investment Fund and Janus Aspen Series.
Glenn P. O'Flaherty, Age 41 - Treasurer and Chief Accounting Officer*
100 Fillmore Street, Suite 300
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Treasurer and Chief Accounting Officer of Janus Investment Fund. Vice
President of Janus Capital. Formerly (1991-1997), Director of Fund
Accounting, Janus Capital.
Kelley Abbott Howes, Age 34 - Assistant Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Assistant Vice President and Secretary of Janus Investment Fund.
Director and Vice President of Janus Distributors, Inc. Vice President
and Associate Counsel of Janus Capital.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
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 Trust's Executive Committee shall have and may exercise all the
powers and authority of the Trustees except for matters requiring
action by all Trustees pursuant to the Trust's Bylaws or Trust
Instrument, Delaware law or the 1940 Act.
33
<PAGE>
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 for
fiscal year ended calendar year ended
Name of Person, Position December 31, 1998 December 31, 1998**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ 0 $ 0
James P. Craig, III, Trustee* $ 0 $ 0
William D. Stewart, Trustee $5,426 $82,000
Gary O. Loo, Trustee $4,432 $74,000
Dennis B. Mullen, Trustee $4,801 $82,000
Martin H. Waldinger, Trustee $4,883 $74,000
James T. Rothe, Trustee $4,941 $82,000
</TABLE>
* An interested person of the Portfolios and of Janus Capital. Compensated by
Janus Capital and not the Portfolios.
** As of December 31, 1998, Janus Funds consisted of two registered investment
companies comprised of a total of 32 funds.
34
<PAGE>
Shares of the trust
NET ASSET VALUE DETERMINATION
As stated in the Prospectus, the net asset value ("NAV") of the Shares
of each Portfolio 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 the Shares of each
Portfolio is not determined on days the NYSE is closed (generally, New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas). The per Share NAV of the Shares of each Portfolio is
determined by dividing the total value of a Portfolio's securities and
other assets, less liabilities, attributable to the Shares of a
Portfolio, 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 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 an amortized cost
basis. Securities for which quotations are not readily available, and
other assets, are valued at fair values determined in good faith under
procedures established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the
close of business on each business day in New York (i.e., a day on
which the NYSE is open). In addition, European or Far Eastern
securities trading generally or in a particular country or countries
may not take place on all business days in New York. Furthermore,
trading takes place in Japanese markets on certain Saturdays and in
various foreign markets on days which are not business days in New
York and on which a 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) qualified retirement
plans. Participating insurance companies and certain designated
organizations are authorized to receive purchase orders on the
Portfolios' behalf and those organizations are authorized to designate
their agents and affiliates as intermediaries to receive purchase
orders. Purchase orders are deemed received by a Portfolio when
authorized organizations, their agents or affiliates receive the
order. The Portfolios are not responsible for the failure of any
designated organization or its agents or affiliates to carry out its
obligations to its customers. Shares of the Portfolios are purchased
at the NAV per Share as determined at the close of the regular trading
session of the NYSE next occurring after a purchase order is received
and accepted by a Portfolio or its authorized agent. In order to
receive a day's price, your order must be received by the close of the
regular trading session of the NYSE as described above in "Net Asset
Value Determination." The
35
<PAGE>
prospectus for your insurance company's separate account or your plan
documents contain detailed information about investing in the
different Portfolios.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Under a distribution and shareholder servicing plan ("Plan") adopted
in accordance with Rule 12b-1 under the 1940 Act, the Shares may pay
Janus Distributors, the Trust's distributor, a fee at an annual rate
of up to 0.25% of the average daily net assets of the Shares of a
Portfolio. Under the terms of the Plan, the Trust is authorized to
make payments to Janus Distributors for remittance to insurance
companies and qualified plan service providers as compensation for
distribution and shareholder servicing performed by such service
providers. The Plan is a compensation type plan and permits the
payment at an annual rate of up to 0.25% of the average daily net
assets of the Shares of a Portfolio for recordkeeping and
administrative services as well as activities which are primarily
intended to result in sales of the Shares, including but not limited
to preparing, printing and distributing prospectuses, Statements of
Additional Information, shareholder reports, and educational materials
to prospective and existing contract owners and plan participants;
responding to inquiries by contract owners and plan participants;
receiving and answering correspondence; contract owner and participant
level recordkeeping and administrative services; and similar
activities. On September 14, 1999, Trustees unanimously approved the
Plan which became effective on that date. The Plan and any Rule 12b-1
related agreement that is entered into by the Portfolios or Janus
Distributors in connection with the Plan will continue in effect for a
period of more than one year only so long as continuance is
specifically approved at least annually by a vote of a majority of the
Trustees, and of a majority of the Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or
any related agreements ("12b-1 Trustees"). All material amendments to
the Plan must be approved by a majority vote of the Trustees,
including a majority of the 12b-1 Trustees, at a meeting called for
that purpose. In addition, the Plan may be terminated at any time,
without penalty, by vote of a majority of the outstanding Shares of a
Portfolio or by vote of a majority of 12b-1 Trustees.
REDEMPTIONS
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified retirement
plans. Certain designated organizations are authorized to receive
redemption orders on the Portfolios' behalf and those organizations
are authorized to designate their agents and affiliates as
intermediaries to receive redemption orders. Redemption orders are
deemed received by a Portfolio when authorized organizations, their
agents or affiliates receive the order. The Portfolios are not
responsible for the failure of any designated organization or its
agents or affiliates to carry out its obligations to its customers.
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.
36
<PAGE>
The right to require the Portfolios to redeem their 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.
37
<PAGE>
Income dividends, capital gains distributions and tax status
It is a policy of the Shares of the Portfolios to distribute
substantially all of their respective investment income at least
semi-annually and their respective net realized gains, if any, at
least annually. The Portfolios intend to qualify as regulated
investment companies by satisfying certain requirements prescribed by
Subchapter M of the Internal Revenue Code ("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 appreciate in value, 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.
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. The
Portfolios may from year to year make the election permitted under
Section 853 of the Code to pass through such taxes to shareholders. If
such election is not made, any foreign taxes paid or accrued will
represent an expense to each Portfolio which will reduce its
investment company taxable income.
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 plans.
See the prospectus for the separate account of the related insurance
company or the plan documents for additional information.
38
<PAGE>
Miscellaneous information
Each Portfolio is a series of the Trust, an open-end management
investment company registered under the 1940 Act and organized as a
Delaware business trust on May 20, 1993. As of the date of this SAI,
the Trust is offering eleven series of shares, known as "Portfolios,"
each of which consists of three classes of shares. Additional series
and/or classes 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. Shares of a Portfolio participate equally
in dividends and other distributions by the shares of 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.
The Portfolios each offer three classes of shares. The Shares
discussed in this SAI are offered only in connection with investment
in and payments under variable insurance contracts and to qualified
retirement plans that require a fee from Portfolio assets to procure
distribution and administrative services to contract owners and plan
participants. A second class of shares, Retirement Shares, is offered
only to qualified plans whose service providers require a fee from the
Trust assets for providing certain services to plan participants. The
third class of shares, Institutional Shares, is offered only in
connection with investments in and payments under variable insurance
contracts as well as other qualified retirement plans.
SHAREHOLDER MEETINGS
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 or class only
if a matter affects or requires the vote of only that Portfolio or
class or that Portfolio's or class' interest in the matter differs
from the interest of other Portfolios of the Trust. A shareholder is
entitled to one vote for each Share owned.
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 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 and Mr. Rothe who were
appointed by the Trustees as of June 30, 1995 and as of January 1,
1997, respectively. Under the Trust Instrument, each Trustee will
continue in office until the termination of the Trust or his earlier
death, retirement, resignation, bankruptcy, incapacity or removal.
Vacancies will be filled by a majority of the remaining Trustees,
subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders
39
<PAGE>
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.
As mentioned above in "Shareholder Meetings," each share of each
portfolio of the Trust has one vote (and fractional votes for
fractional shares). Shares of all portfolios 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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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.
40
<PAGE>
Performance information
Quotations of average annual total return for the Shares of a
Portfolio will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in the Shares of 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 expenses of the
Shares of a Portfolio on an annual basis, and assume that all
dividends and distributions are reinvested when paid. The average
annual total return of the Shares of each Portfolio, computed as of
June 30, 1999, is shown in the table below.
The Service Shares commenced operations on January 1, 2000. The
returns shown for the Service Shares of these Portfolios reflect the
historical performance of a different class of shares (the
Institutional Shares) prior to January 1, 2000. That historical
performance of the Institutional Shares has been restated for purposes
of the Service Shares performance based on the Service Shares
estimated fees and expenses (ignoring any fee and expense limitations)
except where that restatement results in higher performance than the
actual historical performance of the Institutional Shares.
<TABLE>
<CAPTION>
Average Annual Total Return
Portfolio Number -----------------------------------
Inception of Months One Five Ten Life of
Portfolio Name Date in Lifetime Year Years Years Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio - Service Shares 9/13/93 69.5 32.43% 25.04% N/A 21.78%
Aggressive Growth Portfolio - Service Shares 9/13/93 69.5 49.36% 27.24% N/A 25.28%
Capital Appreciation Portfolio - Service Shares 5/1/97 26 51.36% N/A N/A 53.15%
International Growth Portfolio - Service Shares 5/2/94 62 5.25% 21.19% N/A 19.11%
Worldwide Growth Portfolio - Service Shares 9/13/93 69.5 13.11% 24.61% N/A 24.05%
Balanced Portfolio - Service Shares 9/13/93 69.5 27.84% 21.58% N/A 20.00%
Equity Income Portfolio - Service Shares 5/1/97 26 43.07% N/A N/A 48.55%
Growth and Income Portfolio - Service Shares 5/1/98 14 36.78% N/A N/A 37.14%
Flexible Income Portfolio - Service Shares 9/13/93 69.5 2.45% 10.01% N/A 8.74%
High-Yield Portfolio - Service Shares 5/1/96 38 (.68)% 10.21% N/A 10.77%
</TABLE>
Yield quotations for a Portfolio's Shares are based on the investment
income per Share earned during a particular 30-day period (including
dividends, if any, and interest), less expenses accrued during the
period ("net investment income"), and are computed by dividing net
investment income by the net asset value per share on the last day of
the period, according to the following formula:
YIELD = 2[(a - b + 1)(6) - 1]
---------------------
cd
where a = dividend and interest income
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during the period
that were entitled to receive dividends
d = maximum net asset value per share on the last day of the
period
41
<PAGE>
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, Inc. or by publications
of general interest such as Forbes, Money, The Wall Street Journal,
Mutual Funds Magazine, Kiplinger's or Smart Money. The Portfolios may
also compare their performance to that of other selected mutual funds
(for example, peer groups created by Lipper or Morningstar), mutual
fund averages or recognized stock market indicators, including, but
not limited to, the Standard & Poor's 500 Composite Stock Price Index,
the Standard & Poor's 400 Midcap Index, the Dow Jones Industrial
Average, the Lehman Brothers Government/Corporate Bond Index, the
Lehman Brothers Government/Corporate 1-3 Year Bond Index, the Lehman
Brothers Long Government/Corporate Bond Index, the Lehman Brothers
Intermediate Government Bond Index, the Lehman Brothers Municipal Bond
Index, the Russell 2000 Index and the NASDAQ composite. In addition,
the 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, Australasia, Far
East Index (EAFE Index). Such performance ratings or comparisons may
be made with funds that may have different investment restrictions,
objectives, policies or techniques than the Portfolios and such other
funds or market indicators may be comprised of securities that differ
significantly from the Portfolios' investments.
42
<PAGE>
Financial statements
The following audited financial statements for Institutional Shares
and Retirement Shares for the period ended December 31, 1998 and the
unaudited Semiannual Report for Institutional Shares and Retirement
Shares for the period ended June 30, 1999 are hereby incorporated into
this Statement of Additional Information by reference to the
Portfolios' Annual Report dated December 31, 1998 and the Portfolios'
Semiannual Report dated June 30, 1999. A copy of each report
accompanies this SAI. The Service Shares had not yet commenced
operations as of June 30, 1999.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT AND SEMIANNUAL REPORT
Schedules of Investments as of December 31, 1998 and June 30, 1999
Statements of Operations for the period ended December 31, 1998 and
June 30, 1999
Statements of Assets and Liabilities as of December 31, 1998 and June
30, 1999
Statements of Changes in Net Assets for the periods ended December 31,
1998 and 1997 and for the six months ended June 30, 1999
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants dated December 31, 1998
The portions of the Annual Report and Semiannual 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.
43
<PAGE>
Appendix A
EXPLANATION OF RATING CATEGORIES
The following is a description of credit ratings issued by two of the
major credit ratings agencies. Credit ratings evaluate only the safety
of principal and interest payments, not the market value risk of lower
quality securities. Credit rating agencies may fail to change credit
ratings to reflect subsequent events on a timely basis. Although Janus
Capital considers security ratings when making investment decisions,
it also performs its own investment analysis and does not rely solely
on the ratings assigned by credit agencies.
STANDARD & POOR'S
RATINGS SERVICES
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
Investment Grade
AAA......................... Highest rating; extremely strong capacity to pay principal
and interest.
AA.......................... High quality; very strong capacity to pay principal and
interest.
A........................... Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changing circumstances
and economic conditions.
BBB......................... Adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters, but adverse economic
conditions or changing circumstances more likely to lead to
a weakened capacity to pay principal and interest than for
higher rated bonds.
Non-Investment Grade
BB, B, CCC, CC, C........... Predominantly speculative with respect to the issuer's
capacity to meet required interest and principal payments.
BB -- lowest degree of speculation; C -- the highest degree
of speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk exposure to
adverse conditions.
D........................... In default.
</TABLE>
MOODY'S INVESTORS SERVICE, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
Investment Grade
Aaa......................... Highest quality, smallest degree of investment risk.
Aa.......................... High quality; together with Aaa bonds, they compose the
high-grade bond group.
A........................... Upper-medium grade obligations; many favorable investment
attributes.
Baa......................... Medium-grade obligations; neither highly protected nor
poorly secured. Interest and principal appear adequate for
the present but certain protective elements may be lacking
or may be unreliable over any great length of time.
Non-Investment Grade
Ba.......................... More uncertain, with speculative elements. Protection of
interest and principal payments not well safeguarded during
good and bad times.
B........................... Lack characteristics of desirable investment; potentially
low assurance of timely interest and principal payments or
maintenance of other contract terms over time.
Caa......................... Poor standing, may be in default; elements of danger with
respect to principal or interest payments.
Ca.......................... Speculative in a high degree; could be in default or have
other marked shortcomings.
C........................... Lowest-rated; extremely poor prospects of ever attaining
investment standing.
</TABLE>
44
<PAGE>
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 ratings from more than one agency are considered investment
grade if at least one agency has rated the security investment grade.
45
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<PAGE>
LOGO
1-800-29JANUS
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
is not permitted.
LOGO
Subject to Completion
Preliminary Statement of Additional Information Dated October 26, 1999
Janus Aspen Series
Service Shares
Money Market Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 29JANUS
Statement of Additional Information
December 31, 1999
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus
for the Retirement Shares (the "Shares") of Money Market
Portfolio. The Portfolio is each a separate series of Janus
Aspen Series, a Delaware trust.
The Service 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 SAI is not a Prospectus and should be read in conjunction
with the Prospectus dated December 31, 1999, which is
incorporated by reference into this SAI and may be obtained
from your insurance company or plan sponsor. This SAI contains
additional and more detailed information about the Portfolio's
operations and activities than the Prospectus. The Annual
Report, which contains important financial information about
the Portfolio, is incorporated by reference into this SAI and
is also available, without charge, from your insurance company
or plan sponsor.
<PAGE>
LOGO
<PAGE>
Table of contents
<TABLE>
<S> <C>
Investment Restrictions and
Investment Strategies....................................... 2
Performance Data............................................ 10
Determination of Net Asset Value............................ 11
Investment Adviser.......................................... 12
Custodian, Transfer Agent
and Certain Affiliations.................................... 14
Portfolio Transactions and Brokerage........................ 15
Trustees and Officers....................................... 17
Purchase of Shares.......................................... 21
Distribution and Shareholder Servicing Plan................. 22
Redemption of Shares........................................ 23
Dividends and Tax Status.................................... 24
Miscellaneous Information................................... 25
Shares of the Trust...................................... 25
Shareholder Meetings..................................... 25
Voting Rights............................................ 25
Independent Accountants.................................. 26
Registration Statement................................... 26
Financial Statements........................................ 27
Appendix A.................................................. 28
Description of Securities Ratings........................ 28
Appendix B.................................................. 31
Description of Municipal Securities...................... 31
</TABLE>
1
<PAGE>
Investment restrictions and investment strategies
INVESTMENT RESTRICTIONS
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 or class
of shares if a matter affects just the Portfolio or class of shares),
or (ii) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of
the Trust (or the Portfolio or class of shares) are present or
represented by proxy.
As used in the restrictions set forth below and as used elsewhere in
this SAI, the term "U.S. Government Securities" shall have the meaning
set forth in the Investment Company Act of 1940, as amended (the "1940
Act"). The 1940 Act defines U.S. Government Securities as securities
issued or guaranteed by the United States government, its agencies or
instrumentalities. U.S. Government Securities may also include
repurchase agreements collateralized and municipal securities escrowed
with or refunded with escrowed U.S. government securities.
The 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 25% or more 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.
2
<PAGE>
(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.
Investment restriction (1) is intended to reflect the requirements
under Section 5(b)(1) of the 1940 Act for a diversified fund. Rule
2a-7 provides that money market funds that comply with the
diversification limits of Rule 2a-7 are deemed to comply with the
diversification limits of Section 5(b)(1). Thus, the Portfolio
interprets restriction (1) in accordance with Rule 2a-7. Accordingly,
if securities are subject to a guarantee provided by a non-controlled
person, the Rule 2a-7 diversification tests apply to the guarantor,
and the diversification test in restriction (1) does not apply to the
issuer.
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 purchase securities on margin, or make short
sales of securities, except for short sales against the box and the
use of short-term credit necessary for the clearance of purchases and
sales of portfolio securities.
(3) 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.
(4) The Portfolio may not invest in companies for the purpose of
exercising control of management.
Under the terms of an exemptive order received from the Securities and
Exchange Commission ("SEC"), the Portfolio may borrow money from or
lend money to other funds that permit such transactions and for which
Janus Capital serves as investment adviser. All such borrowing and
lending will be subject to the above limits. The Portfolio will borrow
money through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally
extend overnight, but can have a maximum duration of seven days. The
Portfolio will lend through the program only when the returns are
higher than those available from other short-term instruments (such as
repurchase agreements). The Portfolio may have to borrow from a bank
at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending Portfolio could result in
a lost investment opportunity or additional borrowing costs.
For purposes of the Portfolio's policies on investing in particular
industries, the Portfolio will rely primarily on industry or industry
group classifications as published by Bloomberg L.P. To the extent
that Bloomberg L.P. industry classifications are so broad that the
primary economic characteristics in a single industry are materially
different, the Portfolio may further classify issuers in accordance
with industry classifications as published by the SEC.
3
<PAGE>
INVESTMENT STRATEGIES
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. Investment in demand features, guarantees
and other types of instruments or features are subject to the
diversification limits under Rule 2a-7.
Pursuant to Rule 2a-7, 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.
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
4
<PAGE>
arrangements with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the
outstanding principal amount of the obligations upon a specified
number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these
obligations. To the extent a demand note does not have a seven day or
shorter demand feature and there is no readily available market for
the obligation, it is treated as an illiquid investment.
Securities with ultimate maturities of greater than 397 days may be
purchased only pursuant to Rule 2a-7. Under that Rule, only those
long-term instruments that have demand features which comply with
certain requirements and certain variable rate U.S. Government
Securities may be purchased. The rate of interest on securities
purchased by 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 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
5
<PAGE>
guaranteed by agencies of the U.S. government. GNMA pass-through
securities are considered to be riskless with respect to default in
that (i) the underlying mortgage loan portfolio is comprised entirely
of government-backed loans and (ii) the timely payment of both
principal and interest on the securities is guaranteed by the full
faith and credit of the U.S. government, regardless of whether or not
payments have been made on the underlying mortgages. GNMA pass-through
securities are, however, subject to the same market risk as comparable
debt securities. Therefore, the market value of 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.
Securities Lending
The Portfolio may lend securities to qualified parties (typically
brokers or other financial institutions) who need to borrow securities
in order to complete certain transactions such as covering short
sales, avoiding failures to deliver securities or completing arbitrage
activities. The Portfolio may seek to earn additional income through
securities lending. Since there is the risk of delay in recovering a
loaned security or the risk of loss in collateral rights if the
borrower fails financially, securities lending will only be made to
parties that Janus Capital deems creditworthy and in good standing. In
addition, such loans will only be made if Janus Capital believes the
benefit from granting such loans justifies the risk. The Portfolio
will not have the right to vote on securities while they are being
lent, but it will call a loan in anticipation of any important vote.
All loans will be continuously secured by collateral which consists of
cash, U.S. government securities, letters of credit and such other
collateral permitted by the Securities and Exchange Commission and
policies approved by the Trustees. Cash collateral may be invested in
money
6
<PAGE>
market funds advised by Janus Capital to the extent consistent with
exemptive relief obtained from the SEC.
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.
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 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.
Investment Company Securities
From time to time, the Portfolio may invest in securities of other
investment companies. The Portfolio is subject to the provisions of
Section 12(d)(1) of the 1940 Act. The Portfolio may invest in
securities of money market funds managed by Janus Capital in excess of
the limitations of Section 12(d)(1) under the terms of an SEC
exemptive order obtained by Janus Capital and the Janus Funds.
Debt Obligations
Money Market Portfolio may invest in debt obligations of domestic
issuers. In general, sales of these securities may not be made absent
registration under the Securities Act of 1933 or the availability of
an appropriate exemption. Pursuant to Section 4(2) of the 1933 Act or
Rule 144A adopted under the 1933 Act, however, some of these
securities are eligible for resale to institutional investors, and
accordingly, Janus Capital may determine that a liquid market exists
for such a security pursuant to guidelines adopted by the Trustees.
7
<PAGE>
Obligations of Financial Institutions
The Portfolio may invest in obligations of financial institutions.
Examples of obligations in which the Portfolio may invest include
negotiable certificates of deposit, bankers' acceptances, time
deposits and other obligations of U.S. banks (including savings and
loan associations) having total assets in excess of one billion
dollars and U.S. branches of foreign banks having total assets in
excess of ten billion dollars. The Portfolio may also invest in
Eurodollar and Yankee bank obligations as discussed below and other
U.S. dollar-denominated obligations of foreign banks having total
assets in excess of ten billion dollars that Janus Capital believes
are of an investment quality comparable to obligations of U.S. banks
in which the Portfolio may invest.
Certificates of deposit represent an institution's obligation to repay
funds deposited with it that earn a specified interest rate over a
given period. Bankers' acceptances are negotiable obligations of a
bank to pay a draft which has been drawn by a customer and are usually
backed by goods in international trade. Time deposits are
non-negotiable deposits with a banking institution that earn a
specified interest rate over a given period. Fixed time deposits,
which are payable at a stated maturity date and bear a fixed rate of
interest, generally may be withdrawn on demand by the Portfolio but
may be subject to early withdrawal penalties and 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 bank obligations are dollar-denominated certificates of
deposit or time deposits issued outside the U.S. capital markets by
foreign branches of U.S. banks and by foreign banks. Yankee bank
obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks.
Foreign, Eurodollar (and to a limited extent, Yankee) bank obligations
are subject to certain sovereign risks. One such risk is the
possibility that a foreign government might prevent dollar-denominated
funds from flowing across its borders. Other risks include: adverse
political and economic developments in a foreign country; the extent
and quality of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes; and
exploration or nationalization of foreign issuers.
U.S. Government Securities
Money Market Portfolio may invest in U.S. Government Securities. U.S.
Government Securities shall have the meaning set forth in the 1940
Act. The 1940 Act defines U.S. Government Securities to include
securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities. U.S. Government Securities may also include
repurchase agreements collateralized by and municipal securities
escrowed with or refunded with U.S. government securities. U.S.
Government Securities in which the 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.
8
<PAGE>
Municipal Leases
The Portfolio may invest in municipal leases. Municipal leases
frequently have special risks not normally associated with general
obligation or revenue bonds. Municipal leases are municipal securities
which may take the form of a lease or an installment purchase or
conditional sales contract. Municipal leases are issued by state and
local governments and authorities to acquire a wide variety of
equipment and facilities. 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.
9
<PAGE>
Performance data
The Portfolio may provide current annualized and effective annualized
yield quotations of the Shares based on the Shares' 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.
The Service Shares commenced operations on January 1, 2000. The
returns shown for the Service Shares of the Money Market Portfolio
reflect the historical performance of a different class of shares (the
Institutional Shares) prior to January 1, 2000. The historical
performance of the Institutional Shares has been restated for purposes
of the Service Shares performance based on the Service Shares
estimated fees and expenses (ignoring any fee and expense limitations)
except where that restatement results in higher performance than the
actual historical performance of the Institutional Shares.
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 Portfolio may also compare its 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's Shares which is used in
such a manner as to be subject to the provisions of Rule 482(d) under
the Securities Act of 1933, as amended, shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one
percent, based on a specific seven calendar day period. The current
yield of the Portfolio's Shares shall be calculated by (a) determining
the net change during a seven calendar day period in the value of a
hypothetical account having a balance of one share at the beginning of
the period, (b) dividing the net change by the value of the account at
the beginning of the period to obtain a base period return, and (c)
multiplying the quotient by 365/7 (i.e., annualizing). For this
purpose, the net change in account value will reflect the value of
additional shares purchased with dividends declared on the original
share and dividends declared on both the original share and any such
additional shares, but will not reflect any realized gains or losses
from the sale of securities or any unrealized appreciation or
depreciation on portfolio securities. In addition, the 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 yield of the
Portfolio's Shares 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's Shares may differ from the rate of
distribution the Shares paid over the same period or the rate of
income reported in the Portfolio's financial statements.
10
<PAGE>
Although published yield information is useful to investors in
reviewing the performance of the Portfolio's Shares, investors should
be aware that the yield fluctuates from day to day and that the
Share'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. The Shares' yield is not fixed or guaranteed,
and an investment in the Portfolio is not insured. Accordingly, the
Shares' 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 yield information may not necessarily be used to
compare the Portfolio with investment alternatives which are insured
or guaranteed.
11
<PAGE>
Determination of net asset value
Pursuant to the rules of the SEC, the Trustees have established
procedures to stabilize 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.
12
<PAGE>
Investment adviser
As stated in the Prospectus, the Portfolio has an Investment Advisory
Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado
80206-4928. The Advisory Agreement provides that Janus Capital will
furnish continuous advice and recommendations concerning the
Portfolio's investments, provide office space for the Portfolio and
pay the salaries, fees and expenses of all Portfolio officers and of
those Trustees who are affiliated with Janus Capital. Janus Capital
also may make payments to selected broker-dealer firms or institutions
which were instrumental in the acquisition of shareholders for the
Portfolio 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.
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 in any fiscal year, including
the investment advisory fee but excluding the distribution fee
described below, brokerage commissions, interest, taxes and
extraordinary expenses, exceed .50% of average daily net assets. Janus
Capital has agreed to continue such waivers until at least the next
annual renewal of the advisory agreements. Mortality risk, expense
risk and other charges imposed by participating insurance companies
are also excluded from the above expense limitation.
For the fiscal year ended December 31, 1998, the advisory fee was
$79,201. For the fiscal year ended December 31, 1997 and December 31,
1996, the advisory fees were $22,333 and $9,287, respectively. For the
fiscal years ended December 31, 1997 and December 31, 1996, Janus
Capital waived $2,184 and $9,287, respectively (the advisory fee
waivers by Janus Capital exceeded the advisory fees for 1996).
The Advisory Agreement is dated July 1, 1997 and will continue in
effect 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 acts as sub-advisor for a number of private-label
mutual funds and provides separate account advisory services for
institutional accounts. Investment decisions for each account managed
by Janus Capital, including the 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
13
<PAGE>
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 Portfolio and other funds advised by Janus
Capital may also transfer daily uninvested cash balances into one or
more joint trading accounts. Assets in the joint trading accounts are
invested in money market instruments and the proceeds are allocated to
the participating funds on a pro rata basis.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 82%
of the outstanding voting stock of Janus Capital, most of which it
acquired in 1984. KCSI is a publicly traded holding company whose
primary subsidiaries are engaged in transportation, information
processing and financial services. Thomas H. Bailey, President and
Chairman of the Board of Janus Capital, owns approximately 12% of its
voting stock and, by agreement with KCSI, selects a majority of Janus
Capital's Board.
[TO BE UPDATED] KCSI has announced its intention to separate its
transportation and financial services businesses. KCSI is currently
studying alternatives for completion of the separation that meet its
business objectives without risking adverse tax consequences. KCSI
expects completion of the separation to be contemplated in 1999.
Each account managed by Janus Capital has its own investment objective
and 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.
Janus Capital does not permit portfolio managers to purchase and sell
securities for their own accounts except under the limited exceptions
contained in Janus Capital's policy regarding personal investing by
directors, officers and employees of Janus Capital and the 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 Trust to various trading restrictions and
reporting obligations. All reportable transactions are required to be
reviewed for compliance with Janus Capital's policy. Those persons
also may be required under certain circumstances to forfeit their
profits made from personal trading.
The provisions of the policy are administered by and subject to
exceptions authorized by Janus Capital.
14
<PAGE>
Custodian, transfer agent and certain affiliations
Citibank, N.A., 111 Wall Street, 24th Floor, Zone 5, New York, NY
10043, 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, 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 related to the Shares, except for out-of-pocket costs.
Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street,
Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus
Capital, is a distributor of the Portfolio. Janus Distributors is
registered as a broker-dealer under the Securities Exchange Act of
1934 (the "Exchange Act") and is a member of the National Association
of Securities Dealers, Inc.
The Portfolio pays DST Systems, Inc., a subsidiary of KCSI, license
fees at the rate of $3.98 per shareholder account for the use of DST's
shareholder accounting system. The Portfolio also pays DST $1.10 per
closed shareholder account. The Portfolio pays DST for the use of its
portfolio and fund accounting system a monthly base fee of $250 to
$1,250 per month based on the number of Janus funds using the system
and an asset charge of $1 per million dollars of net assets (not to
exceed $500 per month).
The Trustees have authorized the Portfolio to use another affiliate of
DST as introducing broker for certain Portfolio transactions as a
means to reduce Portfolio expenses through credits against the charges
of DST and its affiliates with regard to commissions earned by such
affiliate. See "Portfolio Transactions and Brokerage."
15
<PAGE>
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 years ended December 31, 1998, December 31, 1997 and
December 31, 1996, the Portfolio did not incur any brokerage
commissions. The Portfolio generally buys and sells securities in
principal and agency transactions in which no commissions are paid.
However, the Portfolio may engage an agent and pay commissions for
such transactions if Janus Capital believes that the net result of the
transaction to the Portfolio will be no less favorable than that of
contemporaneously available principal transactions.
Janus Capital may use research products and services in servicing
other accounts in addition to the 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 Portfolio purchases or sells a security in the
over-the-counter market, the transaction takes place directly with a
principal market-maker, without the use of a broker, except in those
circumstances where in the opinion of Janus Capital better prices and
executions will be achieved through the use of a broker.
16
<PAGE>
As of December 31, 1998, the Portfolio owned securities of its regular
broker-dealers (or parents) as shown below:
<TABLE>
<CAPTION>
Value of
Name of Securities
Portfolio Name Broker-Dealer Owned
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio ABN AMRO Securities, Inc. $4,920,000
CS First Boston $1,965,875
Goldman Sachs Group, L.P. $1,999,938
Morgan Stanley, Dean Witter, Discover & Co. $1,977,040
</TABLE>
17
<PAGE>
Trustees and officers
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.
TRUSTEES
Thomas H. Bailey, Age 62 - Trustee, Chairman and President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee, Chairman and President of Janus Investment Fund+. Chairman,
Chief Executive Officer, Director and President of Janus Capital.
Director of Janus Distributors, Inc.
James P. Craig, III, Age 43 - Trustee and Executive Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and Executive Vice President of Janus Investment Fund+. Chief
Investment Officer, Director of Research, Vice Chairman and Director
of Janus Capital. Formerly Executive Vice President and Portfolio
Manager of Growth Portfolio and Janus Fund (from inception and 1986,
respectively, until December 1999). Formerly Executive Vice President
and Co-Manager of Janus Venture Fund (from inception until December
1999).
Gary O. Loo, Age 59 - 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.
Dennis B. Mullen, Age 56 - Trustee
14103 Denver West Parkway
Golden, CO 80401
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund+. Private Investor. Formerly
(1997-1998), Chief Financial Officer - Boston Market Concepts, Boston
Chicken, Inc., Golden, Colorado (restaurant chain); (1993-1997),
President and Chief Executive Officer of BC Northwest, L.P., a
franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant
chain).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Executive Committee.
+Includes comparable office with various Janus funds that were reorganized into
Janus Investment Fund on August 7, 1992.
18
<PAGE>
James T. Rothe, Age 56 - Trustee
102 South Tejon Street, Suite 1100
Colorado Springs, CO 80903
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund+. Professor of Business, University
of Colorado, Colorado Springs, Colorado. Principal, Phillips-Smith
Retail Group, Colorado Springs, Colorado (a venture capital firm).
Formerly (1986-1994), Dean of the College of Business, University of
Colorado, Colorado Springs, Colorado.
William D. Stewart, Age 55 - Trustee#
5330 Sterling Drive
Boulder, CO 80302
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund+. President of HPS Division of MKS
Instruments, Boulder, Colorado (manufacturer of vacuum fittings and
valves).
Martin H. Waldinger, Age 61 - Trustee
4940 Sandshore Court
San Diego, CA 92130
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund+. Private Consultant. Formerly (1993
to 1996), Director of Run Technologies, Inc., a software development
firm, San Carlos, California. Formerly (1989 to 1993), President and
Chief Executive Officer of Bridgecliff Management Services, Campbell,
California (a condominium association management company).
OFFICERS
Sharon S. Pichler, Age 50 - Executive Vice President and Portfolio Manager*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Money Market
Fund and Janus Tax-Exempt Money Market Fund series of Janus Investment
Fund+. Formerly (1994-1998) Executive Vice President and Portfolio
Manager of Janus Government Money Market Fund. Vice President of Janus
Capital. Formerly, Assistant Vice President and portfolio manager at
USAA Investment Management Co. (1990-1994).
- --------------------------------------------------------------------------------
+Includes comparable office with various Janus funds that were reorganized into
Janus Investment Fund on August 7, 1992.
*Interested person of the Trust and of Janus Capital.
19
<PAGE>
Thomas A. Early, Age 45 - Vice President and General Counsel*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and General Counsel of Janus Investment Fund. Vice
President, General Counsel and Secretary of Janus Capital. Vice
President and General Counsel of Janus Service Corporation, Janus
Distributors, Inc. and Janus Capital International, Ltd. Director of
Janus World Funds Plc. Formerly (1997 to 1998), Executive Vice
President and General Counsel of Prudential Investments Fund
Management LLC, Newark, New Jersey. Formerly (1994 to 1997), Vice
President and General Counsel of Prudential Retirement Services,
Newark, New Jersey. Formerly (1988 to 1994), Associate General Counsel
and Chief Financial Services Counsel, Frank Russell Company, Tacoma,
Washington.
Steven R. Goodbarn, Age 42 - Vice President and Chief Financial Officer*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Chief Financial Officer of Janus Investment Fund+.
Vice President of Finance, Treasurer and Chief Financial Officer of
Janus Capital, Janus Service Corporation, and Janus Distributors, Inc.
Director of Janus Service Corporation and Janus Distributors, Inc. and
Janus World Funds Plc. Director, Treasurer and Vice President of
Finance of Janus Capital International Ltd. Formerly (1992-1996),
Treasurer of Janus Investment Fund and Janus Aspen Series.
Glenn P. O'Flaherty, Age 41 - Treasurer and Chief Accounting Officer*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Treasurer and Chief Accounting Officer of Janus Investment Fund. Vice
President of Janus Capital. Formerly (1991-1997), Director of Fund
Accounting, Janus Capital.
Kelley Abbot Howes, Age 34 - Assistant Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Assistant Vice President and Secretary of Janus Investment Fund.
Director and President of Janus Distributors, Inc. Assistant Vice
President and Associate Counsel of Janus Capital.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
+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 Trust's Executive Committee shall have and may exercise all the
powers and authority of the Trustees except for matters requiring
action by all Trustees pursuant to the Trust's Bylaws or Trust
Instrument, Delaware law or the 1940 Act.
20
<PAGE>
The Money Market Funds Committee, consisting of Messrs. Loo, Mullen
and Rothe, monitors the compliance with policies and procedures
adopted particularly for money market funds.
The following table shows the aggregate compensation 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 for
fiscal year ended calendar year ended
Name of Person, Position December 31, 1998 December 31, 1998**
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Thomas H. Bailey, Chairman and Trustee* $ 0 $ 0
James P. Craig, III, Trustee* $ 0 $ 0
William D. Stewart, Trustee $ 36 $82,000
Gary O. Loo, Trustee $ 73 $74,000
Dennis B. Mullen, Trustee $ 77 $82,000
Martin H. Waldinger, Trustee $ 40 $74,000
James T. Rothe, Trustee $ 75 $82,000
</TABLE>
* An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
** As of December 31, 1998, Janus Funds consisted of two registered investment
companies comprised of a total of 32 funds.
21
<PAGE>
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) qualified plans.
Participating insurance companies and certain designated organizations
are authorized to receive purchase orders on the Portfolio's behalf,
and those organizations are authorized to designate their agents and
affiliates as intermediaries to receive purchase orders. Purchase
orders are deemed received by the Portfolio when authorized
organizations, their agents or affiliates receive the order. The
Portfolio is not responsible for the failure of any designated
organization or its agents or affiliates to carry out its obligations
to its customers. 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. In order to
receive a day's dividend, your order must be received by the close of
the regular trading session of the NYSE. The prospectus for your
insurance company's separate account or your plan documents contain
detailed information about investing in the Portfolio.
22
<PAGE>
Distribution and Shareholder Servicing plan
Under a distribution and shareholder servicing plan ("Plan") adopted
in accordance with Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act"), the Shares may pay Janus Distributors, Inc., the
Trust's distributor, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares of the Portfolio. Under the
terms of the Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified plan
service providers as compensation for distribution and shareholder
servicing performed by such service providers. The Plan is a
compensation type plan and permits the payment at an annual rate of up
to 0.25% of the average daily net assets of the Shares of a Portfolio
for recordkeeping and administrative services as well as activities
which are primarily intended to result in sales of the Shares,
including but not limited to preparing, printing and distributing
prospectuses, Statements of Additional Information, shareholder
reports, and educational materials to prospective and existing
contract owners and plan participants; responding to inquiries by
contract owners and plan participants; receiving and answering
correspondence; contract owner and participant level recordkeeping and
administrative services; and similar activities. On September 14,
1999, Trustees unanimously approved the Plan which became effective on
that date. The Plan and any Rule 12b-1 related agreement that is
entered into by the Portfolio or Janus Distributors in connection with
the Plan will continue in effect for a period of more than one year
only so long as continuance is specifically approved at least annually
by a vote of a majority of the Trustees, and of a majority of the
Trustees who are not interested persons (as defined in the 1940 Act)
of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any related agreements ("12b-1
Trustees"). All material amendments to the Plan must be approved by a
majority vote of the Trustees, including a majority of the 12b-1
Trustees, at a meeting called for that purpose. In addition, the Plan
may be terminated at any time, without penalty, by vote of a majority
of the outstanding Shares of the Portfolio or by vote of a majority of
12b-1 Trustees.
23
<PAGE>
Redemption of Shares
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified plans.
Certain designated organizations are authorized to receive redemption
orders on the Portfolio's behalf and those organizations are
authorized to designate their agents and affiliates as intermediaries
to receive redemption orders. Redemption orders are deemed received by
the Portfolio when authorized organizations, their agents or
affiliates receive the order. The Portfolio is not responsible for the
failure of any designated organization or its agents or affiliates to
carry out its obligations to its customers. 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, the 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.
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 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.
24
<PAGE>
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 Code. In addition, because a class of shares of the Portfolio
are sold in connection with variable insurance contracts, 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 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 plans. See the
prospectus for the separate account of the related insurance company
or the plan documents for additional information.
25
<PAGE>
Miscellaneous information
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 and classes of shares. As
of the date of this SAI, the Trust consists of eleven series of
shares, known as "portfolios," in three classes. Additional series
and/or classes 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. The 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.
The Portfolio currently offers three classes of shares. The Shares
discussed in this SAI are offered only in connection with investment
in and payments under variable insurance contracts and to qualified
retirement plans that require a fee from Portfolio assets to procure
distribution and administrative services to contract owners and plan
participants. A second class of shares, Retirement Shares, is offered
only to qualified plans whose service providers require a fee from
Trust assets for providing certain services to plan participants. The
third class of shares, Institutional Shares, are offered only in
connection with investment in and payments under variable contracts
and life insurance contracts, as well as certain qualified retirement
plans.
SHAREHOLDER MEETINGS
The Trust does not intend to hold annual shareholder meetings.
However, special meetings may be called for the Portfolio or for the
Trust as a whole for purposes such as electing or removing Trustees,
terminating or reorganizing the Trust, changing fundamental policies,
or for any other purpose requiring a shareholder vote under the 1940
Act. Separate votes are taken by the Portfolio or class only if a
matter affects or requires the vote of only the Portfolio or class or
the Portfolio's or class' interest in the matter differs from the
interest of the other portfolios or class of the Trust. A shareholder
is entitled to one vote for each Share owned.
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 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 and Mr. Rothe who were
appointed by the Trustees as of June 30, 1995 and as of January 1,
1997, respectively. Under the Trust Instrument, each Trustee will
continue in office until the termination of the Trust or his earlier
death, retirement, resignation, bankruptcy, incapacity or removal.
Vacancies will be filled by a majority of the remaining Trustees,
subject to the 1940 Act. Therefore, no annual or regular meetings of
shareholders
26
<PAGE>
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.
As mentioned in "Shareholder Meetings", each share of each portfolio
of the Trust has one vote (and fractional votes for fractional
shares). Shares of all portfolios of the Trust have noncumulative
voting rights, which means that the holders of more than 50% of the
shares of all portfolios 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 portfolio or class of the Trust will vote
separately only with respect to those matters that affect only that
portfolio or class or if an interest of a portfolio or class in the
matter differs from the interests of other portfolios or classes of
the Trust.
INDEPENDENT AUDITORS
PricewaterhouseCoopers 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.
27
<PAGE>
Financial statements
The following audited financial statements for Institutional Shares
and Retirement Shares for the period ended December 31, 1998 and the
unaudited Semiannual Report for Institutional Shares and Retirement
Shares for the period ended June 30, 1999 are hereby incorporated into
this Statement of Additional Information by reference to the
Portfolio's Annual Report dated December 31, 1998 and the Portfolios'
Semiannual Report dated June 30, 1999. A copy of each report
accompanies this Statement of Additional Information. The Service
Shares had not yet commenced operations as of June 30, 1999.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT AND SEMIANNUAL REPORT
Schedules of Investments as of December 31, 1998 and June 30, 1999
Statement of Operations for the period ended December 31, 1998 and
June 30, 1999
Statement of Assets and Liabilities as of December 31, 1998 and June
30, 1999
Statement of Changes in Net Assets for the periods ended December 31,
1998 and 1997 and for the six months ended June 30, 1999
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants dated December 31, 1998
The portions of the Annual Report and Semiannual 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.
28
<PAGE>
Appendix A
DESCRIPTION OF SECURITIES RATINGS
Moody's and Standard & Poor's
MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS
The two highest ratings of Standard & Poor's Ratings Services ("S&P")
for municipal and corporate bonds are AAA and AA. Bonds rated AAA have
the highest rating assigned by S&P to a debt obligation. Capacity to
pay interest and repay principal is extremely strong. Bonds rated AA
have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The AA
rating may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within that rating category.
The two highest ratings of Moody's Investors Service, Inc. ("Moody's")
for municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are
judged by Moody's to be of the best quality. Bonds rated Aa are judged
to be of high quality by all standards. Together with the Aaa group,
they comprise what are generally known as high-grade bonds. Moody's
states that Aa bonds are rated lower than the best bonds because
margins of protection or other elements make long-term risks appear
somewhat larger than Aaa securities. The generic rating Aa may be
modified by the addition of the numerals 1, 2 or 3. The modifier 1
indicates that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of such
rating category.
SHORT TERM MUNICIPAL LOANS
S&P's highest rating for short-term municipal loans is SP-1. S&P
states that short-term municipal securities bearing the SP-1
designation have a strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess a very strong
capacity to pay debt service will be given a plus (+) designation.
Issues rated SP-2 have satisfactory capacity to pay principal and
interest with some vulnerability to adverse financial and economic
changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1
are of the best quality, enjoying strong protection from established
cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans
bearing the MIG-2/VMIG-2 designation are of high quality, with margins
of protection ample although not so large as in the MIG-1/VMIG-1
group.
OTHER SHORT-TERM DEBT SECURITIES
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's
for other short-term debt securities and commercial paper, and A-1 and
A-2 are the two highest ratings for commercial paper assigned by S&P.
Moody's uses the numbers 1, 2 and 3 to denote relative strength within
its highest classification of Prime, while S&P uses the numbers 1, 2
and 3 to denote relative strength within its highest classification of
A. Issuers rated Prime-1 by Moody's have a superior ability for
repayment of senior short-term debt obligations and have many of the
following characteristics: leading market positions in
well-established industries, high rates of return on funds employed,
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
29
<PAGE>
repayment. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) designation. Issuers rated
A-2 by S&P carry a satisfactory degree of safety regarding timely
repayment.
FITCH
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
F-1+........................ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1......................... Very strong credit quality. Issues assigned this rating
reflect an assurance for timely payment only slightly less
in degree than issues rated F-1+.
F-2......................... Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F-1+ and F-1
ratings.
</TABLE>
DUFF & PHELPS INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
Duff 1+..................... Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or ready access to
alternative sources of funds, is clearly outstanding, and
safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1...................... Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1-..................... High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2...................... Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
</TABLE>
THOMSON BANKWATCH, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
TBW-1....................... The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2....................... The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated TBW-1.
TBW-3....................... The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
TBW-4....................... The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
</TABLE>
30
<PAGE>
IBCA, INC.
<TABLE>
<S> <C>
BOND RATING EXPLANATION
-----------------------------------------------------------------------------------------
A1+......................... Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit
feature, a rating of A1+ is assigned.
A2.......................... Obligations supported by a good capacity for timely
repayment.
A3.......................... Obligations supported by a satisfactory capacity for timely
repayment.
B........................... Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
C........................... Obligations for which there is a high risk of default or
which are currently in default.
</TABLE>
31
<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
32
<PAGE>
public projects. Some authorities provide further security in the form
of a state's ability (without obligation) to make up deficiencies in
the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. Private Activity Bonds are considered municipal bonds if the
interest paid thereon is exempt from Federal income tax and are issued
by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing,
housing and health. These bonds are also used to finance public
facilities such as airports, mass transit systems and ports. The
payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property as
security for such payment.
While, at one time, the pertinent provisions of the Internal Revenue
Code permitted private activity bonds to bear tax-exempt interest in
connection with virtually any type of commercial or industrial project
(subject to various restrictions as to authorized costs, size
limitations, state per capita volume restrictions, and other matters),
the types of qualifying projects under the Code have become
increasingly limited, particularly since the enactment of the Tax
Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain
privately owned and operated rental multi-family housing facilities,
nonprofit hospital and nursing home projects, airports, docks and
wharves, mass commuting facilities and solid waste disposal projects,
among others, and for the refunding (that is, the tax-exempt
refinancing) of various kinds of other private commercial projects
originally financed with tax-exempt bonds. In future years, the types
of projects qualifying under the Code for tax-exempt financing are
expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to
as an "industrial development bond," but more and more frequently
revenue bonds have become classified according 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.
33
<PAGE>
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.
34
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<PAGE>
LOGO
1-800-29JANUS
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
JANUS ASPEN SERIES
PART C - OTHER INFORMATION
ITEM 23 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.
(b) Amendments to Trust Instrument are incorporated
herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 7, filed on February
14, 1996.
(c) Amendment to Trust Instrument dated December 10,
1996 is incorporated herein by reference to
Exhibit 1(c) to Post-Effective Amendment No. 10,
filed on February 13, 1997.
(d) Amendment to Trust Instrument dated September 14,
1999 is filed herein as Exhibit 1(d).
Exhibit 2 (a) Restated Bylaws are incorporated herein by
reference to Exhibit 2(a) to Post-Effective
Amendment No. 7, filed on February 14, 1996.
(b) First Amendment to the Bylaws is incorporated
herein by reference to Exhibit 2(b) to
Post-Effective Amendment No. 7, filed on February
14, 1996.
Exhibit 3 Not Applicable
Exhibit 4 (a) Investment Advisory Agreement for 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 5(a)
to Post-Effective Amendment No. 15, filed on
February 27, 1998.
(b) Investment Advisory Agreement for International
Growth Portfolio is incorporated herein by
reference to Exhibit 5(b) to Post-Effective
Amendment No. 15, filed on February 27, 1998.
(c) Investment Advisory Agreement for Money Market
Portfolio is incorporated herein by reference to
Exhibit 5(c)
<PAGE>
to Post-Effective Amendment No. 15,
filed on February 27, 1998.
(d) Investment Advisory Agreement for High-Yield
Portfolio is incorporated herein by reference to
Exhibit 5(d) to Post-Effective Amendment No. 15,
filed on February 27, 1998.
(e) Investment Advisory Agreement for Equity Income
Portfolio is incorporated herein by reference to
Exhibit 5(e) to Post-Effective Amendment No. 15,
filed on February 27, 1998.
(f) Investment Advisory Agreement for Capital
Appreciation Portfolio is incorporated herein by
reference to Exhibit 5(f) to Post-Effective
Amendment No. 15, filed on February 27, 1998.
(g) Form of Investment Advisory Agreement for Growth
and Income Portfolio is incorporated herein by
reference to Exhibit 5(g) to Post-Effective
Amendment No. 12, filed on August 11, 1997.
Exhibit 5 (a) Distribution Agreement for Retirement Shares is
incorporated herein by reference to Exhibit 6(a)
to Post-Effective Amendment No. 10, filed on
February 13, 1997.
(b) Form of Distribution and Shareholder Services
Agreement for Retirement Shares is incorporated
herein by reference to Post-Effective Amendment
No. 11, filed on April 30, 1997.
(c) Amended Distribution Agreement is incorporated
herein by reference to PEA No. 17 filed on
February 26, 1999.
(d) Amended Distribution Agreement dated September 14,
1999 is filed herein as Exhibit 5(d).
(e) Form of Distribution and Shareholder Services
Agreement for Service Shares for Qualified Plans
is filed herein as Exhibit 5(e)
(f) Form of Distribution and Shareholder Services
Agreement for Service Shares for Insurance
Companies is filed herein as Exhibit 5(f)
Exhibit 6 Not Applicable
<PAGE>
Exhibit 7 (a) Form of Custody Agreement between Janus Aspen
Series and Investors Fiduciary Trust Company is
incorporated herein by reference to Exhibit 8(a)
to Post-Effective Amendment No. 11, filed on April
30, 1997.
(b) Form of Custodian Contract between Janus Aspen
Series and State Street Bank and Trust Company is
incorporated herein by reference to Exhibit 8(b)
to Post-Effective Amendment No. 11, filed on April
30, 1997.
(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. 11, filed on April
30, 1997.
(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. 11, filed on April
30, 1997.
(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, filed on February 14, 1996.
(f) Letter Agreement dated September 10, 1996
regarding State Street Custodian is incorporated
herein by reference to Exhibit 8(f) to
Post-Effective Amendment No. 9, filed on October
24, 1996.
(g) Form of Subcustodian Contract between United
Missouri Bank, N.A. and State Street Bank and
Trust Company is incorporated herein by reference
to Exhibit 8(g) to Post-Effective Amendment No. 9,
filed on October 24, 1996.
(h) Form of Letter Agreement dated September 9, 1997,
regarding State Street Custodian Contract is
incorporated herein by reference to Exhibit 8(h)
to Post-Effective Amendment No. 14, filed on
October 24, 1997.
(i) Form of Global Custody Services Agreement dated
March 11, 1999 with Citibank N.A. is incorporated
herein by reference to Exhibit 7 to Post-Effective
Amendment No. 19, filed on April 30, 1999.
<PAGE>
Exhibit 8 (a) Transfer Agency Agreement with Janus Service
Corporation is incorporated herein by reference to
Exhibit 9(a) to Post-Effective Amendment No. 11,
filed on April 30, 1997.
(b) Transfer Agency Agreement as amended May 1, 1997
is incorporated herein by reference to Exhibit
9(b) to Post-Effective Amendment No. 10, filed on
February 13, 1997.
(c) Form of Model Participation Agreement is
incorporated herein by reference to Exhibit 9(c)
to Post-Effective Amendment No. 11, filed on April
30, 1997.
Exhibit 9 (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 Post-Effective
Amendment No. 11, filed on April 30, 1997.
(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. 11, filed on April
30, 1997.
(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. 11, filed on April
30, 1997.
(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, filed on February 14, 1996.
(e) Opinion and Consent of Fund Counsel with respect
to Equity Income Portfolio and Capital
Appreciation Portfolio is incorporated herein by
reference to Exhibit 10(e) to Post-Effective
Amendment No. 10, filed on February 13, 1997.
(f) Opinion and Consent of Fund Counsel with respect
to the Retirement Shares of all the Portfolios is
incorporated herein by reference to Exhibit 10(f)
to Post-Effective Amendment No. 10, filed on
February 13, 1997.
<PAGE>
(g) Opinion and Consent of Fund Counsel with respect
to Growth and Income Portfolio is incorporated
herein by reference to Exhibit 10(g) to
Post-Effective Amendment No. 12, filed on August
11, 1997.
(h) Opinion and Consent of Fund Counsel with respect
to Retirement Shares of Growth and Income
Portfolio isincorporated herein by reference to
Exhibit 10(h) to Post-Effective Amendment No. 12,
filed on August 11, 1997.
(i) Opinion and Consent of Fund Counsel with respect
to Service Shares of all the Portfolios is filed
herein as Exhibit 9(i)
Exhibit 10 Consent of PricewaterhouseCoopers LLP is filed
herein as Exhibit 10.
Exhibit 11 Not Applicable
Exhibit 12 Not Applicable
Exhibit 13 (a) Form of Distribution and Shareholder Servicing
Plan for Retirement Shares dated May 1, 1997
between Janus Distributors, Inc. and Janus Aspen
Series is incorporated herein by reference to
Exhibit 15 to Post-Effective Amendment No. 10,
filed on February 13, 1997.
(b) Form of Distribution and Shareholder Servicing
Plan for Service Shares dated September 14, 1999
between Janus Distributors, Inc. and Janus Aspen
Series is filed herein as Exhibit 13(b).
Exhibit 14 Not Applicable
Exhibit 15 (a) Rule 18f-3 Plan dated December 10, 1996 is
incorporated herein by reference to Exhibit 18 to
Post-Effective Amendment No. 10, filed on February
13, 1997.
(b) Rule 18f-3 Plan dated June 15, 1999 is filed
incorporated herein by reference to Exhibit 15 to
Post-Effective Amendment No. 19, filed on June 21,
1999.
(c) Rule 18f-3 Plan dated September 14, 1999 is filed
herein as Exhibit 15(c).
<PAGE>
ITEM 24. Persons Controlled by or Under Common Control with Registrant
None
ITEM 25. 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 ultimately will be found to be entitled to
indemnification. The Trust also maintains a liability insurance policy covering
its Trustees and officers.
ITEM 26. 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., Director of Janus World Funds Plc; Marjorie G. Hurd,
Vice President and Chief Operations Officer of Janus Capital Corporation,
Director and President of Janus Service Corporation; Thomas A. Early, Vice
President, General Counsel and Secretary of Janus Capital Corporation, Vice
President and General Counsel of Janus Service Corporation, Janus Distributors,
Inc. and Janus Capital International, Ltd., Director of Janus World Funds Plc,
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,
<PAGE>
Inc., 525 "B" Street, Suite 1080, San Diego, California 92101, an investment
performance consultant. Mr. Thomas A. McDonnell, a director of Janus Capital
Corporation, is President, Chief Executive Officer and a Director of DST
Systems, Inc., 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105,
provider of data processing and recordkeeping services for various mutual funds,
and is Executive Vice President and a director of Kansas City Southern
Industries, Inc., 114 W. 11th Street, Kansas City, Missouri 64105, a publicly
traded holding company whose primary subsidiaries are engaged in transportation
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 27. Principal Underwriters
(a) Janus Distributors, Inc. ("Janus Distributors") serves as
principal underwriter for the Registrant and Janus Investment
Fund.
(b) The principal business address, positions with Janus Distributors
and positions with Registrant of Thomas A. Early, Kelley Abbott
Howes and Steven R. Goodbarn, officers and directors of Janus
Distributors, are described under "Officers and Trustees" in the
Statement of Additional Information included in this Registration
Statement. The remaining principal executive officer of Janus
Distributors is Margie G. Hurd, Director and President. Ms. Hurd
does not hold any positions with the Registrant. Ms. Hurd's
principal business address is 100 Fillmore Street, Denver,
Colorado 80206-4928.
(c) Not Applicable.
ITEM 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by Janus Capital Corporation and Janus Service
Corporation, both of which are located at 100 Fillmore Street, Denver, Colorado
80206-4928 and by State Street Bank and Trust Company, P.O. Box 0351, Boston,
Massachusetts 02117-0351 and Citibank, N.A., 111 Wall Street, 24th Floor, Zone
5, New York, NY 10043.
ITEM 29. Management Services
The Registrant has no management-related service contract which is not
discussed in Part A or Part B of this form.
ITEM 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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
26th day of October, 1999.
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 October 26, 1999
Thomas H. Bailey (Principal Executive
Officer) and Trustee
/s/ Steven R. Goodbarn Vice President and October 26, 1999
Steven R. Goodbarn Chief Financial Officer
(Principal Financial Officer)
/s/ Glenn P. O'Flaherty Treasurer and Chief October 26, 1999
Glenn P. O'Flaherty Accounting Officer
(Principal Accounting Officer)
/s/ James P. Craig, III Trustee October 26, 1999
<PAGE>
James P. Craig, III
Gary O. Loo* Trustee October 26, 1999
Gary O. Loo
Dennis B. Mullen* Trustee October 26, 1999
Dennis B. Mullen
James T. Rothe* Trustee October 26, 1999
James T. Rothe
William D. Stewart* Trustee October 26, 1999
William D. Stewart
Martin H. Waldinger* Trustee October 26, 1999
Martin H. Waldinger
/s/ Steven R. Goodbarn
*By Steven R. Goodbarn
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit Number Exhibit Title
Exhibit 1(d) Amendment to Trust Instrument dated
September 14, 1999
Exhibit 5(d) Amended and Restated Distribution
Agreement
Exhibit 5(e) Form of Distribution and Shareholder
Services Agreement for Service Shares
for Qualified Plans
Exhibit 5(f) Form of Distribution and Shareholder
Services Agreement for Service Shares
for Insurance Companies
Exhibit 9(i) Opinion and Consent of Fund Counsel with
respect to Service Shares
Exhibit 10 Consent of PricewaterhouseCoopers LLP
Exhibit 13(b) Distribution and Shareholder Servicing
Plan for the Service Shares of Janus
Aspen Series
Exhibit 15(c) Amended Rule 18f-3 Plan, dated September
14, 1999
EXHIBIT 1(d)
SEVENTH AMENDMENT DATED SEPTMEBER 14, 1999
TO JANUS ASPEN SERIES TRUST INSTRUMENT DATED MAY 19, 1993
Pursuant to authority granted by the Trustees, Schedule A of the Trust
Instrument is amended as follows to reflect the addition of the Service Shares
as a class of Janus Aspen Series:
SCHEDULE A
Series of the Trust Available Classes
Aggressive Growth Portfolio Institutional Shares
Retirement Shares
Service Shares
Balanced Portfolio Institutional Shares
Retirement Shares
Service Shares
Capital Appreciation Portfolio Institutional Shares
Retirement Shares
Service Shares
Equity Income Portfolio Institutional Shares
Retirement Shares
Service Shares
Flexible Income Portfolio Institutional Shares
Retirement Shares
Service Shares
Growth Portfolio Institutional Shares
Retirement Shares
Service Shares
Growth and Income Portfolio Institutional Shares
Retirement Shares
Service Shares
High-Yield Portfolio Institutional Shares
Retirement Shares
Service Shares
<PAGE>
International Growth Portfolio Institutional Shares
Retirement Shares
Service Shares
Money Market Portfolio Institutional Shares
Retirement Shares
Service Shares
Worldwide Growth Portfolio Institutional Shares
Retirement Shares
Service Shares
[SEAL]
EXHIBIT 5(d)
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
THIS AMENDED AND RESTATED DISTRIBUTION AGREEMENT (the "Agreement") is made
as of the 14th day of September, 1999, by and between Janus Aspen Series, a
business trust organized and existing under the laws of the State of Delaware,
(hereinafter called "JAS") on behalf of the Institutional Shares, Retirement
Shares and Service Shares of each of its portfolios, whether now existing or
hereafter created (each a "Portfolio"), and Janus Distributors, Inc., a
corporation organized and existing under the laws of the State of Colorado
(hereinafter called the "Distributor" or "JDI"). This Agreement applies to the
Institutional Shares, Retirement Shares, and Service Shares (together, the
"Shares") of each Portfolio of JAS, whether now existing or hereafter created.
WITNESSETH:
WHEREAS, JAS is engaged in business as an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the laws of
each state or jurisdiction in which the Distributor engages in business to the
extent such law requires, and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"), (such registrations and membership are
referred to collectively as the "Registrations"); and
WHEREAS, JAS and JDI are parties to a Distribution Agreement dated as of
May 1, 1997, as amended on September 14, 1998, under which JDI serves as
Distributor to Institutional Shares and Retirement Shares, and the parties now
wish to amend such agreement to also make JDI Distributor of Service Shares as
set forth below; and
WHEREAS, JAS has adopted on behalf of each of the Retirement Shares and the
Service Shares of each Portfolio a Distribution and Shareholder Servicing Plan
pursuant to Rule 12b-1 under the 1940 Act; and
WHEREAS, JAS desires the Distributor to act as the underwriter for the
public offering of the Shares of each Portfolio;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1
<PAGE>
1. Appointment. JAS appoints JDI to act as distributor of the Shares.
2. Delivery of Portfolio Documents. JAS has furnished the Distributor
with properly certified or authenticated copies of each of the following in
effect on the date hereof and shall furnish the Distributor from time to time
properly certified or authenticated copies of all amendments or supplements
thereto:
(a) Trust Instrument;
(b) Bylaws; and
(c) Resolutions of the Trustees (hereinafter referred to as the
"Trustees") selecting the Distributor as distributor and approving
this form of agreement and authorizing its execution.
JAS shall furnish the Distributor promptly with copies of any registration
statements filed by it with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended, (the "1933 Act") or the 1940 Act,
together with any financial statements and exhibits included therein, and all
amendments or supplements thereto hereafter filed.
JAS shall also furnish the Distributor with such other certificates or
documents as the Distributor may from time to time, in its discretion,
reasonably deem necessary or appropriate in order to properly perform its duties
under this Agreement.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4 and 7 hereof, and to such
minimum purchase requirements as may from time to time be indicated in the
Prospectus or Statement of Additional Information of the Shares of each
Portfolio, the Distributor is authorized to solicit, as agent on behalf of JAS,
unconditional orders for purchases of each Portfolio's Shares authorized for
issuance and registered under the 1933 Act, provided that:
(1) The Distributor shall act solely as a disclosed agent on behalf of and
for the account of JAS;
(2) The Distributor shall confirm or arrange with the transfer agent for
the Shares to confirm all purchases of the Shares. Such confirmation
shall conform to the requirements of Rule 10b-10 under the 1934 Act
and shall clearly state that the Distributor is acting as agent in the
transaction;
(3) The Distributor shall have no liability for payment for purchases of
Shares it sells as agent;
2
<PAGE>
(4) Each order to purchase Shares of a Portfolio received by the
Distributor shall be subject to acceptance by an officer of JAS and
entry of the order on such Portfolio's records or shareholder accounts
and is not binding until so accepted and entered; and
(5) With respect to the Retirement Shares and the Service Shares, the
Distributor may appoint sub-agents or distribute through dealers
(pursuant to the Distribution and Shareholder Servicing Agreement
applicable to that Class, forms of which are attached hereto as
Exhibits A and B), the Distributor's own sales representatives or
otherwise as the Distributor may determine from time to time.
The purchase price of a Portfolio's Shares to the public shall be the
public offering price described in Paragraph 6 hereof.
(b) In consideration of the rights granted to the Distributor under this
Agreement, the Distributor will use its best efforts (but only in states and
jurisdictions in which the Distributor may lawfully do so) to solicit from
investors unconditional orders to purchase Shares of each Portfolio. JAS shall
make available to the Distributor without cost to the Distributor the currently
effective Prospectus and Statement of Additional Information for the Shares of
each Portfolio and all information, financial statements and other papers that
the Distributor requires for use in connection with the distribution of Shares.
JAS shall provide such materials in the form of camera ready copies, computer
diskettes, or other form reasonably requested by Distributor, to enable
Distributor to provide one copy or diskette to each shareholder of record (it
being understood that the shareholders of record shall be responsible for
providing copies of such materials to the beneficial owners in accordance with
applicable law).
4. Solicitation of Orders to Purchase Shares by Portfolio. The rights
granted to the Distributor shall be non-exclusive in that JAS reserves the right
to otherwise solicit purchases from, and sell Shares to, investors, including
without limitation the right to issue Shares in connection with the merger or
consolidation of any other investment company, trust or personal holding company
with a Portfolio, or a Portfolio's acquisition, by the purchase or otherwise, of
all or substantially all of the assets of an investment company, trust or
personal holding company, or substantially all of the outstanding shares or
interests of any such entity.
5. Compensation and Expenses. JAS shall pay all charges of its transfer,
shareholder recordkeeping, dividend disbursing and redemption agents, if any;
all expenses of preparation, printing and mailing of confirmations; all expenses
of preparation and printing of annual or more frequent revisions of each
Portfolio's Prospectus and Statement of Additional Information and of supplying
copies thereof to shareholders; all expenses of registering and maintaining the
Registrations of JAS under the 1940 Act and the sale of JAS's Shares under the
1933 Act; all expenses of qualifying and maintaining qualifications of each
Portfolio and of the Shares for sale under securities laws of various states or
other jurisdictions and of registration and qualification
3
<PAGE>
of each Portfolio under all laws applicable to JAS or its business activities.
The Distributor may receive from JAS any amounts authorized for payment to the
Distributor out of the Distribution and Shareholder Servicing Plan for the
Retirement Shares and the Service Shares. The Distributor may use such payments,
in its discretion, to compensate dealers, insurance companies or other entities
who provide distribution-related services to the extent permitted by the
Distribution Plan.
6. Public Offering Price. All solicitations by the Distributor pursuant
to this Agreement shall be for orders to purchase Shares of a Portfolio at the
public offering price. The public offering price for each accepted subscription
for a Portfolio's Shares will be the net asset value per share next determined
by JAS after it accepts such subscription. The net asset value per share of the
Shares shall be determined in the manner provided in JAS's Trust Instrument as
now in effect or as it may be amended, and as reflected in the then current
Prospectus and Statement of Additional Information covering the Shares.
7. Suspension of Sales. If and whenever the determination of a
Portfolio's net asset value is suspended and until such suspension is
terminated, no further orders for Shares shall be accepted by JAS except such
unconditional orders placed with JAS and accepted by it before the suspension.
In addition, JAS reserves the right to suspend sales of Shares of a Portfolio
if, in the judgment of the Trustees, it is in the best interest of the Portfolio
to do so, such suspension to continue for such period as may be determined by
the Trustees; and in that event, (i) at the direction of JAS, the Distributor
shall suspend its solicitation of orders to purchase Shares of such Portfolio
until otherwise instructed by JAS and (ii) no orders to purchase Shares of such
Portfolio shall be accepted by JAS while such suspension remains in effect
unless otherwise directed by its Trustees.
8. Authorized Representations. The Distributor is not authorized by JAS
to give on behalf of any Portfolio any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in such Portfolio's registration statement filed
with the SEC under the 1933 Act and/or the 1940 Act, covering Shares, as such
registration statement or such Portfolio's Prospectus or Statement of Additional
Information may be amended or supplemented from time to time, or contained in
shareholder reports or other material that may be prepared by or on behalf of
such Portfolio or approved by such Portfolio for the Distributor's use.
9. Registration of Additional Shares. JAS hereby agrees to register an
indefinite number of Shares pursuant to Rule 24f-2 under the 1940 Act. JAS will,
in cooperation with the Distributor, take such action as may be necessary from
time to time to qualify the Shares of each Portfolio (so registered or otherwise
qualified for sale under the 1933 Act), in any state or jurisdiction mutually
agreeable to the Distributor and JAS, and to maintain such qualification;
provided, however, that nothing herein shall be deemed to prevent JAS from
registering the Shares without approval of the Distributor in any state it deems
appropriate.
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10. Conformity With Law. The Distributor agrees that in soliciting orders
to purchase Shares it shall duly conform in all respects with applicable federal
and state laws and with the rules and regulations of the NASD. The Distributor
will use its best efforts to maintain its Registrations in good standing during
the term of this Agreement and will promptly notify JAS in the event of the
suspension or termination of any of the Registrations.
11. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor, nor any of its officers, directors,
employees, or representatives is or shall be an employee of JAS in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control, and conduct of its
agents and employees and for injury to such agents or employees or to others
through its agents and employees and agrees to pay or to insure that persons
other than JAS will pay all employee taxes due with respect to the activities of
its agents and employees.
12. Indemnification. The Distributor agrees to indemnify and hold harmless
JAS and each of the Trustees and its officers, employees and representatives and
each person, if any, who controls JAS within the meaning of Section 15 of the
1933 Act against any and all losses, liabilities, damages, claims and expenses
(including the reasonable costs of investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees incurred
in connection therewith) to which JAS or such Trustees, officers, employees,
representatives, or controlling person or persons may become subject under the
1933 Act, under any other statute, at common law, or otherwise, arising out of
the acquisition of any Shares of any Portfolio by any person which (i) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, Prospectus, Statement of Additional Information,
shareholder report or other information covering Shares of such Portfolio filed
or made public by JAS or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished to
such Portfolio by the Distributor in writing. In no case (i) is the
Distributor's indemnity in favor of JAS, or any person indemnified, to be deemed
to protect JAS or such indemnified person against any liability to which JAS or
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its or such person's duties or
by reason of its or such person's reckless disregard of its or such person's
obligations and duties under this Agreement, or (ii) is the Distributor to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against JAS or any person indemnified unless JAS or such person,
as the case may be, shall have notified the Distributor in writing of the claim
within a reasonable time after the summons, or other first written notification,
giving information of the nature of the claim served upon JAS or upon such
person (or after JAS or such person shall have received notice of such service
on any designated agent). However, failure to notify the Distributor of any such
claim shall not relieve the Distributor from any liability that the Distributor
may have to JAS or any person against whom
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<PAGE>
such action is brought otherwise than on account of the Distributor's indemnity
agreement contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense, in
the defense, or, if Distributor so elects, to assume the defense of any suit
brought to enforce any such claim but, if the Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the persons indemnified who are defendants in
the suit. In the event that the Distributor elects to assume the defense of any
such suit and retain such legal counsel, persons indemnified who are defendants
in the suit shall bear the fees and expenses of any additional legal counsel
retained by them. If the Distributor does not elect to assume the defense of any
such suit, the Distributor will reimburse persons indemnified who are defendants
in such suit for the reasonable fees of any legal counsel retained by them in
such litigation.
JAS agrees to indemnify and hold harmless the Distributor and each of its
directors, officers, employees, and representatives and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any and all losses, liabilities, damages, claims or expenses (including
the reasonable costs of investigating or defending any alleged loss, liability,
damage, claim or expenses and reasonable legal counsel fees incurred in
connection therewith) to which the Distributor or such of its directors,
officers, employees, representatives or controlling person or persons may become
subject under the 1933 Act, under any other statute, at common law, or otherwise
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by JAS or any of the Trustees, or JAS's officers,
employees or representatives other than the Distributor, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement of Additional
Information, shareholder report or other information covering Shares filed or
made public by JAS or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading unless
such statement or omission was made in reliance upon information furnished by
the Distributor to JAS. In no case (i) is JAS's indemnity in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor or
such indemnified person against any liability to which the Distributor or such
indemnified person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its or such person's duties
or by reason of its or such person's reckless disregard of its or such person's
obligations and duties under this Agreement, or (ii) is JAS to be liable under
its indemnity agreement contained in this Paragraph with respect to any claim
made against the Distributor or any person indemnified unless the Distributor,
or such person, as the case may be, shall have notified JAS in writing of the
claim within a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). However, failure
to notify JAS of any such claim shall not relieve JAS from any liability which
JAS may have to the Distributor or any
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person against whom such action is brought otherwise than on account of JAS's
indemnity agreement contained in this Paragraph.
JAS shall be entitled to participate, at its own expense, in the defense
or, if JAS so elects, to assume the defense of any suit brought to enforce such
claim but, if JAS elects to assume the defense, such defense shall be conducted
by legal counsel chosen by JAS and satisfactory to the persons indemnified who
are defendants in the suit. In the event that JAS elects to assume the defense
of any such suit and retain such legal counsel, the persons indemnified who are
defendants in the suit shall bear the fees and expenses of any additional legal
counsel retained by them. If JAS does not elect to assume the defense of any
such suit, JAS will reimburse the persons indemnified who are defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them
in such litigation.
13. Duration and Termination of this Agreement. This Agreement shall
become effective as of the date first written above and unless terminated as
provided herein, shall remain in effect through July 1, 2000, and from year to
year thereafter with respect to each class of Shares of each Portfolio, but only
so long as such continuance is specifically approved at least annually (a) by a
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons of any such party, voting in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of either a majority
of the Trustees or a majority of the outstanding voting securities of the
respective class of Shares. If the continuance of this Agreement is not approved
as to a class of Shares of a Portfolio or a Portfolio as a whole, the
Distributor may continue to render to that class of Shares or Portfolio the
services described herein in the manner and to the extent permitted by the 1940
Act and the rules and regulations thereunder, and this Agreement shall continue
with respect to a class of Shares of the Portfolios, or those Portfolios as a
whole that have approved its continuance. This Agreement may be terminated with
respect to a class of Shares of a Portfolio or a Portfolio as a whole, without
the payment of any penalty, on 60 days' written notice, (a) by a vote of a
majority of the Trustees or by a vote of a majority of the outstanding voting
securities of such class of Shares of the Portfolio or of the Portfolio, (b) in
the case of the Retirement Shares class of Shares of a Portfolio, by a vote of a
majority of the Trustees who are not interested persons of JAS and have no
direct or indirect financial interest in the operation of the Distribution and
Shareholder Servicing Plan for such Shares or in any agreements related to such
Distribution and Shareholder Servicing Plan, (c) in the case of the Service
Shares class of Shares of a Portfolio, by a vote of a majority of the Trustees
who are not interested persons of JAS and have no direct or indirect financial
interest in the operation of the Distribution and Shareholder Servicing Plan for
such Shares or in any agreements related to such Distribution and Shareholder
Servicing Plan, or (d) by the Distributor. Without prejudice to any other
remedies of JAS, JAS may terminate this Agreement at any time immediately on
written notice in the event of the Distributor's failure to fulfill any of its
obligations hereunder, including the termination or suspension of any of the
Registrations. This Agreement will automatically terminate in the event of its
assignment.
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In interpreting the provisions of this Paragraph 13, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"interested person," "assignment," and "majority of the outstanding voting
securities") shall be applied.
14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by each party against which enforcement of the change, waiver,
discharge, or termination is sought. If JAS should at any time deem it necessary
or advisable in the best interests of a Portfolio or class that any amendment of
this Agreement be made in order to comply with the recommendations or
requirements of the SEC or any other governmental authority or to obtain any
advantage under state or Federal or tax laws and notifies the Distributor of the
form of such amendment, and the reasons therefore, and if the Distributor should
decline to assent to such amendment, JAS may terminate this Agreement as to that
Portfolio or class forthwith. If the Distributor should at any time request that
a change be made in JAS's Trust Instrument or Bylaws or in its methods of doing
business, or in the registration statement, the Prospectus or the Statement of
Additional Information of any Portfolio, in order to comply with any
requirements of Federal or state law or regulations of the SEC, or of a national
securities association of which the Distributor is or may be a member, relating
to the sale of Shares, and JAS should not make such necessary changes within a
reasonable time, the Distributor may terminate this Agreement as to that
Portfolio or class forthwith.
15. Limitation of Personal Liability. The parties to this Agreement
acknowledge and agree that all liabilities of JAS arising, directly or
indirectly, under this Agreement, of any and every nature whatsoever, shall be
satisfied solely out of the assets of JAS and that no Trustee, officer, employee
or agent, or holder of shares of beneficial interest of JAS, whether past,
present or future, shall be personally liable for any of such liabilities.
16. Notification by JAS. JAS agrees to advise the Distributor immediately:
(a) of any request by the SEC for amendments to JAS's Registration
Statement insofar as it relates to the Shares of any of the Portfolios, the
Prospectus or the Statement of Additional Information or for additional
information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of JAS's Registration Statement insofar as it
relates to the Shares of any of the Portfolios, the Prospectus or the Statement
of Additional Information or the initiation of any proceeding for that purpose;
(c) of the occurrence of any material event which makes untrue any
statement made in JAS's Registration Statement insofar as it relates to the
Shares of any of the Portfolios, the Prospectus or the Statement of Additional
Information or which requires the making of a change in order to make the
statements therein not misleading; and
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<PAGE>
(d) of all actions of the SEC with respect to any amendments to JAS's
Registration Statement insofar as they are related to the Shares of any of the
Portfolios, the Prospectus or the Statement of Additional Information which may
from time to time be filed with the SEC under the 1933 Act.
17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only, and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
18. Notice. Any notice required or permitted to be given by a party to
this Agreement or to any other party hereunder shall be deemed sufficient if
delivered in person or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other party at the address
provided below or to the last address furnished by each such other party to the
party giving notice.
If to JAS: 100 Fillmore Street
Denver, Colorado 80206
Attn: Secretary
If to the Distributor: 100 Fillmore Street
Denver, Colorado 80206
Attn: Secretary
IN WITNESS WHEREOF, the parties have executed this Agreement.
ATTEST: JANUS ASPEN SERIES
By:
Thomas H. Bailey
President
ATTEST: JANUS DISTRIBUTORS, INC.
By:
Kelley Abbott Howes
9
EXHIBIT 5(e)
DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT
Service Shares of Janus Aspen Series
(for Qualified Plans)
This Agreement is made as of ______________, by and between Janus
Distributors, Inc. (the "Distributor"), a Colorado corporation, and
__________________________ (the "Service Provider"), a ____________________
corporation.
Recitals
A. The Distributor serves as the distributor to a class of shares
designated the "Service Shares" of each series of Janus Aspen Series (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act").
B. Service Provider desires to provide certain distribution and shareholder
services to certain participants ("Plan Participants") in qualified pension or
retirement plans ("Plans") in connection with their investment in the Service
Shares of the series of the Trust listed on Exhibit A hereto (each a
"Portfolio") and Distributor desires Service Provider to provide such services,
subject to the conditions of this Agreement.
C. Pursuant to Rule 12b-1 under the 1940 Act, the Service Shares of each
Portfolio have adopted a Distribution and Shareholder Servicing Plan (the "12b-1
Plan") which, among other things, authorizes the Distributor to enter into this
Agreement with organizations such as Service Provider and to compensate such
organizations out of each Portfolio's average daily net assets attributable to
the Service Shares.
D. The parties desire that Service Shares of the Portfolios be available as
investment options for Plan Participants.
Agreement
1. Services of Service Provider
(a) The Service Provider shall provide any combination of the
following support services, as agreed upon by the parties from time to time, to
Plan Participants who invest in the Service Shares of the Portfolios: delivering
prospectuses, statements of additional information, shareholder reports, proxy
statements and marketing materials to prospective and existing Plan
Participants; providing educational materials regarding the Service Shares;
providing facilities to answer questions from prospective and existing Plan
Participants about the Portfolios; receiving and answering correspondence;
complying with federal and state securities laws pertaining to the sale of
Service Shares; assisting Plan Participants in completing application forms and
selecting account options; and providing participant record-keeping and similar
administrative services.
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(b) The Service Provider will provide such office space and
equipment, telephone facilities, and personnel as may be reasonably necessary or
beneficial in order to provide such services to Plan Participants.
(c) All orders for Service Shares are subject to acceptance or
rejection by the Trust in its sole discretion, and the Trust may, in its
discretion and without notice, suspend or withdraw the sale of Service Shares of
any Portfolio, including the sale of such Service Shares to the Service Provider
for the account of any Plan Participant or Participants.
(d) Service Provider shall not make the Service Shares available to
Plan Participants except in compliance with federal and state securities law and
subject to the terms of the prospectus for the Service Shares. Service Provider
shall be responsible for delivering the prospectus, statement of additional
information and similar materials for the Shares to Plan Participants in
accordance with and within the time frames required by applicable law.
(e) The Service Provider will furnish to the Distributor, the Trust
or their designees such information as the Distributor may reasonably request,
and will otherwise cooperate with the Distributor in the preparation of reports
to the Trust's Board of Trustees concerning this Agreement, as well as any other
reports or filings that may be required by law.
2. Indemnification. The Service Provider shall indemnify Distributor, the
Trust, and their affiliates, directors, trustees, employees and shareholders for
any loss (including without limitation, litigation costs and expenses and
attorneys' and experts' fees) directly resulting from Service Provider's
negligent or willful act, omission or error, or Service Provider's breach of
this Agreement. Such indemnification shall survive termination of the Agreement.
3. Approval of Informational Materials. No person is authorized to make any
representations concerning the Trust, the Portfolios, the Service Shares, or
Distributor except those representations contained in the then-current
prospectus and statement of additional information for the Service Shares and in
such printed information as Distributor or the Trust may subsequently prepare.
Service Provider shall send all filings with state and federal agencies and
marketing materials in which the Trust or the Portfolios are named to
Distributor for review at least fifteen business days prior to its filing or
general release. No such materials shall be used if Distributor reasonably
objects to such use.
4. Maintenance of Records.
(a) Service Provider shall maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services herein. Upon the reasonable request of Distributor or the Trust,
Service Provider shall provide Distributor, the Trust or the representative of
either, copies of all such records.
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(b) Service Provider shall maintain and transmit to Distributor on at
least a monthly basis information on sales, redemptions and exchanges of Service
Shares of each Portfolio by state or jurisdiction of residence of Plan
Participants and any other information requested by Distributor to enable
Distributor or its affiliates to properly register or report the sale of the
Service Shares under the securities, licensing or qualification laws of the
various states and jurisdictions. Such information shall be provided in a form
mutually agreeable to Distributor and Service Provider.
5. Operations of the Portfolios. Nothing in this Agreement shall in any way
limit the authority of the Trust or Distributor to take such lawful action as
either may deem appropriate or advisable in connection with all matters relating
to the operation of the Portfolios and the sale of the Service Shares. The
parties acknowledge that nothing in this Agreement shall in any way preclude or
prevent the Trust's Board of Trustees from taking any actions deemed necessary
by such Trustees in furtherance of their fiduciary duties to the Trust and its
shareholders, which, among other things, may include the refusal to sell Service
Shares of any Portfolio to any person, or to suspend or terminate the offering
of the Service Shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of the Trustees' fiduciary duties
under applicable law, necessary in the best interests of the shareholders of any
Portfolio.
6. Proprietary Rights. Janus Capital Corporation ("Janus Capital") is
the sole owner of the name and mark "Janus." Neither the Service Provider, nor
its affiliates, employees, or agents shall, without prior written consent of
Janus Capital, use the name or mark "Janus" or make representations regarding
the Trust, Distributor, Janus Capital, or their affiliates, or any products or
services sponsored, managed, advised, or administered by the Trust, Distributor,
Janus Capital or their affiliates, except those contained in the then current
prospectus and the then current printed sales literature for the Service Shares
of the Portfolios. Upon termination of this Agreement for any reason, the
Service Provider shall immediately cease all use of any Janus mark.
7. Fees. In consideration of Service Provider's performance of the services
described in this Agreement, Distributor shall pay to the Service Provider a
monthly fee ("Distribution Fee") calculated as follows: the average aggregate
amount invested in each month in the Service Shares of each Portfolio by Plans
whose Plan Participants receive services hereunder by the Service Provider is
multiplied by a pro-rata fee factor. The pro-rata fee factor is calculated by:
(a) dividing the per annum factor set forth on Exhibit A for the Service Shares
of each Portfolio by the number of days in the applicable year, and (b)
multiplying the result by the actual number of days in the applicable month. The
average aggregate amount invested over a one-month period shall be computed by
totalling the aggregate investment by Plans whose Plan Participants receive
services hereunder by the Service Provider (share net asset value multiplied by
total number of shares held) on each calendar day during the month and dividing
by the total number of calendar days during such month.
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Distributor will calculate the fee at the end of each month and will
make such reimbursement to the Service Provider. The reimbursement check will be
accompanied by a statement showing the calculation of the monthly amounts
payable by Distributor and such other supporting data as may be reasonably
requested by the Service Provider.
8. Non-Exclusivity. Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each of the parties is free to enter into similar agreements and
arrangements with other entities.
9. Representations, Warranties and Agreements. The Service Provider
represents, warrants, and covenants that:
(a) The Service Provider will comply in all material respects with
all applicable laws, rules and regulations;
(b) The Service Provider is authorized by the Plans to enter into
this Agreement;
(c) The Service Provider is registered as a broker and dealer pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act") and any applicable
state securities laws or is not required to be registered in order to enter into
and perform the services set forth in this Agreement;
(d) The performance of the duties and obligations and provision of
services by Service Provider as described in this Agreement and the receipt of
the fee provided in this Agreement will not violate federal or state banking
law, the Employment Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended ("IRC"), federal or
state securities laws, or any other applicable law;
(e) The fee arrangement under this Agreement will be disclosed to a
Plan fiduciary unrelated to the Service Provider, prior to the Service
Provider's receipt of fees hereunder;
(f) [Select alternative A or B] A. [Neither the Service Provider, nor
any affiliate, will be a "fiduciary" of the Plans, as such term is defined in
Section 3(21) of the Employee Retirement Income Security Act f 1974, as amended
("ERISA") and Section 4975 of the IRC. Neither the Service Provider, nor any
affiliate, makes any investment recommendations to any of the Plans or Plan
Participants.] B. [The Service Provider will reduce the fees it charges to the
Plans by an amount equal to the fees paid pursuant to this Agreement.] The
receipt of the fees described in this Agreement by the Service Provider will not
constitute a non-exempt "prohibited transaction," as such term is defined in
Section 406 of ERISA and Section 4975 of the IRC;
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(g) Each Plan meets the requirements for qualified plan status under
one of the IRC Sections listed in Revenue Ruling 94-62 (attached as Exhibit C)
and will continue to meet these requirements. Service Provider will immediately
notify the Distributor if it obtains knowledge that such representation is not
true;
(h) [Each Plan is a participant-directed plan.] If not explain
(i) Any of Service Provider's trading systems that interact with the
Distributor via any form of automated feed prior to, during and after the
calendar year 2000 will recognize accurate century data, and user interfaces and
operation environments will comply with Year 2000 application standards.
10. Termination.
(a) Unless sooner terminated with respect to any Portfolio, this
Agreement will continue with respect to a Portfolio if only the continuance of a
form of this Agreement is specifically approved at least annually by the vote of
a majority of the members of the Board of Trustees of the Trust who are not
"interested persons" (as such term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the 12b-1 Plan relating to such
Portfolio or any agreement relating to such 12b-1 Plan, including this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement will automatically terminate with respect to a
Portfolio in the event of its assignment (as such term is defined in the 1940
Act) with respect to such Portfolio. This Agreement may be terminated with
respect to any Portfolio by the Distributor or by the Service Provider, without
penalty, upon 60 days' prior written notice to the other party. This Agreement
may also be terminated with respect to any Portfolio at any time without penalty
by the vote of a majority of the members of the Board of Trustees of the Trust
who are not "interested persons" (as such term is defined in the 1940 Act) and
who have no direct or indirect financial interest in the 12b-1 Plan relating to
such Portfolio or any agreement relating to such Plan, including this Agreement,
or by a vote of a majority of the Service Shares of such Portfolio on 60 days'
written notice.
(c) In addition, either party may terminate this Agreement immediately
if at any time it is determined by any federal or state regulatory authority
that compensation to be paid under this Agreement is in violation of or
inconsistent with any federal or state law.
11. Miscellaneous.
(a) No modification of any provision of this Agreement will be binding
unless in writing and executed by the parties. No waiver of any provision of
this Agreement will be binding unless in writing and executed by the party
granting such waiver.
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(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns; provided,
however that neither this Agreement nor any rights, privileges, duties, or
obligations of the parties may be assigned by either party without the written
consent of the other party or as expressly contemplated by this Agreement.
(c) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Colorado, exclusive of conflicts of laws.
(d) This Agreement may be executed in several counterparts, each of
which shall be an original but all of which together shall constitute one and
the same instrument.
(e) All notices and other communications to either Service Provider or
Distributor will be duly given if mailed or faxed to the address set forth
below, or to such other address as either party may provide in writing to the
other party.
If to Distributor:
Janus Distributors, Inc.
100 Fillmore Street
Denver, Colorado 80206
Attn: General Counsel
If to the Service Provider:
JANUS DISTRIBUTORS, INC. __________________________________
By:____________________________ By:_____________________________
Name: Kelley Abbott Howes Name:
Title: Vice President Title:
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Exhibit A to Distribution and Shareholder Services Agreement
Name of Portfolio Fee Factor*
All Portfolios of Janus Aspen Series 0.25%
(Service Shares)
*Shall not exceed 0.25%
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EXHIBIT 5(f)
DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENT
Service Shares of Janus Aspen Series
(for Insurance Companies)
This Agreement is made as of ______________, by and between Janus
Distributors, Inc. (the "Distributor"), a Colorado corporation, and
__________________________ (the "Company"), a ____________________ corporation.
Recitals
A. The Company has entered into a participation agreement with Janus Aspen
Series (the "Trust"), an open-end investment company registered under the
Investment Company Act of 1940 (the "1940 Act") with respect to the purchase of
a class of shares designated "Service Shares" of one or more series of the Trust
(each a "Portfolio") by certain separate accounts of the Company ("Accounts").
B. The Distributor serves as the distributor to Service Shares.
C. The Company desires to provide certain distribution and shareholder
services to owners ("Contract Owners") of variable life insurance policies or
variable annuity contracts ("Contracts") in connection with their allocation of
contract values in the Service Shares of the Portfolios and Distributor desires
Company to provide such services, subject to the conditions of this Agreement.
D. Pursuant to Rule 12b-1 under the 1940 Act, the Service Shares of each
Portfolio have adopted a Distribution and Shareholder Servicing Plan (the "12b-1
Plan") which, among other things, authorizes the Distributor to enter into this
Agreement with organizations such as Company and to compensate such
organizations out of each Portfolio's average daily net assets attributable to
the Service Shares.
Agreement
1. Services of Company
(a) The Company shall provide any combination of the following support
services, as agreed upon by the parties from time to time, to Contract Owners
who allocate contract values to the Service Shares of the Portfolios: delivering
prospectuses, statements of additional information, shareholder reports, proxy
statements and marketing materials to prospective and existing Contract Owners;
providing educational materials regarding the Service Shares; providing
facilities to answer questions from prospective and existing Contract Owners
about the Portfolios;
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receiving and answering correspondence; complying with
federal and state securities laws pertaining to the sale of Service Shares;
assisting Contract Owners in completing application forms and selecting account
options; and providing Contract Owner record-keeping and similar administrative
services.
(b) The Company will provide such office space and equipment,
telephone facilities, and personnel as may be reasonably necessary or beneficial
in order to provide such services to Contract Owners.
(c) The Company will furnish to the Distributor, the Trust or their
designees such information as the Distributor may reasonably request, and will
otherwise cooperate with the Distributor in the preparation of reports to the
Trust's Board of Trustees concerning this Agreement, as well as any other
reports or filings that may be required by law.
2. Indemnification. The Company shall indemnify Distributor, the Trust, and
their affiliates, directors, trustees, employees and shareholders for any loss
(including without limitation, litigation costs and expenses and attorneys' and
experts' fees) directly resulting from Company's negligent or willful act,
omission or error, or Company's breach of this Agreement. Such indemnification
shall survive termination of the Agreement.
3. Maintenance of Records. The Company shall maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the services herein. Upon the reasonable request of Distributor or the
Trust, Company shall provide Distributor, the Trust or the representative of
either, copies of all such records.
4. Fees. In consideration of Company's performance of the services
described in this Agreement, Distributor shall pay to the Company a monthly fee
("Distribution Fee") calculated as follows: the average aggregate amount
invested in each month in the Service Shares of each Portfolio by the Accounts
is multiplied by a pro-rata fee factor. The pro-rata fee factor is calculated
by: (a) dividing the per annum factor set forth on Exhibit A for the Service
Shares of each Portfolio by the number of days in the applicable year, and (b)
multiplying the result by the actual number of days in the applicable month. The
average aggregate amount invested over a one-month period shall be computed by
totaling the aggregate investment by the Accounts (share net asset value
multiplied by total number of shares held) on each calendar day during the month
and dividing by the total number of calendar days during such month.
Distributor will calculate the fee at the end of each month and will make
such reimbursement to the Company. The reimbursement check will be accompanied
by a statement showing the calculation of the monthly amounts payable by
Distributor and such other supporting data as may be reasonably requested by the
Company.
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5. Representations, Warranties and Agreements. The Company represents,
warrants, and covenants that:
(a) It and its employees and agents meet the requirements of
applicable law, including but not limited to federal and state securities law
and state insurance law, for the performance of services contemplated herein;
(b) It will not purchase Service Shares with Account assets derived
from tax-qualified retirement plans except indirectly, through Contracts
purchased in connection with such plans and the Service Fee does not include any
payment to the Company that is prohibited under the Employee Retirement Income
Securities Act of 1974 ("ERISA") with respect to any assets of a Contract Owner
invested in a Contract using the Portfolios as investment vehicles;
(c) If required by applicable law, the Company will disclose to each
Contract Owner the existence of the Distribution Fee received by the Company
pursuant to this Agreement in a form consistent with the requirements of
applicable law.
6. Termination.
(a) Unless sooner terminated with respect to any Portfolio, this
Agreement will continue with respect to a Portfolio if only the continuance of a
form of this Agreement is specifically approved at least annually by the vote of
a majority of the members of the Board of Trustees of the Trust who are not
"interested persons" (as such term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the 12b-1 Plan relating to such
Portfolio or any agreement relating to such 12b-1 Plan, including this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement will automatically terminate with respect to a
Portfolio in the event of its assignment (as such term is defined in the 1940
Act) with respect to such Portfolio. This Agreement may be terminated with
respect to any Portfolio by the Distributor or by the Company, without penalty,
upon 60 days' prior written notice to the other party. This Agreement may also
be terminated with respect to any Portfolio at any time without penalty by the
vote of a majority of the members of the Board of Trustees of the Trust who are
not "interested persons" (as such term is defined in the 1940 Act) and who have
no direct or indirect financial interest in the 12b-1 Plan relating to such
Portfolio or any agreement relating to such Plan, including this Agreement, or
by a vote of a majority of the Service Shares of such Portfolio on 60 days'
written notice.
(c) In addition, either party may terminate this Agreement immediately
if at any time it is determined by any federal or state regulatory authority
that compensation to be paid under this Agreement is in violation of or
inconsistent with any federal or state law.
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7. Miscellaneous.
(a) No modification of any provision of this Agreement will be binding
unless in writing and executed by the parties. No waiver of any provision of
this Agreement will be binding unless in writing and executed by the party
granting such waiver.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns; provided,
however that neither this Agreement nor any rights, privileges, duties, or
obligations of the parties may be assigned by either party without the written
consent of the other party or as expressly contemplated by this Agreement.
(c) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Colorado, exclusive of conflicts of laws.
(d) This Agreement may be executed in several counterparts, each of
which shall be an original but all of which together shall constitute one and
the same instrument.
JANUS DISTRIBUTORS, INC. __________________________________
By:___________________________ By:______________________________
Name: Kelley Abbott Howes Name:
Title: Vice President Title:
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Exhibit A to Distribution and Shareholder Services Agreement
Name of Portfolio Fee Factor*
All Portfolios of Janus Aspen Series 0.25%
(Service Shares)
*Shall not exceed 0.25%
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EXHIBIT 9(i)
JANUS
100 FILLMORE STREET
DENVER, COLORADO 80206-4928
PH: 303-316-5644
FAX: 303-639-6662
E-MAIL: [email protected]
October 22, 1999
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206-4928
Re: Public Offering of Janus Aspen Series Service Shares Class of Growth
Portfolio, Aggressive Growth Portfolio, Capital Appreciation Portfolio,
International Growth Portfolio, Worldwide Growth Portfolio, Balanced
Portfolio, Equity Income Portfolio, Growth and Income Portfolio, Flexible
Income Portfolio, High-Yield Portfolio, and Money Market Portfolio
Gentlemen:
I have acted as counsel for Janus Aspen Series, a Delaware business trust (the
"Trust"), in connection with the filing with the Securities and Exchange
Commission of a registration statement with respect to the proposed sale of
shares of beneficial interest, $0.001 par value of the Service Shares (the
"Shares"), as separate class of shares of the above-referenced series of the
Trust.
I have examined the Trust Instrument and Bylaws, as amended, the proceedings of
the Trust's trustees relating to the authorization, issuance and proposed sale
of the Shares, and such other records and documents as I have deemed relevant.
Based upon such examination, it is my opinion that upon the issuance and sale of
the Shares in the manner contemplated by the aforesaid registration statement,
such Shares will be legally issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced registration statement. This opinion is for the exclusive use
of Janus Aspen Series in connection with the filing of such registration
statement with the Securities and Exchange Commission and is not to be used,
circulated, quoted, relied upon or otherwise referred to by any other person or
for any other purpose. This opinion is given as of the date hereof and I render
no opinion and disclaim any obligation to revise or supplement this opinion
based upon any change in applicable law or any factual matter that occurs or
comes to my attention after the date hereof.
Very truly yours,
/s/Thomas A. Early
Thomas A. Early
Vice President and General Counsel
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 20 to the registration statement on N-1A (the "Registration
Statement") of our report dated February 3, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report to Shareholders of Janus Aspen Series, which is also incorporated by
reference into the Registration Statement. We also consent to the reference to
us under the heading "Independent Accountants" in the Statements of Additional
Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
October 25, 1999
EXHIBIT 13(b)
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Service Shares of Janus Aspen Series
WHEREAS, Janus Aspen Series ("JAS") engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, shares of beneficial interest of JAS are currently divided into
multiple series ("Portfolios"), each with three classes of shares, one of which
is designated the "Service Shares";
WHEREAS, Janus Distributors, Inc. ("JDI") serves as the distributor of the
Service Shares (the "Distributor") pursuant to a Distribution Agreement dated
September 14, 1999, as amended from time to time, between JDI and JAS; and
NOW, THEREFORE, JAS hereby adopts with respect to the Service Shares of
each Portfolio, and the Distributor hereby agrees to the terms of, the Plan, in
accordance with Rule 12b-1 under the Act on the following terms and conditions:
1. JAS shall pay to the Distributor, as the distributor of the Service
Shares, a fee for distribution of the shares at the rate of up to 0.25% on an
annualized basis of the average daily net assets of the Service Shares, provided
that, at any time such payment is made, whether or not this Plan continues in
effect, the making thereof will not cause the limitation upon such payments
established by this Plan to be exceeded. Such fee shall be calculated and
accrued daily and paid at such intervals as the Trustees shall determine,
subject to any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Service Shares in connection with
any activities or expenses primarily intended to result in the sale of the
Service Shares, including, but not limited to, payment of compensation,
including incentive compensation, to securities dealers and other financial
institutions and organizations (collectively, the "Service Providers") to obtain
various distribution related and/or administrative services for the investors in
the Service Shares (contract owners in the case of insurance company separate
accounts that invest in the Service Shares or plan participants in the case of
qualified plans that invest in the Service Shares). These services may include,
but are not limited to the following functions: printing and delivering
prospectuses, statements of additional information, shareholder reports, proxy
statements and marketing materials related to the Service Shares to prospective
and existing contract owners and plan participants; providing educational
materials regarding the Service Shares; providing facilities to answer questions
from prospective and existing contract owners and plan participants about the
Portfolios; receiving and answering correspondence; complying with federal and
state securities laws pertaining to the sale of Service Shares; and assisting
contract owners and plan participants
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in completing application forms and selecting dividend and other accounts
options; and providing contract owner or participant record keeping and
administrative services. The Distributor is also authorized to engage directly
in any activities relating to the purposes of this plan. In addition, this Plan
hereby authorizes payment by JAS of the cost of preparing, printing and
distributing prospectuses and statements of additional information relating to
the Service Shares to prospective investors and of implementing and operating
the Plan. Payments under the Plan are not tied exclusively to actual
distribution and service expenses, and the payments may exceed distribution and
service expenses actually incurred.
3. This Plan shall not take effect until it, together with any related
agreements, has been approved by votes of a majority of both (a) the Trustees of
JAS and (b) those Trustees of JAS who are not "interested persons" of JAS (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
4. After approval as set forth in paragraph 3, this Plan shall take effect
as of the date of execution. The Plan shall continue in full force and effect as
to the Service Shares of each Portfolio of JAS for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in paragraph 3.
5. The Distributor shall provide to the Trustees of JAS, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
6. This Plan may be terminated as to the Service Shares of any Portfolio of
JAS at any time, without payment of any penalty, by vote of the Trustees of JAS,
by vote of a majority of the Rule 12b-1 Trustees, or by a vote of a majority of
the outstanding voting securities of the Service Shares of JAS.
7. This Plan may not be amended to increase materially the amount of
distribution fee provided for in paragraph 1 hereof for any Portfolio unless
such amendment is approved by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Service Shares of that Portfolio and
no material amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not "interested persons" (as defined in the Act) of JAS shall be
committed to the discretion of the Trustees who are not such interested persons.
9. JAS shall preserve copies of this Plan and any related agreements and
all reports made pursuant to paragraph 5 hereof, for a period of not less than
six years from the date of this
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Plan, any such agreement or any such report, as the case may be, the first two
years in an easily accessible place.
IN WITNESS WHEREOF, JAS, on behalf of the Service Shares of each Portfolio,
and the Distributor have executed this Distribution Plan as of
___________________.
JANUS ASPEN SERIES
By:_______________________________________
Name: Thomas H. Bailey
Title: President
JANUS DISTRIBUTORS, INC.
By:_______________________________________
Name: Kelley Abbott Howes
Title: Vice President
3
EXHIBIT 15(c)
September 14, 1999
RULE 18f-3 PLAN
Janus Aspen Series
This Rule 18f-3 Plan ("Plan") is adopted by Janus Aspen Series ("JAS") with
respect to Institutional Shares, Retirement and Service Shares (each a "Class")
of each existing and future Portfolio (each a "Portfolio") of JAS in accordance
with the provisions of Rule 18f-3 under the Investment Company Act of 1940 (the
"Act").
1. Features of the Classes. Each Portfolio may issue its shares of
beneficial interest in three classes: the "Institutional Shares," the
"Retirement Shares" and "Service Shares." Institutional Shares may be sold only
to insurance company separate accounts and qualified plans. Retirement Shares
may be sold only to qualified plans that require a fee out of Portfolio assets
to procure distribution and administrative services to plans and plan
participants. Service Shares may be sold to insurance company separate accounts
and qualified plans that require a fee out of Portfolio assets to procure
distribution and/or administrative services to contract owners or plans/plan
participants. In the case of qualified plan investors in the Service Shares,
such plans require a fee that is lower than that payable with respect to
Retirement Shares, because, for example, they are compensated from a different
source or they are providing a less costly level of services. Class Expenses, as
defined in Section 2 below relating to each Class are borne solely by the Class
to which they relate and within each Class are borne by each share pro rata on
the basis of its net asset value. Each Class shall have exclusive voting rights
on any matter submitted to shareholders that relates solely to its service or
distribution arrangement and each Class shall have separate voting rights on any
matter submitted to shareholders in which the interests of one Class differ from
the interests of any other Class. In addition, Institutional
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Shares, Retirement Shares and Service Shares shall have the features described
in Sections 2 through 5 below.
2. Class Expenses. Expenses incurred by JAS that are chargeable to a
specific Class ("Class Expenses") include expenses (not including advisory or
custodial fees or other expenses related to the management of a Portfolio's
assets) that are incurred in a different amount by that Class or are in
consideration of services provided to that Class of a different kind or to a
different degree than are provided to another Class. Class Expenses include: (i)
the Distribution Fee and Participant Administration Fee described in Section 3
applicable to the Retirement Shares and the Distribution Fee described in
Section 3 applicable to Service Shares; (ii) expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of record (i.e., insurance company separate
accounts and qualified plans, as omnibus accounts) of a specific Class; (iii)
Blue Sky fees incurred with respect to a specific Class; (iv) administrative,
subaccounting and transfer agency expenses in connection with the shareholders
of record (omnibus accounts) investing in a specific Class; (v) litigation or
other legal expenses relating to a specific Class; (vi) fees or expenses of the
Trustees of JAS who are not interested persons of Janus Capital Corporation
("Independent Trustees"), and of counsel and consultants to the Independent
Trustees, incurred as a result of issues relating to a specific Class; (vii)
auditing and consulting expenses relating to a specific Class; and (viii)
additional expenses incurred with respect to a specific Class as identified and
approved by the Trustees of JAS and the Independent Trustees.
3. Distribution Fees and Participant Administration Fee.
(a) Retirement Shares. The Trust has adopted a Distribution and
Shareholder Servicing Plan pursuant to Rule 12b-1 with respect to the Retirement
Shares of each Portfolio.
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Under the terms of the Plan, JAS pays Janus Distributors, Inc., as Distributor
of the Retirement Shares, a "Distribution Fee" out of the assets attributable to
the Retirement Shares of each Portfolio, in an amount up to 0.25% on an annual
basis of the average daily net assets of that class. JDI is permitted to use
this fee to compensate financial intermediaries that provide services in
connection with any activities or expenses primarily intended to result in the
sale of Retirement Shares.
Under the terms of the Distribution and Shareholder Servicing Plan,
these services may include, but are not limited to, the following functions:
printing and delivering prospectuses, statements of additional information,
shareholder reports, proxy statements and marketing materials related to the
Retirement Shares to prospective and existing plan participants; providing
educational materials regarding the Retirement Shares; providing facilities to
answer questions from prospective and existing plan participants about the
Portfolios; receiving and answering correspondence; complying with federal and
state securities laws pertaining to the sale of Retirement Shares; and assisting
plan participants in completing application forms and selecting dividend and
other account options.
JAS pays Janus Service Corporation ("JSC"), as Transfer Agent of JAS,
a "Participant Administration Fee," out of the assets attributable to the
Retirement Shares of each Portfolio, in an amount up to 0.25% on an annual basis
of the average daily net assets of that class. JSC is permitted to use this fee
to compensate service providers that provide recordkeeping, subaccounting and
other administrative services to qualified plan participants that invest in the
Retirement Shares. Such services may include, but are not limited to, the
following functions: furnishing participant subaccounting; maintaining separate
records for each plan
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reflecting purchase and redemption transactions; processing purchase and
redemption transactions; disbursing or crediting to the plan and maintaining
records of all proceeds of redemptions of shares and all other distributions not
reinvested in shares; preparing and transmitting to the plans, plan
participants, or the trustees of the plans periodic account statements showing
the total number of shares owned by each plan or participant as of the statement
closing date, purchases and redemptions of shares by the plan or participant
during the period covered by the statement, and the dividends and other
distributions paid to the plan or participant during the statement period
(whether paid in cash or reinvested in shares), and the integration of such
statements with those of other transactions and balances in other accounts of
the plan or participant; transmitting to JAS or its agents periodic reports
necessary to enable JAS to comply with state Blue Sky requirements; issuing
confirmations of purchase orders and redemption requests placed by the plans;
maintaining all account balance information for the plans and daily and monthly
purchase summaries expressed in shares and dollar amounts; preparing, filing,
and transmitting all federal, state, and local government reports and returns as
required by law with respect to each account maintained on behalf of a plan;
maintaining account designations and addresses; and printing and delivering
prospectuses, statements of additional information, shareholder reports, and
proxy statements to existing plan participants.
(b) Institutional Shares. JAS does not pay a Distribution Fee or
Participant Administration Fee with respect to the Institutional Shares of each
Portfolio (although JAS does pay administrative, subaccounting and transfer
agency expenses necessary for each insurance company separate account or
qualified plan as an omnibus account to invest in the Institutional Shares as
discussed under "Class Expenses" above).
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(c) Service Shares. The Trust has adopted a Distribution and
Shareholder Servicing Plan pursuant to Rule 12b-1 with respect to the Service
Shares of each Portfolio. Under the terms of the Plan, JAS pays Janus
Distributors, Inc., as Distributor of the Service Shares, a "Distribution Fee"
out of the assets attributable to the Service Shares of each Portfolio, in an
amount up to 0.25% on an annual basis of the average daily net assets of that
class. JDI is permitted to use this fee to compensate insurance companies or
financial intermediaries that provide services in connection with recordkeeping
and administrative services as well as any activities or expenses primarily
intended to result in the sale of Service Shares.
Under the terms of the Distribution and Shareholder Servicing Plan,
these services may include, but are not limited to, the following functions:
printing and delivering prospectuses, statements of additional information,
shareholder reports, proxy statements and marketing materials related to the
Service Shares to prospective and existing contract owners and plan
participants; providing educational materials regarding the Service Shares;
providing facilities to answer questions from prospective and existing contract
owners and plan participants about the Portfolios; receiving and answering
correspondence; complying with federal and state securities laws pertaining to
the sale of Service Shares; assisting contract owners and plan participants in
completing application forms and selecting dividend and other account options;
and performing contract owner or participant recordkeeping and administrative
services.
4. Differences in Class Expenses. The differences in the Class
Expenses payable by each Class pursuant to this Plan are due to the differing
levels of services provided or procured by JAS to beneficial owners (i.e.,
contract owners and plan participants) eligible to purchase shares of each Class
through omnibus accounts (i.e., insurance company separate accounts and
qualified plans) and to the differing levels of expenses expected to be incurred
with
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respect to each Class. Institutional Shares may be sold to insurance company
separate accounts and qualified plans that do not require a fee out of Portfolio
assets to procure distribution and administrative services to plan participants.
For the Institutional Shares, the contract owners or plan participants are
typically charged a fee for such services directly at the contract or plan level
(or the qualified plan sponsor bears these fees). Retirement Shares will be sold
to qualified plans whose service providers require a fee from Portfolio assets
for providing such services. Service Shares may be sold to insurance company
separate accounts and qualified plans that also require a fee from Portfolio
assets for providing such services, but in the case of qualified plan investors
in the Service Shares, such plans require a fee that is lower than that payable
with respect to Retirement Shares, because, for example, they are compensated
from a different source or they are providing a less costly level of services.
5. Exchange Privilege. The exchange privilege offered by each
Portfolio provides that shares of a Class may be exchanged only for shares of
the same Class of another Portfolio (provided that Portfolio is offered as an
investment option by the particular insurance company or qualified plan).
6. Effective Date. This Plan was adopted as of December 10, 1996, and
amended as of June 15, 1999 and September 14, 1999, pursuant to determinations
made by the Trustees of JAS, including a majority of the Independent Trustees,
that the multiple class structure and the allocation of expenses as set forth in
the Plan are in the best interests of each of the Institutional Shares,
Retirement Shares and Service Shares individually and each Portfolio and JAS as
a whole. This Plan will continue in effect until terminated in accordance with
Section 8.
7. Amendment. Material amendments to the Plan may be made with respect
to a Class at any time with the approval of the Trustees of JAS, including a
majority of the
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Independent Trustees, upon finding that the Plan as proposed to be amended,
including the allocation of expenses, is in the best interests of each Class
individually and each Portfolio and JAS as a whole. Non-material amendments to
the Plan may be made by Janus Capital Corporation at any time.
8. Termination. This Plan may be terminated by the Trustees without
penalty at any time.
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