OMB APPROVAL
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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. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [X]
Amendment No. 26 [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: May 1, 2000
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485 on (date)
[ ] 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
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
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization, and Management of the Portfolios
Capital Structure
7. Shareholder Information Shareholder's Guide; Other Information;
Distributions and Taxes
8. Distribution Arrangements Other Information (Service Shares
and Retirement Shares Prospectuses
only)
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,
and Investment Strategies and Risks;
Appendix A
13. Management of the Fund Investment Adviser; Custodian,
Transfer Agent and Certain
Affiliations; Trustees and
Officers
14. Control Persons and Principal Not Applicable
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
<PAGE>
19. Taxation of the Fund Income Dividends, Capital Gains
Distributions and Tax Status
20. Underwriters Custodian, Transfer Agent, and
Certain Affiliations
21. Calculation of Performance Performance Information
Data
22. Financial Statements Financial Statements
<PAGE>
<PAGE>
[JANUS LOGO]
Janus Aspen Series
Institutional Shares
PROSPECTUS
MAY 1, 2000
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Global Life Sciences Portfolio
Global Technology 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 thirteen 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 two or three classes of shares. The Institutional Shares
(the "Shares") are sold under the name of "Janus Aspen Series"
and 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
Equity Portfolios........................................ 2
Fixed-Income Portfolios.................................. 10
Money Market Portfolio................................... 12
Fees and expenses........................................ 14
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS
Equity Portfolios........................................ 16
Fixed-Income Portfolios.................................. 21
General portfolio policies for Portfolios other than
Money Market Portfolio................................... 22
Risks for Equity Portfolios.............................. 25
Risks for Fixed-Income Portfolios........................ 26
Risks Common to All Non-Money Market Portfolios.......... 27
Money Market Portfolio................................... 29
MANAGEMENT OF THE PORTFOLIOS
Investment adviser....................................... 32
Management expenses and expense limits................... 32
Investment personnel..................................... 34
OTHER INFORMATION........................................... 38
DISTRIBUTIONS AND TAXES
Distributions............................................ 39
Portfolios other than Money Market Portfolio............. 39
Money Market Portfolio................................... 39
Taxes.................................................... 39
SHAREHOLDER'S GUIDE
Pricing of portfolio shares.............................. 41
Purchases................................................ 41
Redemptions.............................................. 42
Frequent trading......................................... 42
Shareholder communications............................... 42
FINANCIAL HIGHLIGHTS........................................ 43
GLOSSARY
Glossary of investment terms............................. 54
RATING CATEGORIES
Explanation of rating categories......................... 58
</TABLE>
Table of contents 1
<PAGE>
Risk return summary
EQUITY PORTFOLIOS
The Equity 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 EQUITY PORTFOLIOS?
- --------------------------------------------------------------------------------
DOMESTIC EQUITY 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.
- 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.
GLOBAL/INTERNATIONAL EQUITY PORTFOLIOS
- INTERNATIONAL GROWTH PORTFOLIO, GLOBAL LIFE SCIENCES PORTFOLIO
AND GLOBAL TECHNOLOGY PORTFOLIO seek 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 EQUITY 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.
2 Janus Aspen Series
<PAGE>
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.
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.
GLOBAL LIFE SCIENCES PORTFOLIO invests primarily in equity securities
of U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes have a life science
orientation. Generally speaking, the "life sciences" relate to
maintaining or improving quality of life. So, for example, companies
with a "life science orientation" include companies engaged in
research development, production or distribution of products or
services related to health and personal care, medicine or
pharmaceuticals. As a fundamental policy, the Portfolio normally
invests at least 25% of its total assets, in the aggregate, in the
following industry groups: healthcare; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.
GLOBAL TECHNOLOGY PORTFOLIO invests primarily in equity securities of
U.S. and foreign companies selected for their growth potential. Under
normal circumstances, it invests at least 65% of its total assets in
securities of companies that the portfolio manager believes will
benefit significantly from advances or improvements in technology.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY PORTFOLIOS?
The biggest risk of investing in these Portfolios is that their
returns may vary, and you could lose money. If you are considering
investing in any of the Equity 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's holdings may decrease if the value of an
individual company in the portfolio decreases. The value of a
Portfolio's holdings could also decrease if the stock market goes
down. If the value of a Portfolio's holdings decreases, that
Portfolio's net asset value (NAV) will also decrease, which means if
you sell your shares in a Portfolio you would get back less money.
The income component of BALANCED PORTFOLIO, EQUITY INCOME PORTFOLIO
AND GROWTH AND INCOME PORTFOLIO 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
Risk return summary 3
<PAGE>
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.
GLOBAL LIFE SCIENCES PORTFOLIO concentrates its investments in related
industry groups. Because of this, companies in its portfolio may share
common characteristics and react similarly to market developments. For
example, many companies with a life science orientation are highly
regulated and may be dependent upon certain types of technology. As a
result, changes in government funding or subsidies, new or anticipated
legislative changes, or technological advances could affect the value
of such companies and, therefore, the Portfolio's NAV. The Portfolio's
returns may be more volatile than those of a less concentrated
portfolio.
Although GLOBAL TECHNOLOGY PORTFOLIO does not concentrate its
investments in specific industries, it may invest in companies related
in such a way that they react similarly to certain market pressures.
For example, competition among technology companies may result in
increasingly aggressive pricing of their products and services, which
may affect the profitability of companies in the portfolio. In
addition, because of the rapid pace of technological development,
products or services developed by companies in the Portfolio's
portfolio may become rapidly obsolete or have relatively short product
cycles. As a result, the Portfolio's returns may be considerably more
volatile than the returns of a fund that does not invest in similarly
related companies.
INTERNATIONAL GROWTH PORTFOLIO, WORLDWIDE GROWTH PORTFOLIO, GLOBAL
LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY 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, CAPITAL APPRECIATION PORTFOLIO, GLOBAL
LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY 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 Equity Portfolios by showing how each of the Equity
Portfolios' performance has varied over time. 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 Shares of each Portfolio for the periods indicated to
a broad-based securities market index.
4 Janus Aspen Series
<PAGE>
GROWTH PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
2.76% 30.17% 18.45% 22.75% 35.66% 43.98%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1998 27.71% Worst Quarter: 3rd-1998 (10.92%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Growth Portfolio - Institutional Shares 43.98% 29.89% 24.28%
S&P 500 Index* 21.03% 28.54% 22.68%
--------------------------------------------
</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 - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
16.33% 27.48% 7.95% 12.66% 34.26% 125.40%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1999 59.34% Worst Quarter: 3rd-1998 (14.98%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Aggressive Growth Portfolio - Institutional Shares 125.40% 36.23% 34.42%
S&P MidCap 400 Index* 14.72% 23.05% 18.08%
---------------------------------------------
</TABLE>
* The S&P MidCap 400 Index is an unmanaged group of 400 domestic
stocks chosen for their market size, liquidity and industry group
representation.
Risk return summary 5
<PAGE>
CAPITAL APPRECIATION PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
58.11% 67.00%
1998 1999
Best Quarter: 4th-1999 41.77% Worst Quarter: 3rd-1998 (9.98%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Capital Appreciation Portfolio - Institutional Shares 67.00% 57.18%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
BALANCED PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
0.84% 24.79% 16.18% 22.10% 34.28% 26.76%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1998 20.32% Worst Quarter: 3rd-1998 (4.97%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Balanced Portfolio - Institutional Shares 26.76% 24.68% 20.62%
S&P 500 Index* 21.03% 28.54% 22.68%
Lehman Brothers Gov't/Corp Bond Index** (2.15%) 7.61% 5.40%
--------------------------------------------
</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.
6 Janus Aspen Series
<PAGE>
EQUITY INCOME PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
46.24% 41.58%
1998 1999
Best Quarter: 4th-1998 28.51% Worst Quarter: 3rd-1998 (7.18%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Equity Income Portfolio - Institutional Shares 41.58% 46.87%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</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 - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
74.04%
1999
Best Quarter: 4th-1999 38.39% Worst Quarter: 3rd-1999 4.30%
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/98)
<S> <C> <C>
Growth and Income Portfolio -- Institutional Shares 74.04% 55.33%
S&P 500 Index* 21.03% 19.85%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
Risk return summary 7
<PAGE>
INTERNATIONAL GROWTH PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
23.15% 34.71% 18.51% 17.23% 82.27%
1995 1996 1997 1998 1999
Best Quarter 4th-1999 58.48% Worst Quarter 3rd-1998 (17.76%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (5/24/94)
<S> <C> <C> <C>
International Growth Portfolio - Institutional Shares 82.27% 33.25% 28.19%
Morgan Stanley Capital International EAFE(R) Index* 26.96% 12.83% 11.22%
----------------------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE(R) 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.
8 Janus Aspen Series
<PAGE>
WORLDWIDE GROWTH PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
1.53% 27.37% 29.04% 22.15% 28.92% 64.45%
1994 1995 1996 1997 1998 1999
Best Quarter 4th-1999 42.24% Worst Quarter 3rd-1998 (16.03%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Worldwide Growth Portfolio - Institutional Shares 64.45% 33.60% 29.71%
Morgan Stanley Capital International World Index* 24.93% 19.76% 16.41%
--------------------------------------------
</TABLE>
* The Morgan Stanley Capital International World Index is a market
capitalization weighted index composed of companies representative
of the market structure of 21 Developed Market countries in North
America, Europe and the Asia/Pacific Region.
Since Global Life Sciences Portfolio and Global Technology Portfolio
did not commence operations until January 15, 2000, there is no
performance available as of the date of this prospectus.
The Equity 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 bonds, 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 bonds, 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 bonds 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.
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.
10 Janus Aspen Series
<PAGE>
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 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 Shares of each Portfolio for the
periods indicated to a broad-based securities market index.
FLEXIBLE INCOME PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
(0.91%) 23.86% 9.19% 11.76% 9.11% 1.60%
1994 1995 1996 1997 1998 1999
Best Quarter: 2nd-1995 6.71% Worst Quarter: 2nd-1999 (1.21%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Flexible Income Portfolio - Institutional Shares 1.60% 10.88% 8.50%
Lehman Brothers Gov't/Corp Bond Index* (2.15%) 7.61% 5.40%
---------------------------------------------
</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 - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
15.98% 1.26% 6.85%
1997 1998 1999
Best Quarter: 1st-1998 5.52% Worst Quarter: 3rd-1998 (6.07%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/96)
<S> <C> <C>
High-Yield Portfolio - Institutional Shares 6.85% 9.83%
Lehman Brothers High-Yield Bond Index* 2.39% 7.06%
-------------------------------
</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 the Money Market Portfolio by showing how Money Market
Portfolio's performance has varied over time. 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 or yield
computations. Total return and yield figures include the effect of the
Portfolio's expenses.
MONEY MARKET PORTFOLIO - INSTITUTIONAL SHARES
Annual returns for periods ended 12/31
5.05% 5.17% 5.36% 4.98%
1996 1997 1998 1999
Best Quarter: 4th-1999 1.40% Worst Quarter: 1st-1999 1.09%
The 7-day yield for the Portfolio's Shares on December 31, 1999 was
5.70%. 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. 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
Management Other Operating Expenses Operating Expenses
Fee Expenses Without Waivers* Total Waivers With Waivers*
<S> <C> <C> <C> <C> <C>
Growth Portfolio 0.65% 0.02% 0.67% N/A 0.67%
Aggressive Growth Portfolio 0.65% 0.02% 0.67% N/A 0.67%
Capital Appreciation Portfolio 0.65% 0.04% 0.69% N/A 0.69%
Balanced Portfolio 0.65% 0.02% 0.67% N/A 0.67%
Equity Income Portfolio 0.65% 0.63% 1.28% 0.03% 1.25%
Growth and Income Portfolio 0.65% 0.40% 1.05% N/A 1.05%
International Growth Portfolio 0.65% 0.11% 0.76% N/A 0.76%
Worldwide Growth Portfolio 0.65% 0.05% 0.70% N/A 0.70%
Global Life Sciences Portfolio 0.65% 0.19% 0.84% N/A 0.84%
Global Technology Portfolio 0.65% 0.13% 0.78% N/A 0.78%
Flexible Income Portfolio 0.65% 0.07% 0.72% N/A 0.72%
High-Yield Portfolio 0.75% 4.17% 4.92% 3.92% 1.00%
Money Market Portfolio 0.25% 0.18% 0.43% N/A 0.43%
</TABLE>
- --------------------------------------------------------------------------------
* Expenses (except for Global Technology and Global Life Sciences
Portfolios) are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for
Growth, Aggressive Growth, Capital Appreciation, International Growth,
Worldwide Growth, Balanced, Equity Income and Growth and Income
Portfolios. Expenses for Global Technology and Global Life Sciences
Portfolios are based on the estimated expenses that those Portfolios
expect to incur in their initial fiscal year. Expenses are stated both
with and without contractual waivers by Janus Capital. Waivers, if
applicable, are first applied against the management fee and then
against other expenses, and will continue until at least the next annual
renewal of the advisory agreement. All expenses are shown without the
effect of any expense offset arrangements.
- --------------------------------------------------------------------------------
EXAMPLE:
THE FOLLOWING EXAMPLE IS BASED ON EXPENSES WITHOUT WAIVERS (IF ANY).
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 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $ 68 $ 214 $ 373 $ 835
Aggressive Growth Portfolio $ 68 $ 214 $ 373 $ 835
Capital Appreciation Portfolio $ 70 $ 221 $ 384 $ 859
Balanced Portfolio $ 68 $ 214 $ 373 $ 835
Equity Income Portfolio $130 $ 406 $ 702 $1,545
Growth and Income Portfolio $107 $ 334 $ 579 $1,283
International Growth Portfolio $ 78 $ 243 $ 422 $ 942
Worldwide Growth Portfolio $ 72 $ 224 $ 390 $ 871
Global Life Sciences Portfolio $ 86 $ 268 N/A N/A
Global Technology Portfolio $ 80 $ 249 N/A N/A
Flexible Income Portfolio $ 74 $ 230 $ 401 $ 894
High-Yield Portfolio $492 $1,478 $2,465 $4,940
Money Market Portfolio $ 44 $ 138 $ 241 $ 542
</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
Balanced Portfolio Janus Balanced Fund
Equity Income Portfolio Janus Equity Income Fund
Growth and Income Portfolio Janus Growth and Income Fund
International Growth Portfolio Janus Overseas Fund
Worldwide Growth Portfolio Janus Worldwide Fund
Global Life Sciences Portfolio Janus Global Life Sciences Fund
Global Technology Portfolio Janus Global Technology Fund
Flexible Income Portfolio Janus Flexible Income Fund
High-Yield Portfolio Janus High-Yield Fund
Money Market Portfolio Janus Money Market Fund
</TABLE>
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.
EQUITY PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Equity Portfolios, their principal investment strategies and
certain risks of investing in the Equity 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 25-28 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 EQUITY 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
16 Janus Aspen Series
<PAGE>
equity assets in medium-sized companies. Medium-sized companies are
those whose market capitalization falls within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly used
measure of the size and value of a company. The market capitalizations
within the Index will vary, but as of December 31, 1999, they ranged
from approximately $170 million to $37 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.
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.
GLOBAL/INTERNATIONAL EQUITY 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.
Investment objectives, principal investment strategies and risks 17
<PAGE>
GLOBAL LIFE SCIENCES PORTFOLIO
Global Life Sciences Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in equity securities of
U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes have a life science
orientation. As a fundamental policy, the Portfolio normally invests
at least 25% of its total assets, in the aggregate, in the following
industry groups: health care; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.
GLOBAL TECHNOLOGY PORTFOLIO
Global Technology Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in equity securities of
U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes will benefit
significantly from advances or improvements in technology. These
companies generally fall into two categories:
a. Companies that the portfolio manager believes have or will develop
products, processes or services that will provide significant
technological advancements or improvements; and
b. Companies that the portfolio manager believes rely extensively on
technology in connection with their operations or services.
The following questions and answers are designed to help you better understand
the Equity 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. Except for Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio, realization
of income is not a significant consideration when choosing investments
for the Portfolios. Income realized on the Portfolios' investments may
be incidental to their objectives. In the case of Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio, a portfolio
manager may consider dividend-paying characteristics to a greater
degree in selecting common stock.
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.
18 Janus Aspen Series
<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 Equity 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.
4. HOW DO BALANCED PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME
PORTFOLIO 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 Balanced Portfolio or Equity Income
Portfolio. Although Equity Income Portfolio 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 less volatile than Equity Income Portfolio and
Growth and Income Portfolio.
5. 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.
6. 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.
7. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE BALANCED
PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME PORTFOLIO?
The growth component of these portfolios is expected to consist
primarily of common stocks, but may also include warrants, preferred
stocks or convertible securities selected primarily for their growth
potential.
8. 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 is expected to consist of securities that the portfolio
managers believe have income potential. Such securities may include
equity
Investment objectives, principal investment strategies and risks 19
<PAGE>
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.
9. WHAT DOES "LIFE SCIENCE ORIENTATION" MEAN IN RELATION TO GLOBAL LIFE SCIENCES
PORTFOLIO?
Generally speaking, the "life sciences" relate to maintaining or
improving quality of life. So, for example, companies with a "life
science orientation" include companies engaged in research,
development, production or distribution of products or services
related to health and personal care, medicine or pharmaceuticals. Life
science oriented companies also include companies that the portfolio
manager believes have growth potential primarily as a result of
particular products, technology, patents or other market advantages in
the life sciences. Life sciences encompass a variety of industries,
including health care, nutrition, agriculture, medical diagnostics,
nuclear and biochemical research and development and health care
facilities ownership and operation.
10. HOW DOES GLOBAL TECHNOLOGY PORTFOLIO'S INDUSTRY POLICY DIFFER FROM THAT OF
GLOBAL LIFE SCIENCES PORTFOLIO?
Unlike Global Life Sciences Portfolio, Global Technology Portfolio
will not concentrate its investments in any particular industry or
group of related industries. As a result, its portfolio manager may
have more flexibility to find companies that he believes will benefit
from advances or improvements in technology in a number of industries.
Nevertheless, the Portfolio may hold a significant portion of its
assets in industries such as: aerospace/defense; biotechnology;
computers; office/business equipment; semi-conductors; software;
telecommunications; and telecommunications equipment.
20 Janus Aspen Series
<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 25-28 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 bonds, 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 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.
Investment objectives, principal investment strategies and risks 21
<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 BOND?
A high-yield/high-risk bond (also called a "junk" bond) is a bond
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 Equity 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 Equity Portfolios also invest in domestic and foreign equity
securities with varying degrees of emphasis on
22 Janus Aspen Series
<PAGE>
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 bonds (less than 35% of each Portfolio's
assets)
- options, futures, forwards, swaps 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, swaps 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.
Investment objectives, principal investment strategies and risks 23
<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.
Global Technology Portfolio may invest in companies with relatively
short product cycles, for example, 6 to 9 months. Consequently its
portfolio turnover may be more frequent. 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.
24 Janus Aspen Series
<PAGE>
RISKS FOR EQUITY 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, initial
public offerings (IPOs) or companies with relatively small market
capitalizations. IPOs and other investment techniques may have a
magnified performance impact on a portfolio with a small asset base. A
portfolio may not experience similar performance as its assets grow.
Global Technology Portfolio's performance may also be affected by
industry risk.
The following questions and answers are designed to help you better understand
some of the risks of investing in the Equity Portfolios.
1. THE PORTFOLIOS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS?
Many attractive investment opportunities may be smaller, start-up
companies offering emerging products or services. Smaller or newer
companies may suffer more significant losses as well as realize more
substantial growth than larger or more established issuers because
they may lack depth of management, be unable to generate funds
necessary for growth or potential development, or be developing or
marketing new products or services for which markets are not yet
established and may never become established. In addition, such
companies may be insignificant factors in their industries and may
become subject to intense competition from larger or more established
companies. Securities of smaller or newer companies may have more
limited trading markets than the markets for securities of larger or
more established issuers, and may be subject to wide price
fluctuations. Investments in such companies tend to be more volatile
and somewhat more speculative.
2. HOW DOES THE NONDIVERSIFIED STATUS OF AGGRESSIVE GROWTH PORTFOLIO, CAPITAL
APPRECIATION PORTFOLIO, GLOBAL LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY
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.
Investment objectives, principal investment strategies and risks 25
<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, derivative instruments and
initial public offerings (IPOs). IPOs and other investment techniques
may have a magnified performance impact on a portfolio with a small
asset base. A portfolio may not experience similar performance as its
assets grow.
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 pages 58-59 for a description of
rating categories.
26 Janus Aspen Series
<PAGE>
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 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
BONDS?
High-yield/high-risk bonds (or "junk" bonds) are bonds rated below
investment grade by the primary rating agencies such as Standard &
Poor's and Moody's. The value of lower quality bonds generally is more
dependent on credit risk, or the ability of the issuer to meet
interest and principal payments, than investment grade bonds. Issuers
of high-yield bonds 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 bonds,
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 pages 58-59 for
a description of bond rating categories.
Investment objectives, principal investment strategies and risks 27
<PAGE>
3. HOW DO THE PORTFOLIOS TRY TO REDUCE RISK?
The Portfolios may use futures, options, swaps 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. WHAT IS "INDUSTRY RISK"?
Industry risk is the possibility that a group of related stocks will
decline in price due to industry-specific developments. Companies in
the same or similar industries may share common characteristics and
are more likely to react similarly to industry-specific market or
economic developments. In the life sciences, for example, many
companies are subject to government regulation and approval of their
products and services, which may affect their price or availability.
In addition, the products and services offered by these companies may
quickly become obsolete in the face of scientific or technological
developments. The economic outlook of such companies may fluctuate
dramatically due to changes in regulatory or competitive environments.
In technology-related industries, competitive pressures may have a
significant effect on the performance of companies in which Global
Technology Portfolio may invest. In addition, technology and
technology-related companies often progress at an accelerated rate,
and these companies may be subject to short product cycles and
aggressive pricing which may increase their volatility.
Global Life Sciences Portfolio invests in a concentrated portfolio,
which may result in greater exposure to related industries. As a
result, the Portfolio may be more volatile than a less concentrated
portfolio. Although Global Technology Portfolio does not "concentrate"
in a specific group of industries, it may, at times, have significant
exposure to companies in a variety of technology-related industries.
28 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 U.S. dollar denominated debt obligations.
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 29
<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.
30 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 31
<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 certain 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 and paid monthly. 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 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.
32 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
Average Daily
Net Assets Annual Rate Expense Limit
Fee Schedule of Portfolio Percentage (%) Percentage (%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio All Asset Levels 0.65 N/A
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------
Global Life Sciences Portfolio All Asset Levels 0.65 1.25(1)
Global Technology Portfolio
- ------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio All Asset Levels 0.65 1.25(2)
- ------------------------------------------------------------------------------------------------------------------
First $300
Flexible Income Portfolio Million 0.65 1.00(1)
Over $300 Million 0.55
- ------------------------------------------------------------------------------------------------------------------
First $300
High-Yield Portfolio Million 0.75 1.00(2)
Over $300 Million 0.65
- ------------------------------------------------------------------------------------------------------------------
Money Market Portfolio All Asset Levels 0.25 0.50(1)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements. As noted
in the fee table on page 15, however, the Portfolios' expenses without
waivers are not expected to exceed the expense limit.
(2) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements.
For the fiscal year ended December 31, 1999, each Portfolio paid Janus
Capital the following management fees based upon each Portfolio's
average net assets: 0.67% for Growth Portfolio, 0.68% for Aggressive
Growth Portfolio, 0.75% for Capital Appreciation Portfolio, 0.67% for
Balanced Portfolio, 0.75% for Equity Income Portfolio, 0.75% for
Growth and Income Portfolio, 0.73% for International Growth Portfolio,
0.66% for Worldwide Growth Portfolio, 0.65% for Flexible Income
Portfolio, 0.75% for High-Yield Portfolio and 0.25% for Money Market
Portfolio. These rates were based on a higher fee rate that was
previously in effect for certain of these Portfolios.
Management of the portfolios 33
<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 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 as a research analyst. He received
an undergraduate degree with honors in Religion with a
concentration in Philosophy from Dartmouth College and a Masters
Degree in Political Science from Stanford University. He has
earned the right to use the Chartered Financial Analyst
designation.
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 is 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 1997. He holds a
Bachelor of Arts in Economics from Yale University and he has
earned the right to use the Chartered Financial Analyst
designation.
HELEN YOUNG HAYES
- --------------------------------------------------------------------------------
is Executive Vice President and co-manager of International
Growth Portfolio and Worldwide 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 she has
earned the right to use the Chartered Financial Analyst
designation.
34 Janus Aspen Series
<PAGE>
C. MIKE LU
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Global
Technology Portfolio and Janus Global Technology Fund, which he
has managed since inception. He joined Janus Capital in 1991 as a
research analyst and has consistently focused on companies in the
technology industry. Mr. Lu has a Bachelor of Arts in History and
a Bachelor of Arts in Economics from Yale University. Mr. Lu has
earned the right to use the Chartered Financial Analyst
designation.
THOMAS R. MALLEY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Global Life
Sciences Portfolio and Janus Global Life Sciences Fund, which he
has managed since inception. He joined Janus Capital in 1991 as a
research analyst and has focused on companies in the health care,
pharmaceutical and biotechnology industries. Mr. Malley has a
Bachelor of Science in Biology from Stanford University and he
has earned the right to use the Chartered Financial Analyst
designation.
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 has earned the
right to use the Chartered Financial Analyst designation.
KAREN L. REIDY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Balanced
Portfolio and Equity Income Portfolio as of January 2000, and an
assistant portfolio manager of Growth Portfolio since 1998. She
also manages Janus Balanced Fund and Janus 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 as a manager in both the Mergers and
Acquisitions and Audit business units. In this capacity, Ms.
Reidy performed due diligence work for corporate clients and
oversaw audit engagements. She received an undergraduate degree
in Accounting from the University of Colorado in 1989 and passed
the CPA exam in 1992. She has earned the right to use the
Chartered Financial Analyst designation.
Management of the portfolios 35
<PAGE>
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 he has earned the right to use the
Chartered Financial Analyst designation.
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.
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 has earned the right to use the Chartered
Financial Analyst designation.
In January 1997, Mr. Speaker settled an SEC administrative action
involving two personal trades made by him in January of 1993.
Without admitting or denying the allegations, Mr. Speaker agreed
to civil money penalty, disgorgement, and interest payments
totaling $37,199 and to a 90-day suspension which ended on April
25, 1997.
36 Janus Aspen Series
<PAGE>
ASSISTANT PORTFOLIO MANAGERS
MATTHEW A. ANKRUM
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Aggressive Growth Portfolio.
He is also assistant portfolio manager of Janus Enterprise Fund.
Mr. Ankrum joined Janus Capital as an intern in June 1996, and
became an equity research analyst in August 1997. Prior to
joining Janus, Mr. Ankrum worked as a corporate finance analyst
at William Blair and Company from 1993 through 1995. He was also
a fixed-income research analyst at Conseco Capital Management.
Mr. Ankrum has an undergraduate degree in Business Administration
from the University of Wisconsin and a Master of Business
Administration from the University of Chicago. Mr. Ankrum has
earned the right to use the Chartered Financial Analyst
designation.
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 Strategic Value
Portfolio, Janus Strategic Value Fund and Janus Special
Situations Fund, each of which he has managed since its
inception. He obtained a Masters of Business Administration in
Finance from the Fuqua School of Business at Duke University and
a Bachelor of Arts in Economics and Political Science from Tufts
University. Mr. Decker has earned the right to use the Chartered
Financial Analyst designation.
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 has earned the right to use the
Chartered Financial Analyst designation.
DANIEL D. SCHOEN
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Money Market Portfolio. He
joined Janus in July 1993 and has worked as a trader and credit
analyst on Janus Money Market Funds. He has a Bachelor of Arts in
Economics from the University of Colorado.
JOHN H. SCHREIBER
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Growth Portfolio. Mr.
Schreiber joined Janus Capital 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 an MBA from Harvard University.
Management of the portfolios 37
<PAGE>
Other information
CLASSES OF SHARES
Each Portfolio currently offers two or 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. Service Shares of the
Portfolios are offered only in connection with investment in and
payments under variable insurance contracts as well as certain
qualified retirement plans that require a fee from Portfolio assets to
procure distribution and administrative services to contract owners
and plan participants. Retirement Shares of certain Portfolios are
offered only to qualified plans using plan service providers that are
compensated for providing distribution and/or recordkeeping and other
administrative services provided to plan participants. Because the
expenses of each class may differ, the performance of each class is
expected to differ. If you would like additional information about the
Service Shares or the Retirement Shares, please call 1-800-525-0020.
During the third quarter of 2000, the Retirement Shares shareholders
will be asked to approve the spin-off of the Retirement Shares into a
separate Delaware business trust, Janus Adviser Series. In connection
with this spin-off, each Portfolio will distribute all of its ordinary
income and capital gain income earned through the date of the
spin-off. The distributions will be made for all classes, including
Institutional Shares. It is anticipated that the spin-off and
distributions will occur during the third quarter of 2000.
CONFLICTS OF INTEREST
The Shares offered by this prospectus 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. Retirement Shares of the Portfolios (offered through
a separate prospectus) are available to certain qualified plans.
Although the Portfolios do not currently anticipate any disadvantages
to policy owners 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
Retirement Shares of 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 Retirement 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.
DISTRIBUTION OF EACH PORTFOLIO
Each Portfolio is distributed by Janus Distributors, Inc., a member of
the National Association of Securities Dealers, Inc. ("NASD"). To
obtain information about NASD member firms and their associated
persons, you may contact NASD Regulation, Inc. at www.nasdr.com, or
the Public Disclosure Hotline at 800-289-9999. An investor brochure
containing information describing the Public Disclosure Program is
available from NASD Regulation, Inc.
38 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 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 tax withholding or other 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 as a foreign tax credit. 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 39
<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 the Shares of each Portfolio are
sold in connection with variable 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.
40 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.
The Portfolios do not permit frequent trading or market timing.
Excessive purchases of Portfolio Shares disrupt portfolio management
and drive Portfolio expenses higher. 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 policy owners and plan 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.
Shareholder's guide 41
<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 to the participating
insurance company the business day following receipt of the redemption
order, but in no event later than seven days after receipt of such
order.
FREQUENT TRADING
Frequent trading of Portfolio shares in response in short-term
fluctuations in the market -- also known as "market timing" -- may
make it very difficult to manage a Portfolio's investments. The
Portfolios do not permit frequent trading or market timing. When
market timing occurs, a Portfolio may have to sell portfolio
securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell
any securities, which may harm a Portfolio's performance. When large
dollar amounts are involved, market timing can also make it difficult
to use long-term investment strategies because the portfolio manager
cannot predict how much cash a Portfolio will have to invest. When in
Janus Capital's opinion such activity would have a disruptive effect
on portfolio management, a Portfolio reserves the right to refuse
purchase orders and exchanges into a Portfolio by any person, group or
commonly controlled account. A Portfolio may notify a market timer of
rejection of a purchase or exchange order after the day the order is
placed. If a Portfolio allows a market timer to trade Portfolio
shares, it may require the market timer to enter into a written
agreement to follow certain procedures and limitations.
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.
42 Janus Aspen Series
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand
the Institutional Shares' financial performance for each of the five
most recent fiscal years or the life of the Portfolio if less than
five years. Items 1 through 11 reflect financial results for a single
Share. Total return in the tables represents the rate that an investor
would have earned (or lost) on an investment in each of the
Institutional Shares of the Portfolios (assuming reinvestment of all
dividends and distributions) but does not include charges and expenses
attributable to any insurance product. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the
Portfolios' financial statements, is included in the Annual Report,
which is available upon request and incorporated by reference into the
SAI.
Financial highlights are not presented for Global Life Sciences
Portfolio and Global Technology Portfolio because the Portfolios had
not commenced operations as of December 31, 1999.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO - INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $23.54 $18.48 $15.51 $13.45 $10.57
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.07 0.05 0.15 0.17 0.28
3. Net gains or losses on securities (both realized and
unrealized) 10.24 6.36 3.34 2.29 2.90
4. Total from investment operations 10.31 6.41 3.49 2.46 3.18
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.06) (0.05) (0.15) (0.17) (0.30)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) (0.14) (1.30) (0.37) (0.23) --
8. Distributions (in excess of realized gains) -- -- -- -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.20) (1.35) (0.52) (0.40) (0.30)
11. NET ASSET VALUE, END OF PERIOD $33.65 $23.54 $18.48 $15.51 $13.45
12. Total return 43.98% 35.66% 22.75% 18.45% 30.17%
13. Net assets, end of period (in thousands) $2,942,649 $1,103,549 $608,281 $325,789 $126,911
14. Average net assets for the period (in thousands) $1,775,373 $789,454 $477,914 $216,125 $77,344
15. Ratio of gross expenses to average net assets 0.67%(1) 0.68%(1) 0.70%(1) 0.69%(1) 0.78%(1)
16. Ratio of net expenses to average net assets 0.67% 0.68% 0.69% 0.69% 0.76%
17. Ratio of net investment income to average net assets 0.30% 0.26% 0.91% 1.39% 1.24%
18. Portfolio turnover rate 53% 73% 122% 87% 185%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The ratio was 0.69% in 1999, 0.75% in 1998, 0.78% in 1997, 0.83% in 1996 and
0.98% in 1995 before waiver of certain fees and/or reduction of adviser's
fees to the effective rate of Janus Fund.
Financial highlights 43
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO - INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $27.64 $20.55 $18.24 $17.08 $13.62
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income -- -- -- -- 0.24
3. Net gains or losses on securities (both realized and
unrealized) 33.46 7.09 2.31 1.36 3.47
4. Total from investment operations 33.46 7.09 2.31 1.36 3.71
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) -- -- -- -- (0.25)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) (1.40) -- -- (0.19) --
8. Distributions (in excess of realized gains) -- -- -- -- --
9. Tax return of capital distributions -- -- -- (0.01) --
10. Total distributions (1.40) -- -- (0.20) (0.25)
11. NET ASSET VALUE, END OF PERIOD $59.70 $27.64 $20.55 $18.24 $17.08
12. Total return 125.40% 34.26% 12.66% 7.95% 27.48%
13. Net assets, end of period (in thousands) $3,319,619 $772,943 $508,198 $383,693 $185,911
14. Average net assets for the period (in thousands) $1,476,445 $576,444 $418,464 $290,629 $107,582
15. Ratio of gross expenses to average net assets 0.70%(1) 0.75%(1) 0.76%(1) 0.76%(1) 0.86%(1)
16. Ratio of net expenses to average net assets 0.69% 0.75% 0.76% 0.76% 0.84%
17. Ratio of net investment income to average net assets (0.50%) (0.36%) (0.10%) (0.27%) 0.58%
18. Portfolio turnover rate 105% 132% 130% 88% 155%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The ratio was 0.70% in 1999, 0.75% in 1998, 0.78% in 1997, 0.83% in 1996 and
0.93% in 1995 before waiver of certain fees and/or reduction of adviser's
fees to the effective rate of Janus Enterprise Fund.
44 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997(1)
<S> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $19.94 $12.62 $10.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.12 0.01 0.05
3. Net gains or losses on securities (both realized and
unrealized) 13.22 7.32 2.61
4. Total from investment operations 13.34 7.33 2.66
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.11) (0.01) (0.04)
6. Dividends (in excess of net investment income) -- -- --
7. Distributions (from capital gains) -- -- --
8. Distributions (in excess of realized gains) -- -- --
9. Tax return of capital distributions -- -- --
10. Total distributions (0.11) (0.01) (0.04)
11. NET ASSET VALUE, END OF PERIOD $33.17 $19.94 $12.62
12. Total return* 67.00% 58.11% 26.60%
13. Net assets, end of period (in thousands) $626,611 $74,187 $6,833
14. Average net assets for the period (in thousands) $257,422 $25,964 $2,632
15. Ratio of gross expenses to average net assets** 0.70%(2) 0.92%(2) 1.26%(2)
16. Ratio of net expenses to average net assets** 0.70% 0.91% 1.25%
17. Ratio of net investment income to average net assets** 0.76% 0.27% 1.43%
18. Portfolio turnover rate** 52% 91% 101%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) through December 31, 1997.
(2) The ratio was 0.79% in 1999, 0.97% in 1998 and 2.19% in 1997 before waiver
of certain fees and/or reduction of adviser's fees to the effective rate of
the corresponding retail fund (Janus Olympus Fund until May 1, 1999, Janus
Twenty Fund thereafter).
Financial highlights 45
<PAGE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO - INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $22.50 $17.47 $14.77 $13.03 $10.63
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.59 0.39 0.34 0.32 0.17
3. Net gains (or losses) on securities (both realized and
unrealized) 5.38 5.51 2.89 1.81 2.45
4. Total from investment operations 5.97 5.90 3.23 2.13 2.62
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.56) (0.38) (0.35) (0.30) (0.22)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) -- (0.45) (0.18) (0.09) --
8. Distributions (in excess of realized gains) -- (0.04) -- -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.56) (0.87) (0.53) (0.39) (0.22)
11. NET ASSET VALUE, END OF PERIOD $27.91 $22.50 $17.47 $14.77 $13.03
12. Total return 26.76% 34.28% 22.10% 16.18% 24.79%
13. Net assets, end of period (in thousands) $2,453,079 $882,495 $362,409 $85,480 $14,021
14. Average net assets for the period (in thousands) $1,583,635 $555,002 $176,432 $43,414 $5,739
15. Ratio of gross expenses to average net assets 0.69%(1) 0.74%(1) 0.83%(1) 0.94%(1) 1.37%(1)
16. Ratio of net expenses to average net assets 0.69% 0.74% 0.82% 0.92% 1.30%
17. Ratio of net investment income to average net assets 2.86% 2.41% 2.87% 2.92% 2.41%
18. Portfolio turnover rate 92% 70% 139% 103% 149%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The ratio was 0.69% in 1999, 0.74% in 1998, 0.83% in 1997, 1.07% in 1996 and
1.55% in 1995 before waiver of certain fees and/or reduction of adviser's
fees to the effective rate of Janus Balanced Fund.
46 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO - INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997(1)
<S> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $19.41 $13.46 $10.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.07 0.02 0.01
3. Net gains (or losses) on securities (both realized and
unrealized) 7.99 6.16 3.46
4. Total from investment operations 8.06 6.18 3.47
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.06) (0.02) (0.01)
6. Dividends (in excess of net investment income) -- -- --
7. Distributions (from capital gains) (0.09) (0.21) --
8. Distributions (in excess of realized gains) -- -- --
9. Tax return of capital distributions -- -- --
10. Total distributions (0.15) (0.23) (0.01)
11. NET ASSET VALUE, END OF PERIOD $27.32 $19.41 $13.46
12. Total return* 41.58% 46.24% 34.70%
13. Net assets, end of period (in thousands) $18,975 $9,017 $3,047
14. Average net assets for the period (in thousands) $14,663 $5,629 $1,101
15. Ratio of gross expenses to average net assets** 1.25%(2) 1.25%(2) 1.25%(2)
16. Ratio of net expenses to average net assets** 1.25% 1.25% 1.25%
17. Ratio of net investment income to average net assets** 0.31% 0.17% 0.35%
18. Portfolio turnover rate** 114% 79% 128%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) through December 31, 1997.
(2) The ratio was 1.38% in 1999, 1.86% in 1998 and 5.75% in 1997 before waiver
of certain fees and/or reduction of adviser's fees to the effective rate of
Janus Equity Income Fund.
Financial highlights 47
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------
Period ending
December 31
1999 1998(1)
<S> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $11.96 $10.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.04 0.02
3. Net gains (or losses) on securities (both realized and
unrealized) 8.81 1.96
4. Total from investment operations 8.85 1.98
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.04) (0.02)
6. Dividends (in excess of net investment income) -- --
7. Distributions (from capital gains) -- --
8. Distributions (in excess of realized gains) -- --
9. Tax return of capital distributions -- --
10. Total distributions (0.04) (0.02)
11. NET ASSET VALUE, END OF PERIOD $20.77 $11.96
12. Total return* 74.04% 19.80%
13. Net assets, end of period (in thousands) $84,480 $6,413
14. Average net assets for the period (in thousands) $28,838 $2,883
15. Ratio of gross expenses to average net assets** 1.06%(2) 1.25%(2)
16. Ratio of net expenses to average net assets** 1.05% 1.25%
17. Ratio of net investment income to average net assets** 0.56% 0.66%
18. Portfolio turnover rate** 59% 62%
- ------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized.
** Annualized.
(1) May 1, 1998 (inception) through December 31, 1998.
(2) The ratio was 1.15% in 1999 and 3.06% in 1998 before waiver of certain fees
and/or reduction of adviser's fees to the effective rate of Janus Growth and
Income Fund.
48 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $21.27 $18.48 $15.72 $11.95 $9.72
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.06 0.13 0.11 0.05 0.09
3. Net gains or losses on securities (both realized and
unrealized) 17.40 3.07 2.80 4.06 2.16
4. Total from investment operations 17.46 3.20 2.91 4.11 2.25
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.06) (0.14) (0.11) (0.11) (0.02)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) -- -- (0.01) (0.23) --
8. Distributions (in excess of realized gains) -- (0.27) (0.03) -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.06) (0.41) (0.15) (0.34) (0.02)
11. NET ASSET VALUE, END OF PERIOD $38.67 $21.27 $18.48 $15.72 $11.95
12. Total return* 82.27% 17.23% 18.51% 34.71% 23.15%
13. Net assets, end of period (in thousands) $810,392 $311,110 $161,091 $27,192 $1,608
14. Average net assets for the period (in thousands) $425,876 $234,421 $96,164 $7,437 $1,792
15. Ratio of gross expenses to average net assets** 0.77%(1) 0.86%(1) 0.96%(1) 1.26%(1) 2.69%(1)
16. Ratio of net expenses to average net assets** 0.76% 0.86% 0.96% 1.25% 2.50%
17. Ratio of net investment income to average net assets** 0.26% 0.73% 0.70% 0.62% (0.80%)
18. Portfolio turnover rate** 80% 93% 86% 65% 211%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) The ratio was 0.84% in 1999, 0.95% in 1998, 1.08% in 1997, 2.21% in 1996 and
3.57% in 1995 before waiver of certain fees and/or reduction of adviser's
fees to the effective rate of Janus Overseas Fund.
Financial highlights 49
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE GROWTH PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $29.09 $23.39 $19.44 $15.31 $12.07
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.07 0.16 0.16 0.16 0.11
3. Net gains or losses on securities (both realized and
unrealized) 18.65 6.59 4.14 4.27 3.19
4. Total from investment operations 18.72 6.75 4.30 4.43 3.30
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.06) (0.18) (0.17) (0.17) (0.06)
6. Dividends (in excess of net investment income) -- -- (0.02) -- --
7. Distributions (from capital gains) -- -- (0.16) (0.13) --
8. Distributions (in excess of realized gains) -- (0.87) -- -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.06) (1.05) (0.35) (0.30) (0.06)
11. NET ASSET VALUE, END OF PERIOD $47.75 $29.09 $23.39 $19.44 $15.31
12. Total return 64.45% 28.92% 22.15% 29.04% 27.37%
13. Net assets, end of period (in thousands) $6,496,773 $2,890,375 $1,576,548 $582,603 $108,563
14. Average net assets for the period (in thousands) $3,862,773 $2,217,695 $1,148,951 $304,111 $59,440
15. Ratio of gross expenses to average net assets 0.71%(1) 0.72%(1) 0.74%(1) 0.80%(1) 0.90%(1)
16. Ratio of net expenses to average net assets 0.71% 0.72% 0.74% 0.80% 0.87%
17. Ratio of net investment income to average net assets 0.20% 0.64% 0.67% 0.83% 0.95%
18. Portfolio turnover rate 67% 77% 80% 62% 113%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The ratio was 0.71% in 1999, 0.74% in 1998, 0.81% in 1997, 0.91% in 1996 and
1.09% in 1995 before waiver of certain fees and/or reduction of adviser's
fees to the effective rate of Janus Worldwide Fund.
50 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
FLEXIBLE INCOME PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $12.05 $11.78 $11.24 $11.11 $9.48
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.76 0.64 0.67 0.74 0.53
3. Net gains or losses on securities (both realized and
unrealized) (0.58) 0.41 0.62 0.24 1.70
4. Total from investment operations 0.18 1.05 1.29 0.98 2.23
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.75) (0.67) (0.64) (0.72) (0.60)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) (0.07) (0.11) (0.11) (0.13) --
8. Distributions (in excess of realized gains) -- -- -- -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.82) (0.78) (0.75) (0.85) (0.60)
11. NET ASSET VALUE, END OF PERIOD $11.41 $12.05 $11.78 $11.24 $11.11
12. Total return 1.60% 9.11% 11.76% 9.19% 23.86%
13. Net assets, end of period (in thousands) $186,681 $129,582 $54,098 $25,315 $10,831
14. Average net assets for the period (in thousands) $161,459 $86,627 $36,547 $17,889 $5,556
15. Ratio of gross expenses to average net assets 0.72% 0.73% 0.75% 0.84% 1.07%
16. Ratio of net expenses to average net assets 0.72% 0.73% 0.75% 0.83% 1.00%
17. Ratio of net investment income to average net assets 6.99% 6.36% 6.90% 7.31% 7.46%
18. Portfolio turnover rate 116% 145% 119% 250% 236%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Financial highlights 51
<PAGE>
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996(1)
<S> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $10.85 $11.78 $10.83 $10.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 1.14 0.87 0.70 0.43
3. Net gains or losses on securities (both realized and
unrealized) (0.41) (0.70) 0.99 0.80
4. Total from investment operations 0.73 0.17 1.69 1.23
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (1.13) (0.89) (0.68) (0.40)
6. Dividends (in excess of net investment income) -- -- -- --
7. Distributions (from capital gains) -- (0.05) (0.06) --
8. Distributions (in excess of realized gains) -- (0.16) -- --
9. Tax return of capital distributions -- -- -- --
10. Total distributions (1.13) (1.10) (0.74) (0.40)
11. NET ASSET VALUE, END OF PERIOD $10.45 $10.85 $11.78 $10.83
12. Total return* 6.85% 1.26% 15.98% 12.40%
13. Net assets, end of period (in thousands) $1,620 $2,977 $2,914 $783
14. Average net assets for the period (in thousands) $2,448 $3,281 $1,565 $459
15. Ratio of gross expenses to average net assets** 1.00%(2) 1.00%(2) 1.00%(2) 1.01%(2)
16. Ratio of net expenses to average net assets** 1.00% 1.00% 1.00% 1.00%
17. Ratio of net investment income to average net assets** 8.41% 7.76% 7.98% 5.74%
18. Portfolio turnover rate** 554% 301% 299% 301%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) May 1, 1996 (inception) through December 31, 1996.
(2) The ratio was 4.92% in 1999, 2.11% in 1998, 3.27% in 1997 and 6.29% in 1996
before waiver of certain fees incurred by the Portfolio.
52 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO - INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997 1996 1995(1)
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.05 0.05 0.05 0.05 0.04
3. Net gains or losses on securities (both realized and
unrealized) -- -- -- -- --
4. Total from investment operations 0.05 0.05 0.05 0.05 0.04
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.05) (0.05) (0.05) (0.05) (0.04)
6. Dividends (in excess of net investment income) -- -- -- -- --
7. Distributions (from capital gains) -- -- -- -- --
8. Distributions (in excess of realized gains) -- -- -- -- --
9. Tax return of capital distributions -- -- -- -- --
10. Total distributions (0.05) (0.05) (0.05) (0.05) (0.04)
11. NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
12. Total return* 4.98% 5.36% 5.17% 5.05% 3.63%
13. Net assets, end of period (in thousands) $69,266 $38,690 $15,374 $6,016 $1,735
14. Average net assets for the period (in thousands) $54,888 $31,665 $8,926 $3,715 $1,543
15. Ratio of gross expenses to average net assets** 0.43% 0.34% 0.50% 0.50% 0.50%
16. Ratio of net expenses to average net assets** 0.43% 0.34% 0.50%(2) 0.50%(2) 0.50%(2)
17. Ratio of net investment income to average net assets** 4.94% 5.21% 5.17% 4.93% 5.30%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1995 (inception) to December 31, 1995.
(2) The ratio was 0.55% in 1997, 0.78% in 1996 and 1.07% in 1995 before waiver
of certain fees incurred by the Portfolio.
Financial highlights 53
<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 BONDS are bonds 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 bonds include "lower rated bonds," "noninvestment grade
bonds" and "junk bonds."
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of
mortgages or other debt. These securities are generally pass-through
securities, which means that principal and interest payments on the
underlying securities (less servicing fees) are passed through to
shareholders on a pro rata basis. These securities involve prepayment
risk, which is the risk that the underlying mortgages or other debt
may be refinanced or paid off prior to their maturities during periods
of declining interest rates. In that case, a portfolio manager may
have to reinvest the proceeds from the securities at a lower rate.
Potential market gains on a security subject to prepayment risk may be
more limited than potential market gains on a comparable security that
is not subject to prepayment risk.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are any foreign
corporations which generate certain amounts of passive income or hold
certain amounts of assets for the production of passive income.
Passive income includes dividends, interest, royalties, rents and
annuities. To avoid taxes and interest that the
54 Janus Aspen Series
<PAGE>
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 55
<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
56 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 57
<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>
58 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 59
<PAGE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended December 31, 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 5%
AA 6%
A 10%
BBB 23%
BB 12%
B 19%
CCC 2%
CC 0%
C 0%
Not Rated 6%
Preferred Stock 2%
Cash and Options 15%
TOTAL 100%
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C>
BONDS-S&P RATING:
AAA 0%
AA 0%
A 0%
BBB 0%
BB 5%
B 61%
CCC 4%
CC 0%
C 0%
Not Rated 7%
Preferred Stock 1%
Cash and Options 22%
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 year ended
December 31, 1999.
60 Janus Aspen Series
<PAGE>
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<PAGE>
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<PAGE>
[JANUS LOGO]
1-800-525-0020
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 insurance company or 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 LOGO]
Janus Aspen Series
Retirement Shares
PROSPECTUS
MAY 1, 2000
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth 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 two or
three classes of shares. The Retirement Shares, (the "Shares"),
are offered by this prospectus to qualified retirement plans.
Certain Portfolios may not be available in connection with a
particular qualified plan. Please contact your plan sponsor for
further information.
<PAGE>
Table of contents
<TABLE>
<S> <C>
RISK/RETURN SUMMARY
Equity Portfolios........................................ 2
Fixed-Income Portfolios.................................. 9
Money Market Portfolio................................... 11
Fees and expenses........................................ 13
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS
Equity Portfolios........................................ 15
Fixed-Income Portfolios.................................. 18
General portfolio policies of the Portfolios other than
Money Market Portfolio................................... 20
Risks for Equity Portfolios.............................. 23
Risks for Fixed-Income Portfolios........................ 24
Risks Common to all Non-Money Market Portfolios.......... 24
Money Market Portfolio................................... 26
MANAGEMENT OF THE PORTFOLIOS
Investment adviser....................................... 29
Management expenses and expense limits................... 29
Investment personnel..................................... 31
OTHER INFORMATION........................................... 35
DISTRIBUTIONS AND TAXES
Distributions............................................ 37
Portfolios other than Money Market Portfolio............. 37
Money Market Portfolio................................... 37
Taxes.................................................... 37
SHAREHOLDER'S GUIDE
Pricing of portfolio shares.............................. 39
Purchases................................................ 39
Redemptions.............................................. 39
Frequent trading......................................... 40
Shareholder communications............................... 40
FINANCIAL HIGHLIGHTS........................................ 41
GLOSSARY
Glossary of investment terms............................. 47
RATING CATEGORIES
Explanation of rating categories......................... 51
</TABLE>
Table of contents 1
<PAGE>
Risk return summary
EQUITY PORTFOLIOS
The Equity 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 EQUITY PORTFOLIOS?
- --------------------------------------------------------------------------------
DOMESTIC EQUITY 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.
- 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.
GLOBAL/INTERNATIONAL EQUITY 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 EQUITY 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.
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.
2 Janus Aspen Series
<PAGE>
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.
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.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY PORTFOLIOS?
The biggest risk of investing in these Portfolios is that their
returns may vary, and you could lose money. If you are considering
investing in any of the Equity 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's holdings may decrease if the value of an
individual company in the portfolio decreases. The value of a
Portfolio's holdings could also decrease if the stock market goes
down. If the value of a Portfolio's holdings decreases, that
Portfolio's net asset value (NAV) will also decrease, which means if
you sell your shares in a Portfolio you would get back less money.
The income component of the BALANCED PORTFOLIO, EQUITY INCOME
PORTFOLIO AND GROWTH AND INCOME PORTFOLIO 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.
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 Equity Portfolios by showing how each of the Equity
Portfolios' performance has varied over time. The Growth, Aggressive
Growth, Balanced Portfolio, International Growth and Worldwide Growth
Portfolios Retirement Shares
Risk return summary 3
<PAGE>
commenced operations on May 1, 1997. The returns shown for the
Retirement Shares of these Portfolios reflect the historical
performance of a different class of shares (the Institutional Shares)
prior to May 1, 1997, restated based on the Retirement Shares' fees
and expenses on May 1, 1997 (ignoring any fee and expense
limitations). The bar charts depict the change in performance from
year-to-year during the period indicated. The tables compare the
average annual returns for the Retirement Shares of each Portfolio for
the periods indicated to a broad-based securities market index.
GROWTH PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
2.31% 29.47% 17.64% 21.74% 34.99% 43.98%
1994 1995 1996 1997 1998 1999
Best Quarter 4th-1998 27.58% Worst Quarter 3rd-1998 (11.04%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Growth Portfolio - Retirement Shares 43.98% 29.25% 23.49%
S&P 500 Index* 21.03% 28.54% 22.68%
--------------------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
4 Janus Aspen Series
<PAGE>
AGGRESSIVE GROWTH PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
16.03% 26.92% 7.19% 11.91% 33.58% 124.34%
1994 1995 1996 1997 1998 1999
Best Quarter 4th-1999 59.17% Worst Quarter 3rd-1998 (15.06%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Aggressive Growth Portfolio - Retirement Shares 124.34% 35.47% 33.53%
S&P MidCap 400 Index* 14.72% 23.05% 18.08%
---------------------------------------------
</TABLE>
* The S&P MidCap 400 Index is an unmanaged group of 400 domestic
stocks chosen for their market size, liquidity and industry group
representation.
CAPITAL APPRECIATION PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
57.37% 66.16%
1998 1999
Best Quarter 4th-1999 41.57% Worst Quarter 3rd-1998 (10.18%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Capital Appreciation Portfolio - Retirement Shares 66.16% 56.43%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
Risk return summary 5
<PAGE>
BALANCED PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
0.84% 24.50% 15.39% 20.99% 33.59% 26.13%
1994 1995 1996 1997 1998 1999
Best Quarter 4th-1998 20.12% Worst Quarter 3rd-1998 (5.08%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Balanced Portfolio - Retirement Shares 26.13% 23.98% 19.82%
S&P 500 Index* 21.03% 28.54% 22.68%
Lehman Brothers Gov't/Corp Bond Index** (2.15%) 7.61% 5.40%
---------------------------------------------
</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.
6 Janus Aspen Series
<PAGE>
EQUITY INCOME PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
45.55% 40.94%
1998 1999
Best Quarter 4th-1998 28.28% Worst Quarter 3rd-1998 (7.28%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Equity Income Portfolio - Retirement Shares 40.94% 46.15%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</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 - RETIREMENT SHARES
Annual returns for periods ended 12/31
73.20%
1999
Best Quarter 4th-1999 38.24% Worst Quarter 3rd-1999 4.18%
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/98)
<S> <C> <C>
Growth and Income Portfolio 73.20% 54.57%
S&P 500 Index* 21.03% 19.85%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
Risk return summary 7
<PAGE>
INTERNATIONAL GROWTH PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
22.92% 32.76% 16.15% 16.86% 81.32%
1995 1996 1997 1998 1999
Best Quarter: 4th-1999 58.25% Worst Quarter: 3rd-1998 (17.76%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (5/2/94)
<S> <C> <C> <C>
International Growth Portfolio - Retirement Shares 81.32% 32.06% 27.11%
Morgan Stanley Capital International EAFE(R) Index* 26.96% 12.83% 11.22%
--------------------------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE(R) 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.
WORLDWIDE GROWTH PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
1.20% 26.82% 28.15% 20.96% 28.25% 63.66%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1999 42.05% Worst Quarter: 3rd-1998 (16.16%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Worldwide Growth Portfolio - Retirement Shares 63.66% 32.78% 28.77%
Morgan Stanley Capital International World Index* 24.93% 19.76% 16.41%
--------------------------------------------
</TABLE>
* The Morgan Stanley Capital International World Index is a market
capitalization weighted index composed of companies representative
of the market structure of 21 Developed Market countries in North
America, Europe and the Asia/Pacific Region.
The Equity Portfolios' past performance does not necessarily indicate
how they will perform in the future.
8 Janus Aspen Series
<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 bonds, 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 bonds, 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 bonds 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.
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.
Risk return summary 9
<PAGE>
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
Flexible Income and High-Yield Portfolios Retirement Shares commenced
operations on May 1, 1997. The returns shown for the Retirement Shares
of these Portfolios reflect the historical performance of a different
class of shares (the Institutional Shares) prior to May 1, 1997,
restated based on the Retirement Shares' fees and expenses on May 1,
1997 (ignoring any fee and expense limitations). The bar charts depict
the change in performance from year-to-year during the period
indicated. The tables compare the average annual returns for the
Retirement Shares of each Portfolio for the periods indicated to a
broad-based securities market index.
FLEXIBLE INCOME PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
(1.25%) 23.47% 8.62% 10.77% 8.58% 0.90%
1994 1995 1996 1997 1998 1999
Best Quarter: 2nd-1995 6.61% Worst Quarter: 2nd-1999 (1.38%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Flexible Income Portfolio - Retirement Shares 0.90% 10.24% 7.89%
Lehman Brothers Gov't/Corp Bond Index* (2.15%) 7.61% 5.40%
--------------------------------------------
</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.
10 Janus Aspen Series
<PAGE>
HIGH-YIELD PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
9.52% 0.67% 6.35%
1997 1998 1999
Best Quarter: 1st-1998 5.35% Worst Quarter: 3rd-1998 (6.23%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/96)
<S> <C> <C>
High-Yield Portfolio - Retirement Shares 6.35% 6.19%
Lehman Brothers High-Yield Bond Index* 2.39% 7.06%
-------------------------------
</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.
Risk return summary 11
<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 Retirement Shares commenced operations on May 1, 1997. The
returns shown for the Retirement Shares of this Portfolio reflect the
historical performance of a different class of shares (the
Institutional Shares) prior to May 1, 1997, restated based on the
Retirement Share's fees and expenses on May 1, 1997 (ignoring any fee
and expense limitations). The bar chart depicts the change in
performance from year to year.
MONEY MARKET PORTFOLIO - RETIREMENT SHARES
Annual returns for periods ended 12/31
4.24% 4.02% 4.85% 4.45%
1996 1997 1998 1999
Best Quarter: 4th-1999 1.29% Worst Quarter: 1st-1997 0.64%
The 7-day yield for the Portfolio's Retirement Shares on December 31,
1999 was 5.20%. 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.
12 Janus Aspen Series
<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.
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.
Risk return summary 13
<PAGE>
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolios. It is based upon gross expenses
(without the effect of expense offset arrangements) for the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
Total Annual Fund Total Annual Fund
Distribution Operating Operating
Management (12b-1) Other Expenses Total Expenses
Fee Fees(1) Expenses(2) Without Waivers(3) Waivers With Waivers(3)
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 0.65% 0.25% 0.27% 1.17% N/A 1.17%
Aggressive Growth Portfolio 0.65% 0.25% 0.26% 1.16% N/A 1.16%
Capital Appreciation Portfolio 0.65% 0.25% 0.28% 1.18% N/A 1.18%
Balanced Portfolio 0.65% 0.25% 0.27% 1.17% N/A 1.17%
Equity Income Portfolio 0.65% 0.25% 0.91% 1.81% 0.06% 1.75%
Growth and Income Portfolio 0.65% 0.25% 0.62% 1.52% N/A 1.52%
International Growth Portfolio 0.65% 0.25% 0.34% 1.24% N/A 1.24%
Worldwide Growth Portfolio 0.65% 0.25% 0.30% 1.20% N/A 1.20%
Flexible Income Portfolio 0.65% 0.25% 0.30% 1.20% N/A 1.20%
High-Yield Portfolio 0.75% 0.25% 4.42% 5.42% 3.92% 1.50%
Money Market Portfolio 0.25% 0.25% 0.36% 0.86% N/A 0.86%
</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) Includes compensation to service providers of recordkeeping
subaccounting, and other administrative services to plan participants.
(3) Expenses are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for
Growth, Aggressive Growth, Capital Appreciation, International Growth,
Worldwide Growth, Balanced, Equity Income and Growth and Income
Portfolios. Expenses are stated both with and without contractual
waivers by Janus Capital. Waivers, if applicable, are first applied
against the management fee and then against other expenses, and will
continue until at least the next annual renewal of the advisory
agreement. All expenses are shown without the effect of expense offset
arrangements.
- --------------------------------------------------------------------------------
EXAMPLE:
THE FOLLOWING EXAMPLE IS BASED ON EXPENSES WITHOUT WAIVERS. 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 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $119 $ 372 $ 644 $1,420
Aggressive Growth Portfolio $118 $ 368 $ 638 $1,409
Capital Appreciation Portfolio $120 $ 375 $ 649 $1,432
Balanced Portfolio $119 $ 372 $ 644 $1,420
Equity Income Portfolio $184 $ 569 $ 980 $2,127
Growth and Income Portfolio $155 $ 480 $ 829 $1,813
International Growth Portfolio $126 $ 393 $ 681 $1,500
Worldwide Growth Portfolio $122 $ 381 $ 660 $1,455
Flexible Income Portfolio $122 $ 381 $ 660 $1,455
High-Yield Portfolio $541 $1,616 $2,682 $5,308
Money Market Portfolio $ 88 $ 274 $ 477 $1,061
</TABLE>
14 Janus Aspen Series
<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
Balanced Portfolio Janus Balanced Fund
Equity Income Portfolio Janus Equity Income Fund
Growth and Income Portfolio Janus Growth and Income Fund
International Growth Portfolio Janus Overseas Fund
Worldwide Growth Portfolio Janus Worldwide Fund
Flexible Income Portfolio Janus Flexible Income Fund
High-Yield Portfolio Janus High-Yield Fund
Money Market Portfolio Janus Money Market Fund
</TABLE>
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.
EQUITY PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Equity Portfolios, their principal investment strategies and
certain risks of investing in the Equity 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 23-25 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 EQUITY 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 capitalization falls within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly used
measure of the size and value of a company. The market capitalizations
within the Index will vary, but as of December 31, 1999, they ranged
from approximately $170 million to $37 billion.
Investment objectives, principal investment strategies and risks 15
<PAGE>
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.
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.
GLOBAL/INTERNATIONAL EQUITY 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.
16 Janus Aspen Series
<PAGE>
The following questions and answers are designed to help you better understand
the Equity 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. Except for Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio realization of
income is not a significant consideration when choosing investments
for the Portfolios. Income realized on the Portfolios' investments may
be incidental to their objectives. In the case of Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio, a portfolio
manager may consider dividend-paying characteristics to a greater
degree in selecting common stock.
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.
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 Equity 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.
4. HOW DO BALANCED PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME
PORTFOLIO 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 Balanced Portfolio or Equity Income
Portfolio. Although Equity Income Portfolio 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 less volatile than Equity Income Portfolio and
Growth and Income Portfolio.
5. 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
Investment objectives, principal investment strategies and risks 17
<PAGE>
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.
6. 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.
7. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE BALANCED
PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME PORTFOLIO?
The growth component of these 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.
8. 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 is expected to 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.
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 24-25 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.
18 Janus Aspen Series
<PAGE>
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 bonds, 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 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.
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.
Investment objectives, principal investment strategies and risks 19
<PAGE>
5. WHAT IS A HIGH-YIELD/HIGH-RISK BOND?
A high-yield/high-risk bond (also called a "junk" bond) is a bond
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 Equity 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 Equity Portfolios also invest in domestic and foreign equity
securities with 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 bonds (less than 35% of each Portfolio's
assets)
- options, futures, forwards, swaps 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
20 Janus Aspen Series
<PAGE>
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, swaps 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.
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.
Investment objectives, principal investment strategies and risks 21
<PAGE>
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.
22 Janus Aspen Series
<PAGE>
RISKS FOR EQUITY 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, initial
public offerings (IPOs) or companies with relatively small market
capitalizations. IPOs and other investment techniques may have a
magnified performance impact on a portfolio with a small asset base. A
portfolio may not experience similar performance as its assets grow.
The following questions and answers are designed to help you better understand
some of the risks of investing in the Equity Portfolios.
1. THE PORTFOLIOS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS?
Many attractive investment opportunities may be smaller, start-up
companies offering emerging products or services. Smaller or newer
companies may suffer more significant losses as well as realize more
substantial growth than larger or more established issuers because
they may lack depth of management, be unable to generate funds
necessary for growth or potential development, or be developing or
marketing new products or services for which markets are not yet
established and may never become established. In addition, such
companies may be insignificant factors in their industries and may
become subject to intense competition from larger or more established
companies. Securities of smaller or newer companies may have more
limited trading markets than the markets for securities of larger or
more established issuers, and may be subject to wide price
fluctuations. Investments in such companies tend to be more volatile
and somewhat more speculative.
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.
Investment objectives, principal investment strategies and risks 23
<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, derivative instruments and
initial public offerings (IPOs). IPOs and other investment techniques
may have a magnified performance impact on a portfolio with a small
asset base. A portfolio may not experience similar performance as its
assets grow.
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 pages 51-52 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
24 Janus Aspen Series
<PAGE>
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based on only a
few industries. In some countries, there is the risk that the
government may take over the assets or operations of a company or
that the government may impose taxes or limits on the removal of a
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
BONDS?
High-yield/high-risk bonds (or "junk" bonds) are bonds rated below
investment grade by the primary rating agencies such as Standard &
Poor's and Moody's. The value of lower quality bonds generally is more
dependent on credit risk, or the ability of the issuer to meet
interest and principal payments, than investment grade bonds. Issuers
of high-yield bonds 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 bonds,
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 pages 51-52 for
a description of bond rating categories.
3. HOW DO THE PORTFOLIOS TRY TO REDUCE RISK?
The Portfolios may use futures, options, swaps 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.
Investment objectives, principal investment strategies and risks 25
<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 U.S. dollar denominated debt obligations.
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
26 Janus Aspen Series
<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.
Investment objectives, principal investment strategies and risks 27
<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.
28 Janus Aspen Series
<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.
Service providers to qualified plans that purchase the Shares receive
fees for providing recordkeeping, subaccounting and other
administrative services.
MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Portfolio pays Janus Capital a management fee which is calculated
daily and paid monthly. 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 participant administration fee and 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> <C>
Growth Portfolio All Asset Levels 0.65 N/A
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio All Asset Levels 0.65 1.25(1)
- ------------------------------------------------------------------------------------------------------------------
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(1)
Over $300 Million 0.65
- ------------------------------------------------------------------------------------------------------------------
Money Market Portfolio All Asset Levels 0.25 0.50(2)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements. The
Distribution Fee and Participant Administration Fee described on page 35 are
not included in the expense limit.
(2) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements. The
Distribution Fee and Participant Administration Fee describe on page 35 are
not included in the expense limit. As noted in the fee table on page 14,
however, the Portfolios' expenses without waivers are not expected to exceed
the expense limit.
Management of the portfolios 29
<PAGE>
For the fiscal year ended December 31, 1999, each Portfolio paid Janus
Capital the following management fees based upon each Portfolio's
average net assets: 0.67% for Growth Portfolio, 0.68% for Aggressive
Growth Portfolio, 0.75% for Capital Appreciation Portfolio, 0.67% for
Balanced Portfolio, 0.75% for Equity Income Portfolio, 0.75% for
Growth and Income Portfolio, 0.73% for International Growth Portfolio,
0.66% for Worldwide Growth Portfolio, 0.65% for Flexible Income
Portfolio, 0.75% for High-Yield Portfolio and 0.25% for Money Market
Portfolio. These rates were based on a higher fee rate that was
previously in effect for certain of these Portfolios.
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 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 as a research analyst. He received
an undergraduate degree with honors in Religion with a
concentration in Philosophy from Dartmouth College and after
receiving a Masters Degree in Political Science from Stanford
University. He has earned the right to use the Chartered
Financial Analyst designation.
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 is 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 1997. He holds a
Bachelor of Arts in Economics from Yale University and he has
earned the right to use the Chartered Financial Analyst
designation.
HELEN YOUNG HAYES
- --------------------------------------------------------------------------------
is Executive Vice President and co-manager of International
Growth Portfolio and Worldwide 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 she has
earned the right to use the Chartered Financial Analyst
designation.
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 has earned the
right to use the Chartered Financial Analyst designation.
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. 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 he has earned the right to use the
Chartered Financial Analyst designation.
KAREN L. REIDY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Balanced
Portfolio and Equity Income Portfolio as of January 2000, and an
assistant portfolio manager of Growth Portfolio since 1998. She
also manages Janus Balanced Fund and Janus 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 as a manager in both the Mergers and
Acquisitions and Audit business units. In this capacity, Ms.
Reidy performed due diligence work for corporate clients and
oversaw audit engagements. She received an undergraduate degree
in Accounting from the University of Colorado in 1989 and passed
the CPA exam in 1992. She has earned the right to use the
Chartered Financial Analyst designation.
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.
32 Janus Aspen Series
<PAGE>
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.
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 he has earned the right to use the Chartered
Financial Analyst designation.
In January 1997, Mr. Speaker settled an SEC administrative action
involving two personal trades made by him in January of 1993.
Without admitting or denying the allegations, Mr. Speaker agreed
to civil money penalty, disgorgement, and interest payments
totaling $37,199 and to a 90-day suspension which ended on April
25, 1997.
ASSISTANT PORTFOLIO MANAGERS
MATTHEW A. ANKRUM
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Aggressive Growth Portfolio.
He is also assistant portfolio manager of Janus Enterprise Fund.
Mr. Ankrum joined Janus Capital as an intern in June 1996, and
became an equity research analyst in August 1997. Prior to
joining Janus, Mr. Ankrum worked as a corporate finance analyst
at William Blair and Company from 1993 through 1995. He was also
a fixed-income research analyst at Conseco Capital Management.
Mr. Ankrum has an undergraduate degree in Business Administration
from the University of Wisconsin and a Master of Business
Administration from the University of Chicago. Mr. Ankrum has
earned the right to use the Chartered Financial Analyst
designation.
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 Strategic Value
Portfolio, Janus Strategic Value Fund and Janus Special
Situations Fund, each of which he has managed since its
inception. He obtained a Masters of Business Administration in
Finance from the Fuqua School of Business at Duke University and
a Bachelor of Arts in Economics and Political Science from Tufts
University. Mr. Decker has earned the right to use the Chartered
Financial Analyst designation.
Management of the portfolios 33
<PAGE>
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 has earned the right to use the
Chartered Financial Analyst designation.
DANIEL D. SCHOEN
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Money Market Portfolio. He
joined Janus in July 1993 and has worked as a trader and credit
analyst on Janus Money Market Funds. He holds a Bachelor of Arts
in Economics from the University of Colorado.
JOHN H. SCHREIBER
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Growth Portfolio. Mr.
Schreiber joined Janus Capital 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 an MBA from Harvard University.
34 Janus Aspen Series
<PAGE>
Other information
CLASSES OF SHARES
Each Portfolio offers two or 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 only in connection with investment in and
payments under variable insurance contracts as well as certain
qualified retirement plans. Service Shares of each Portfolio are
offered only in connection with investment in and payments under
variable insurance contracts as well as certain qualified retirement
plans that require a fee from Portfolio assets to procure distribution
and administrative services to contract owners and plan participants.
Because the expenses of each class may differ, the performance of each
class is expected to differ. If you would like additional information
about the Institutional Shares, please call 1-800-525-0020.
SPIN-OFF OF RETIREMENT SHARES
During the third quarter of 2000, the Retirement Shares shareholders
will be asked to approve the spin-off of the Retirement Shares into a
separate Delaware business trust, Janus Adviser Series. In connection
with this spin-off, each Portfolio will distribute all of its ordinary
income and capital gain income earned through the date of the
spin-off. The distributions will be made for all classes, including
Retirement Shares. It is anticipated that the spin-off and
distributions will occur during the third quarter of 2000.
PARTICIPANT ADMINISTRATION FEE
Janus Service Corporation, the Trust's transfer agent, receives a
participant administration fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares of each Portfolio for providing
or procuring recordkeeping, subaccounting and other administrative
services to plan participants who invest in the Shares. Janus Service
expects to use this fee to compensate qualified plan service providers
for providing these services.
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 qualified plan service providers as
compensation for distribution and shareholder servicing performed by
such service providers. Because 12b-1 fees are paid out of the
Retirement 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 Shares offered by this prospectus are available only to qualified
plans. Institutional Shares (offered through a separate prospectus)
are available to variable annuity and variable life separate accounts
of insurance companies unaffiliated with Janus Capital and to certain
qualified retirement plans. Although the Portfolios do not currently
anticipate any disadvantages to policy owners or plan participants
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
Other information 35
<PAGE>
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.
DISTRIBUTION OF EACH PORTFOLIO
Each Portfolio is distributed by Janus Distributors, Inc., a member of
the National Association of Securities Dealers, Inc. ("NASD"). To
obtain information about NASD member firms and their associated
persons, you may contact NASD Regulation, Inc. at www.nasdr.com, or
the Public Disclosure Hotline at 800-289-9999. An investor brochure
containing information describing the Public Disclosure Program is
available from NASD Regulation, Inc.
36 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
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
qualified plan. Generally, withdrawals from qualified 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. For further information, please contact your
plan sponsor.
TAXATION OF THE PORTFOLIOS
Dividends, interest and some gains received by the Portfolios on
foreign securities may be subject to tax withholding or other 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 as a foreign tax credit. 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 37
<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 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.
38 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 QUALIFIED
RETIREMENT PLANS. CERTAIN PORTFOLIOS MAY NOT BE AVAILABLE IN
CONNECTION WITH A PARTICULAR QUALIFIED PLAN AND CERTAIN QUALIFIED
PLANS MAY LIMIT ALLOCATIONS AMONG THE PORTFOLIOS. REFER TO YOUR PLAN
DOCUMENTS FOR INSTRUCTIONS ON HOW TO SELECT SPECIFIC PORTFOLIOS AS
INVESTMENT OPTIONS FOR 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 qualified plans. Refer to your
plan documents for information on how to invest in the Shares of each
Portfolio. Certain plan service providers are authorized to receive
purchase orders on the Portfolios' behalf.
The Portfolios do not permit frequent trading or market timing.
Excessive purchases of Portfolio Shares disrupt portfolio management
and drive Portfolio expenses higher. 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.
REDEMPTIONS
Redemptions, like purchases, may be effected only through qualified
plans. Please refer to the appropriate plan documents for details.
Shareholder's guide 39
<PAGE>
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.
FREQUENT TRADING
Frequent trading of Portfolio shares in response in short-term
fluctuations in the market -- also known as "market timing" -- may
make it very difficult to manage a Portfolio's investments. The
Portfolios do not permit frequent trading or market timing. When
market timing occurs, a Portfolio may have to sell portfolio
securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell
any securities, which may harm a Portfolio's performance. When large
dollar amounts are involved, market timing can also make it difficult
to use long-term investment strategies because the portfolio manager
cannot predict how much cash a Portfolio will have to invest. When in
Janus Capital's opinion such activity would have a disruptive effect
on portfolio management, a Portfolio reserves the right to refuse
purchase orders and exchanges into a Portfolio by any person, group or
commonly controlled account. A Portfolio may notify a market timer of
rejection of a purchase or exchange order after the day the order is
placed. If a Portfolio allows a market timer to trade Portfolio
shares, it may require the market timer to enter into a written
agreement to follow certain procedures and limitations.
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.
40 Janus Aspen Series
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand
the Retirement Shares' financial performance from inception of the
Shares through December 31st of each fiscal period shown. Items 1
through 9 reflect financial results for a single Share. The total
returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Retirement Shares of the
Portfolios (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with the Portfolios' financial statements, are included
in the Annual Report, which is available upon request and incorporated
by reference into the SAI.
<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH GROWTH
PORTFOLIO - PORTFOLIO -
RETIREMENT RETIREMENT
SHARES SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Periods ending Periods ending
December 31 December 31
1999 1998 1997(1) 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF
PERIOD $ 23.45 $ 18.46 $ 16.18 $ 27.42 $ 20.49 $ 16.12
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.07 (0.03) 0.04 0.19 (0.12) (0.06)
3. Net gains or losses on securities
(both realized and unrealized) 10.25 6.32 2.71 32.70 7.05 4.43
4. Total from investment operations 10.32 6.29 2.75 32.89 6.93 4.37
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) -- -- (0.10) -- -- --
6. Tax return of capital
distributions -- -- -- -- -- --
7. Distributions (from capital gains) (0.14) (1.30) (0.37) (1.40) -- --
8. Total distributions (0.14) (1.30) (0.47) (1.40) -- --
9. NET ASSET VALUE, END OF PERIOD $ 33.63 $ 23.45 $ 18.46 $ 58.91 $ 27.42 $ 20.49
10. Total return* 44.12% 34.99% 17.22% 124.34% 33.58% 27.11%
11. Net assets, end of period (in
thousands) $59,334 $ 18 $ 12 $47,928 $ 17 $ 13
12. Average net assets for the period
(in thousands) $12,209 $ 13 $ 11 $ 9,786 $ 14 $ 11
13. Ratio of gross expenses to average
net assets** 1.17%(2) 1.18%(2) 1.20%(2) 1.19%(3) 1.26%(3) 1.32%(3)
14. Ratio of net expenses to average
net assets** 1.17% 1.18% 1.20% 1.19% 1.26% 1.32%
15. Ratio of net investment income to
average net assets** (0.25%) (0.23%) 0.29% (1.00%) (0.86%) (0.62%)
16. Portfolio turnover rate** 53% 73% 122% 105% 132% 130%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) The ratio was 1.19% in 1999, 1.25% in 1998 and 1.28% in 1997 before
reduction of the management fees to the effective rate of Janus Fund.
(3) The ratio was 1.19% in 1999, 1.26% in 1998 and 1.34% in 1997 before
reduction of the management fees to the effective rate of Janus Enterprise
Fund.
Financial highlights 41
<PAGE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL GROWTH
PORTFOLIO - RETIREMENT SHARES PORTFOLIO - RETIREMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Periods ending December 31 Periods ending December 31
1999 1998 1997(1) 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF
PERIOD $ 19.86 $12.62 $10.00 $ 21.27 $18.44 $16.80
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.08) (0.04) 0.12 -- 0.05 0.04
3. Net gains or losses on securities
(both realized and unrealized) 13.22 7.28 2.50 17.30 3.07 1.73
4. Total from investment operations 13.14 7.24 2.62 17.30 3.12 1.77
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) -- -- -- (0.01) (0.01) (0.09)
6. Tax return of capital
distributions -- -- -- -- -- --
7. Distributions (from capital gains) -- -- -- -- (0.28) (0.04)
8. Total distributions -- -- -- (0.01) (0.29) (0.13)
9. NET ASSET VALUE, END OF PERIOD $ 33.00 $19.86 $12.62 $ 38.56 $21.27 $18.44
10. Total return* 66.16% 57.37% 26.20% 81.32% 16.86% 10.53%
11. Net assets, end of period (in
thousands) $23,529 $ 20 $ 13 $16,986 $ 17 $ 11
12. Average net assets for the period
(in thousands) $ 4,402 $ 15 $ 12 $ 3,738 $ 13 $ 11
13. Ratio of gross expenses to average
net assets** 1.19%(2) 1.44%(2) 1.73%(2) 1.25%(3) 1.35%(3) 1.45%(3)
14. Ratio of net expenses to average
net assets** 1.19% 1.44% 1.73% 1.24% 1.35% 1.45%
15. Ratio of net investment income to
average net assets** 0.23% (0.25%) 1.55% (0.29%) 0.26% 0.26%
16. Portfolio turnover rate** 52% 91% 101% 80% 93% 86%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) The ratio was 1.28% in 1999, 1.49% in 1998 and 2.66% in 1997 before
reduction of the management fees to the effective rate of Janus Twenty Fund.
(3) The ratio was 1.32% in 1999, 1.44% in 1998 and 1.57% in 1997 before
reduction of the management fees to the effective rate of Janus Overseas
Fund.
42 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
WORLDWIDE GROWTH PORTFOLIO - BALANCED PORTFOLIO -
RETIREMENT SHARES RETIREMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Periods ending December 31 Periods ending December 31
1999 1998 1997(1) 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF
PERIOD $ 29.06 $ 23.36 $20.72 $ 22.59 $ 17.47 $ 15.38
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income (0.04) 0.02 0.14 0.46 0.21 0.27
3. Net gains or losses on securities
(both realized and unrealized) 18.54 6.57 2.80 5.41 5.58 2.30
4. Total from investment operations 18.50 6.59 2.94 5.87 5.79 2.57
LESS DISTRIBUTIONS:
5. Dividends (from net investment
income) -- (0.02) (0.14) (0.42) (0.18) (0.30)
6. Tax return of capital
distributions -- -- -- -- -- --
7. Distributions (from capital gains) -- (0.87) (0.16) -- (0.49) (0.18)
8. Total distributions -- (0.89) (0.30) (0.42) (0.67) (0.48)
9. NET ASSET VALUE, END OF PERIOD $ 47.56 $29.06 $23.36 $ 28.04 $ 22.59 $ 17.47
10. Total return* 63.66% 28.25% 14.22% 26.13% 33.59% 16.92%
11. Net assets, end of period (in
thousands) $174,399 $5,837 $ 403 $53,598 $ 17,262 $ 12
12. Average net assets for the period
(in thousands) $ 49,424 $1,742 $ 11 $28,498 $ 3,650 $ 11
13. Ratio of gross expenses to average
net assets** 1.21%(2) 1.22%(2) 1.26%(2) 1.19%(3) 1.24%(3) 1.32%(3)
14. Ratio of net expenses to average
net assets** 1.21% 1.22% 1.26% 1.19% 1.24% 1.32%
15. Ratio of net investment income to
average net assets** (0.34%) (0.02%) 0.16% 2.36% 2.04% 2.38%
16. Portfolio turnover rate** 67% 77% 80% 92% 70% 139%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) The ratio was 1.21% in 1999, 1.24% in 1998 and 1.32% in 1997 before
reduction of the management fees to the effective rate of Janus Worldwide
Fund.
(3) The ratio was 1.19% in 1999, 1.26% in 1998 and 1.33% in 1997 before
reduction of the management fees to the effective rate of Janus Balanced
Fund.
Financial highlights 43
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND
INCOME
PORTFOLIO -
EQUITY INCOME PORTFOLIO - RETIREMENT
RETIREMENT SHARES SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Periods ending
Periods ending December 31 December 31
1999 1998 1997(1) 1999 1998(2)
<S> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $19.28 $ 13.42 $ 10.00 $ 11.94 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.03 (0.05) 0.01 (0.01) 0.01
3. Net gains (or losses) on securities (both
realized and unrealized) 7.85 6.12 3.41 8.75 1.93
4. Total from investment operations 7.88 6.07 3.42 8.74 1.94
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) -- -- -- -- --
6. Tax return of capital distributions -- -- -- -- --
7. Distributions (from capital gains) (0.09) (0.21) -- -- --
8. Total distributions (0.09) (0.21) -- -- --
9. NET ASSET VALUE, END OF PERIOD $27.07 $ 19.28 $ 13.42 $ 20.68 $ 11.94
10. Total return* 40.94% 45.55% 34.20% 73.20% 19.40%
11. Net assets, end of period (in thousands) $ 464 $ 20 $ 13 $ 6,982 $ 12
12. Average net assets for the period (in thousands) $ 128 $ 16 $ 12 $ 1,826 $ 10
13. Ratio of gross expenses to average net assets** 1.78%(3) 1.75%(3) 1.74%(3) 1.53%(4) 1.72%(4)
14. Ratio of net expenses to average net assets** 1.77% 1.75% 1.74% 1.53% 1.72%
15. Ratio of net investment income to average net
assets** (0.04%) (0.33%) 0.07% 0.11% 0.21%
16. Portfolio turnover rate** 114% 79% 128% 59% 62%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) May 1, 1998 (inception) to December 31, 1998.
(3) The ratio was 1.91% in 1999, 2.36% in 1998 and 6.19% in 1997 before
reduction of the management fee to the effective rate of Janus Equity Income
Fund.
(4) The ratio was 1.62% in 1999 and 3.53% in 1998 before reduction of the
management fees to the effective rate of Janus Growth and Income Fund.
44 Janus Aspen Series
<PAGE>
<TABLE>
<CAPTION>
FLEXIBLE INCOME PORTFOLIO - HIGH-YIELD PORTFOLIO -
RETIREMENT SHARES RETIREMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Periods ending December 31 Periods ending December 31
1999 1998 1997(1) 1999 1998 1997(1)
<S> <C> <C> <C> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $ 12.05 $11.77 $11.41 $10.84 $ 11.78 $ 11.19
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.37 0.73 0.50 0.89 0.87 0.59
3. Net gains or losses on securities (both
realized and unrealized) (0.27) 0.27 0.58 (0.21) (0.77) 0.71
4. Total from investment operations 0.10 1.00 1.08 0.68 0.10 1.30
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.36) (0.61) (0.61) (0.85) (0.83) (0.65)
6. Tax return of capital distributions -- -- -- -- -- --
7. Distributions (from capital gains) (0.07) (0.11) (0.11) -- (0.21) (0.06)
8. Total distributions (0.43) (0.72) (0.72) (0.85) (1.04) (0.71)
9. NET ASSET VALUE, END OF PERIOD $ 11.72 $12.05 $11.77 $10.67 $10.84 $ 11.78
10. Total return* 0.90% 8.58% 9.73% 6.35% 0.67% 11.96%
11. Net assets, end of period (in thousands) $ 842 $ 12 $ 11 $ 12 $ 11 $ 11
12. Average net assets for the period (in
thousands) $ 250 $ 11 $ 10 $ 12 $ 12 $ 11
13. Ratio of gross expenses to average net
assets** 1.20%(2) 1.24%(2) 1.23%(2) 1.50%(3) 1.50%(3) 1.50%(3)
14. Ratio of net expenses to average net
assets** 1.20% 1.23% 1.23% 1.50% 1.50% 1.50%
15. Ratio of net investment income to average
net assets** 6.80% 5.92% 6.39% 8.05% 7.33% 7.42%
16. Portfolio turnover rate** 116% 145% 119% 554% 301% 299%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) The ratio was 1.20% in 1999, 1.24% in 1998 and 1.23% in 1997 before waiver
of certain fees incurred by Flexible Income Portfolio.
(3) The ratio was 5.42% in 1999, 2.61% in 1998 and 3.42% in 1997 before waiver
of certain fees incurred by High-Yield Portfolio.
Financial highlights 45
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO -
RETIREMENT SHARES
- ---------------------------------------------------------------------------------------------------------
Periods ending December 31
1999 1998 1997(1)
<S> <C> <C> <C>
1. NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
2. Net investment income 0.04 0.05 0.03
3. Net gains or losses on securities (both realized and
unrealized) -- -- --
4. Total from investment operations 0.04 0.05 0.03
LESS DISTRIBUTIONS:
5. Dividends (from net investment income) (0.04) (0.05) (0.03)
6. Tax return of capital distributions -- -- --
7. Distributions (from capital gains) -- -- --
8. Total distributions (0.04) (0.05) (0.03)
9. NET ASSET VALUE, END OF PERIOD $1 .00 $ 1.00 $ 1.00
10. Total return* 4.45% 4.85% 3.13%
11. Net assets, end of period (in thousands) $1,153 $ 11 $ 10
12. Average net assets for the period (in thousands) $ 150 $ 10 $ 10
13. Ratio of gross expenses to average net assets** 0.86%(2) 0.84%(2) 1.00%
14. Ratio of net expenses to average net assets** 0.86% 0.84% 1.00%(2)
15. Ratio of net investment income to average net assets** 5.18% 4.74% 4.66%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Total return not annualized for periods of less than one year.
** Annualized for periods of less than one full year.
(1) May 1, 1997 (inception) to December 31, 1997.
(2) The ratio was 0.86% in 1999, 0.84% in 1998 and 1.10% in 1997 before waiver
of certain fees incurred by Money Market Portfolio.
46 Janus Aspen Series
<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 BONDS are bonds 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 bonds include "lower rated bonds," "noninvestment grade
bonds" and "junk bonds."
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of
mortgages or other debt. These securities are generally pass-through
securities, which means that principal and interest payments on the
underlying securities (less servicing fees) are passed through to
shareholders on a pro rata basis. These securities involve prepayment
risk, which is the risk that the underlying mortgages or other debt
may be refinanced or paid off prior to their maturities during periods
of declining interest rates. In that case, a portfolio manager may
have to reinvest the proceeds from the securities at a lower rate.
Potential market gains on a security subject to prepayment risk may be
more limited than potential market gains on a comparable security that
is not subject to prepayment risk.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are any foreign
corporations which generate certain amounts of passive income or hold
certain amounts of assets for the production of passive income.
Passive income includes dividends, interest, royalties, rents and
annuities. To avoid taxes and interest that the
Glossary of investment terms 47
<PAGE>
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.
48 Janus Aspen Series
<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
Glossary of investment terms 49
<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.
50 Janus Aspen Series
<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>
Explanation of rating categories 51
<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.
52 Janus Aspen Series
<PAGE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended December 31, 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 5%
AA 6%
A 10%
BBB 23%
BB 12%
B 19%
CCC 2%
CC 0%
C 0%
Not Rated 6%
Preferred Stock 2%
Cash and Options 15%
TOTAL 100%
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C>
BONDS-S&P RATING:
AAA 0%
AA 0%
A 0%
BBB 0%
BB 5%
B 61%
CCC 4%
CC 0%
C 0%
Not Rated 7%
Preferred Stock 1%
Cash and Options 22%
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, 1999.
Explanation of rating categories 53
<PAGE>
This page intentionally left blank
<PAGE>
[JANUS LOGO]
1-800-525-0020
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 LOGO]
Janus Aspen Series
Service Shares
PROSPECTUS
MAY 1, 2000
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Global Life Sciences Portfolio
Global Technology 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 thirteen 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 two or 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
Equity Portfolios........................................ 2
Fixed-Income Portfolios.................................. 10
Money Market Portfolio................................... 12
Fees and expenses........................................ 14
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS
Equity Portfolios........................................ 16
Fixed-Income Portfolios.................................. 21
General portfolio policies of the Portfolios other than
Money Market Portfolio................................... 23
Risks for Equity Portfolios.............................. 25
Risks for Fixed-Income Portfolios........................ 26
Risks Common to all Non-Money Market Portfolios.......... 26
Money Market Portfolio................................... 29
MANAGEMENT OF THE PORTFOLIOS
Investment adviser....................................... 32
Management expenses and expense limits................... 33
Investment personnel..................................... 34
OTHER INFORMATION........................................... 38
DISTRIBUTIONS AND TAXES
Distributions............................................ 40
Portfolios other than Money Market Portfolio............. 40
Money Market Portfolio................................... 40
Taxes.................................................... 40
SHAREHOLDER'S GUIDE
Pricing of portfolio shares.............................. 42
Purchases................................................ 42
Redemptions.............................................. 43
Frequent trading......................................... 43
Shareholder communications............................... 43
FINANCIAL HIGHLIGHTS........................................ 44
GLOSSARY
Glossary of investment terms............................. 45
RATING CATEGORIES
Explanation of rating categories......................... 49
</TABLE>
Table of contents 1
<PAGE>
Risk return summary
EQUITY PORTFOLIOS
The Equity 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 EQUITY PORTFOLIOS?
- --------------------------------------------------------------------------------
DOMESTIC EQUITY 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.
- 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.
GLOBAL/INTERNATIONAL EQUITY PORTFOLIOS
- INTERNATIONAL GROWTH PORTFOLIO, GLOBAL LIFE SCIENCES PORTFOLIO
AND GLOBAL TECHNOLOGY PORTFOLIO seek 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 EQUITY 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.
2 Janus Aspen Series
<PAGE>
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.
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.
GLOBAL LIFE SCIENCES PORTFOLIO invests primarily in equity securities
of U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes have a life science
orientation. Generally speaking, the "life sciences" relate to
maintaining or improving quality of life. So, for example, companies
with a "life science orientation" include companies engaged in
research, development, production or distribution of products or
services related to health and personal care, medicine or
pharmaceuticals. As a fundamental policy, the Portfolio normally
invests at least 25% of its total assets, in the aggregate, in the
following industry groups: healthcare; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.
GLOBAL TECHNOLOGY PORTFOLIO invests primarily in equity securities of
U.S. and foreign companies selected for their growth potential. Under
normal circumstances, it invests at least 65% of its total assets in
securities of companies that the portfolio manager believes will
benefit significantly from advances or improvements in technology.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY PORTFOLIOS?
The biggest risk of investing in these Portfolios is that their
returns may vary, and you could lose money. If you are considering
investing in any of the Equity 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's holdings may decrease if the value of an
individual company in the portfolio decreases. The value of a
Portfolio's holdings could also decrease if the stock market goes
down. If the value of a Portfolio's holdings decreases, that
Portfolio's net asset value (NAV) will also decrease, which means if
you sell your shares in a Portfolio you would get back less money.
The income component of the BALANCED PORTFOLIO, EQUITY INCOME
PORTFOLIO AND GROWTH AND INCOME PORTFOLIO 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
Risk return summary 3
<PAGE>
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.
GLOBAL LIFE SCIENCES PORTFOLIO concentrates its investments in related
industry groups. Because of this, companies in its portfolio may share
common characteristics and react similarly to market developments. For
example, many companies with a life science orientation are highly
regulated and may be dependent upon certain types of technology. As a
result, changes in government funding or subsidies, new or anticipated
legislative changes, or technological advances could affect the value
of such companies and, therefore, the Portfolio's NAV. The Portfolio's
returns may be more volatile than those of a less concentrated
portfolio.
Although GLOBAL TECHNOLOGY PORTFOLIO does not concentrate its
investments in specific industries, it may invest in companies related
in such a way that they react similarly to certain market pressures.
For example, competition among technology companies may result in
increasingly aggressive pricing of their products and services, which
may affect the profitability of companies in the portfolio. In
addition, because of the rapid pace of technological development,
products or services developed by companies in the Portfolio's
portfolio may become rapidly obsolete or have relatively short product
cycles. As a result, the Portfolio's returns may be considerably more
volatile than the returns of a fund that does not invest in similarly
related companies.
INTERNATIONAL GROWTH PORTFOLIO, WORLDWIDE GROWTH PORTFOLIO, GLOBAL
LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY 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, CAPITAL APPRECIATION PORTFOLIO, GLOBAL
LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY 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 Equity Portfolios by showing how each of the Equity
Portfolios' performance has varied over time. The Portfolios' Service
Shares commenced operations on December 31, 1999. 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 December 31, 1999, restated based on the Service Shares'
estimated fees and expenses (ignoring any fee and expense
limitations). 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.
4 Janus Aspen Series
<PAGE>
GROWTH PORTFOLIO
Annual returns for periods ended 12/31
2.71% 29.96% 18.14% 22.49% 35.59% 43.01%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1998 27.71% Worst Quarter: 3rd-1998 (10.95%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Growth Portfolio 43.01% 29.53% 23.86%
S&P 500 Index* 21.03% 28.54% 22.68%
--------------------------------------------
</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
Annual returns for periods ended 12/31
16.33% 27.38% 7.72% 12.53% 34.19% 123.16%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1999 58.17% Worst Quarter: 3rd-1998 (15.00%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Aggressive Growth Portfolio 123.16% 35.83% 33.98%
S&P MidCap 400 Index* 14.72% 23.05% 18.08%
---------------------------------------------
</TABLE>
* The S&P MidCap 400 Index is an unmanaged group of 400 domestic
stocks chosen for their market size, liquidity and industry group
representation.
Risk return summary 5
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
Annual returns for periods ended 12/31
57.91% 64.60%
1998 1999
Best Quarter: 4th-1999 40.00% Worst Quarter: 3rd-1998 (9.99%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Capital Appreciation Portfolio 64.60% 56.39%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
BALANCED PORTFOLIO
Annual returns for periods ended 12/31
0.84% 24.79% 16.18% 21.96% 34.03% 26.03%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1998 20.26% Worst Quarter: 3rd-1998 (5.02%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Balanced Portfolio 26.03% 24.55% 20.51%
S&P 500 Index* 21.03% 28.54% 22.68%
Lehman Brothers Gov't/Corp Bond Index** (2.15%) 7.61% 5.40%
--------------------------------------------
</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.
6 Janus Aspen Series
<PAGE>
EQUITY INCOME PORTFOLIO
Annual returns for periods ended 12/31
45.99% 40.39%
1998 1999
Best Quarter: 4th-1998 28.47% Worst Quarter: 3rd-1998 (7.23%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/97)
<S> <C> <C>
Equity Income Portfolio 40.39% 46.19%
S&P 500 Index* 21.03% 27.40%
--------------------------------
</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
Annual returns for periods ended 12/31
73.09%
1999
Best Quarter: 4th-1999 37.51% Worst Quarter: 3rd-1999 4.30%
Average annual total return for period ended 12/31/99
-----------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/98)
<S> <C> <C>
Growth and Income Portfolio 73.09% 54.92%
S&P 500 Index* 21.03% 19.85%
--------------------------------
</TABLE>
* The S&P 500 is the Standard & Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock prices.
Risk return summary 7
<PAGE>
INTERNATIONAL GROWTH PORTFOLIO
Annual returns for periods ended 12/31
23.15% 34.71% 18.36% 16.88% 79.52%
1995 1996 1997 1998 1999
Best Quarter: 4th-1999 56.24% Worst Quarter: 3rd-1998 (17.76%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (5/2/94)
<S> <C> <C> <C>
International Growth Portfolio 79.52% 33.17% 28.19%
Morgan Stanley Capital International EAFE(R) Index* 26.96% 12.83% 11.22%
----------------------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE(R) 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.
8 Janus Aspen Series
<PAGE>
WORLDWIDE GROWTH PORTFOLIO
Annual returns for periods ended 12/31
1.53% 27.29% 28.80% 21.91% 28.71% 63.49%
1994 1995 1996 1997 1998 1999
Best Quarter: 4th-1999 41.62% Worst Quarter: 3rd-1998 (17.00%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Worldwide Growth Portfolio 63.49% 33.28% 29.35%
Morgan Stanley Capital International World Index* 24.93% 19.76% 16.41%
--------------------------------------------
</TABLE>
* The Morgan Stanley Capital International World Index is a market
capitalization weighted index composed of companies representative
of the market structure of 21 Developed Market countries in North
America, Europe and the Asia/Pacific Region.
Since Global Life Sciences Portfolio and Global Technology Portfolio
did not commence operations until January 15, 2000, there is no
performance available as of the date of this prospectus.
The Equity 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 bonds, 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 bonds, 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 bonds 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.
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.
10 Janus Aspen Series
<PAGE>
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 December 31, 1999.
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 December 31, 1999, restated based on
the Service Shares' estimated fees and expenses on (ignoring any fee
and expense limitations). 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
Annual returns for periods ended 12/31
(0.91%) 23.86% 9.03% 11.52% 8.85% 1.30%
1994 1995 1996 1997 1998 1999
Best Quarter: 2nd-1995 6.71% Worst Quarter: 2nd-1999 (1.27%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year 5 years (9/13/93)
<S> <C> <C> <C>
Flexible Income Portfolio 1.30% 10.68% 8.36%
Lehman Brothers Gov't/Corp Bond Index* (2.15%) 7.61% 5.40%
--------------------------------------------
</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
Annual returns for periods ended 12/31
11.37% (2.82%) 2.74%
1997 1998 1999
Best Quarter: 1st-1998 4.51% Worst Quarter: 3rd-1998 (7.29%)
Average annual total return for periods ended 12/31/99
------------------------------------------------------
<TABLE>
<CAPTION>
Since Inception
1 year (5/1/96)
<S> <C> <C>
High-Yield Portfolio 2.74% 5.13%
Lehman Brothers High-Yield Bond Index* 2.39% 7.06%
------------------------------------
</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 December 31, 1999.
The returns shown for the Service Shares of this Portfolio reflect the
historical performance of a different class of shares (the
Institutional Shares) prior to December 31, 1999, restated based on
the Service Share's estimated fees and expenses (ignoring any fee and
expense limitations). 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
Annual returns for periods ended 12/31
4.88% 5.00% 5.03% 4.79%
1996 1997 1998 1999
Best Quarter: 4th-1999 1.36% Worst Quarter: 1st-1999 1.05%
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. 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
Distribution Operating Operating
Management (12b-1) Other Expenses Total Expenses
Fee Fees(1) Expenses Without Waivers(2) Waivers With Waivers(2)
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 0.65% 0.25% 0.02% 0.92% N/A 0.92%
Aggressive Growth Portfolio 0.65% 0.25% 0.02% 0.92% N/A 0.92%
Capital Appreciation Portfolio 0.65% 0.25% 0.04% 0.94% N/A 0.94%
Balanced Portfolio 0.65% 0.25% 0.02% 0.92% N/A 0.92%
Equity Income Portfolio 0.65% 0.25% 0.63% 1.53% 0.03% 1.50%
Growth and Income Portfolio 0.65% 0.25% 0.40% 1.30% N/A 1.30%
International Growth Portfolio 0.65% 0.25% 0.11% 1.01% N/A 1.01%
Worldwide Growth Portfolio 0.65% 0.25% 0.05% 0.95% N/A 0.95%
Global Life Sciences Portfolio 0.65% 0.25% 0.19% 1.09% N/A 1.09%
Global Technology Portfolio 0.65% 0.25% 0.13% 1.03% N/A 1.03%
Flexible Income Portfolio 0.65% 0.25% 0.07% 0.97% N/A 0.97%
High-Yield Portfolio 0.75% 0.25% 4.17% 5.17% 3.92% 1.25%
Money Market Portfolio 0.25% 0.25% 0.18% 0.68% N/A 0.68%
</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) Expenses are based on the estimated expenses that the new Service
Shares Class of each Portfolio expects to incur in its initial fiscal
year. Expenses are stated both with and without contractual waivers by
Janus Capital. Waivers, if applicable, are first applied against the
management fee and then against other expenses, and will continue
until at least the next annual renewal of the advisory agreement. All
expenses are shown without the effect of any expense offset
arrangements.
- --------------------------------------------------------------------------------
EXAMPLE:
THE FOLLOWING EXAMPLE IS BASED ON EXPENSES WITHOUT WAIVERS (IF ANY).
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 $ 94 $ 293
Aggressive Growth Portfolio $ 94 $ 293
Capital Appreciation Portfolio $ 96 $ 300
Balanced Portfolio $ 94 $ 293
Equity Income Portfolio $156 $ 483
Growth and Income Portfolio $132 $ 412
International Growth Portfolio $103 $ 322
Worldwide Growth Portfolio $ 97 $ 303
Global Life Sciences Portfolio $111 $ 347
Global Technology Portfolio $105 $ 328
Flexible Income Portfolio $ 99 $ 309
High-Yield Portfolio $517 $1,547
Money Market Portfolio $ 69 $ 218
</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
Balanced Portfolio Janus Balanced Fund
Equity Income Portfolio Janus Equity Income Fund
Growth and Income Portfolio Janus Growth and Income Fund
International Growth Portfolio Janus Overseas Fund
Worldwide Growth Portfolio Janus Worldwide Fund
Global Life Sciences Portfolio Janus Global Life Sciences Fund
Global Technology Portfolio Janus Global Technology Fund
Flexible Income Portfolio Janus Flexible Income Fund
High-Yield Portfolio Janus High-Yield Fund
Money Market Portfolio Janus Money Market Fund
</TABLE>
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.
EQUITY PORTFOLIOS
This section takes a closer look at the investment objectives of each
of the Equity Portfolios, their principal investment strategies and
certain risks of investing in the Equity 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 25-28 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 EQUITY 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 capitalization falls 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,
1999, they ranged from approximately $170 million to $37 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.
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.
GLOBAL/INTERNATIONAL EQUITY 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.
Investment objectives, principal investment strategies and risks 17
<PAGE>
GLOBAL LIFE SCIENCES PORTFOLIO
Global Life Sciences Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in equity securities of
U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes have a life science
orientation. As a fundamental policy, the Portfolio normally invests
at least 25% of its total assets, in the aggregate, in the following
industry groups: health care; pharmaceuticals; agriculture;
cosmetics/personal care; and biotechnology.
GLOBAL TECHNOLOGY PORTFOLIO
Global Technology Portfolio seeks long-term growth of capital. It
pursues its objective by investing primarily in equity securities of
U.S. and foreign companies selected for their growth potential.
Normally, it invests at least 65% of its total assets in securities of
companies that the portfolio manager believes will benefit
significantly from advances or improvements in technology. These
companies generally fall into two categories:
a. Companies that the portfolio manager believes have or will develop
products, processes or services that will provide significant
technological advancements or improvements; and
b. Companies that the portfolio manager believes rely extensively on
technology in connection with their operations or services.
The following questions and answers are designed to help you better understand
the Equity 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. Except for Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio, realization
of income is not a significant consideration when choosing investments
for the Portfolios. Income realized on the Portfolios' investments may
be incidental to their objectives. In the case of Balanced Portfolio,
Equity Income Portfolio and Growth and Income Portfolio, a portfolio
manager may consider dividend-paying characteristics to a greater
degree in selecting common stock.
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.
18 Janus Aspen Series
<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 Equity 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.
4. HOW DO BALANCED PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME
PORTFOLIO 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 Balanced Portfolio or Equity Income
Portfolio. Although Equity Income Portfolio 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 less volatile than Equity Income Portfolio and
Growth and Income Portfolio.
5. 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.
6. 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.
7. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE BALANCED
PORTFOLIO, EQUITY INCOME PORTFOLIO AND GROWTH AND INCOME PORTFOLIO?
The growth component of these Portfolios is expected to consist
primarily of common stocks, but may also include warrants, preferred
stocks or convertible securities selected primarily for their growth
potential.
Investment objectives, principal investment strategies and risks 19
<PAGE>
8. 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 is expected to 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.
9. WHAT DOES "LIFE SCIENCE ORIENTATION" MEAN IN RELATION TO GLOBAL LIFE SCIENCES
PORTFOLIO?
Generally speaking, the "life sciences" relate to maintaining or
improving quality of life. So, for example, companies with a "life
science orientation" include companies engaged in research,
development, production or distribution of products or services
related to health and personal care, medicine or pharmaceuticals. Life
science oriented companies also include companies that the portfolio
manager believes have growth potential primarily as a result of
particular products, technology, patents or other market advantages in
the life sciences. Life sciences encompass a variety of industries,
including health care, nutrition, agriculture, medical diagnostics,
nuclear and biochemical research and development and health care
facilities ownership and operation.
10. HOW DOES GLOBAL TECHNOLOGY PORTFOLIO'S INDUSTRY POLICY DIFFER FROM THAT OF
GLOBAL LIFE SCIENCES PORTFOLIO?
Unlike Global Life Sciences Portfolio, Global Technology Portfolio
will not concentrate its investments in any particular industry or
group of related industries. As a result, its portfolio manager may
have more flexibility to find companies that he believes will benefit
from advances or improvements in technology in a number of industries.
Nevertheless, the Portfolio may hold a significant portion of its
assets in industries such as: aerospace/defense; biotechnology;
computers; office/business equipment; semi-conductors; software;
telecommunications; and telecommunications equipment.
20 Janus Aspen Series
<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 26-28 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 bonds, 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 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.
Investment objectives, principal investment strategies and risks 21
<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 BOND?
A high-yield/high-risk bond (also called a "junk" bond) is a bond
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.
22 Janus Aspen Series
<PAGE>
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 Equity 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 Equity Portfolios also invest in domestic and foreign equity
securities with 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 bonds (less than 35% of each Portfolio's
assets)
- options, futures, forwards, swaps 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, swaps 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
Investment objectives, principal investment strategies and risks 23
<PAGE>
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.
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.
Global Technology Portfolio may invest in companies with relatively
short product cycles, for example, 6 to 9 months. Consequently its
portfolio turnover may be more frequent. 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.
24 Janus Aspen Series
<PAGE>
RISKS FOR EQUITY 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, initial
public offerings (IPOs) or companies with relatively small market
capitalizations. IPOs and other investment techniques may have a
magnified performance impact on a portfolio with a small asset base. A
portfolio may not experience similar performance as its assets grow.
Global Technology Portfolio's performance may also be affected by
industry risk.
The following questions and answers are designed to help you better understand
some of the risks of investing in the Equity Portfolios.
1. THE PORTFOLIOS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY
SPECIAL RISKS?
Many attractive investment opportunities may be smaller, start-up
companies offering emerging products or services. Smaller or newer
companies may suffer more significant losses as well as realize more
substantial growth than larger or more established issuers because
they may lack depth of management, be unable to generate funds
necessary for growth or potential development, or be developing or
marketing new products or services for which markets are not yet
established and may never become established. In addition, such
companies may be insignificant factors in their industries and may
become subject to intense competition from larger or more established
companies. Securities of smaller or newer companies may have more
limited trading markets than the markets for securities of larger or
more established issuers, and may be subject to wide price
fluctuations. Investments in such companies tend to be more volatile
and somewhat more speculative.
2. HOW DOES THE NONDIVERSIFIED STATUS OF AGGRESSIVE GROWTH PORTFOLIO, GLOBAL
LIFE SCIENCES PORTFOLIO AND GLOBAL TECHNOLOGY 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.
Investment objectives, principal investment strategies and risks 25
<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, derivative instruments and
initial public offerings (IPOs). IPOs and other investment techniques
may have a magnified performance impact on a portfolio with a small
asset base. A portfolio may not experience similar performance as its
assets grow.
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 pages 48-49 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
26 Janus Aspen Series
<PAGE>
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based on only a
few industries. In some countries, there is the risk that the
government may take over the assets or operations of a company or
that the government may impose taxes or limits on the removal of a
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
BONDS?
High-yield/high-risk bonds (or "junk" bonds) are bonds rated below
investment grade by the primary rating agencies such as Standard &
Poor's and Moody's. The value of lower quality bonds generally is more
dependent on credit risk, or the ability of the issuer to meet
interest and principal payments, than investment grade debt bonds.
Issuers of high-yield bonds 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 bonds,
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 pages 48-49 for
a description of bond rating categories.
3. HOW DO THE PORTFOLIOS TRY TO REDUCE RISK?
The Portfolios may use futures, options, swaps 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. WHAT IS "INDUSTRY RISK"?
Industry risk is the possibility that a group of related stocks will
decline in price due to industry-specific developments. Companies in
the same or similar industries may share common characteristics and
are more likely to react similarly to industry-specific market or
economic developments. In the life sciences, for example, many
companies are subject to government regulation and approval of their
products and services, which may affect their price or availability.
In addition, the products and services offered by these
Investment objectives, principal investment strategies and risks 27
<PAGE>
companies may quickly become obsolete in the face of scientific or
technological developments. The economic outlook of such companies may
fluctuate dramatically due to changes in regulatory or competitive
environments. In technology-related industries, competitive pressures
may have a significant effect on the performance of companies in which
Global Technology Portfolio may invest. In addition, technology and
technology-related companies often progress at an accelerated rate,
and these companies may be subject to short product cycles and
aggressive pricing which may increase their volatility.
Global Life Sciences Portfolio invests in a concentrated portfolio,
which may result in greater exposure to related industries. As a
result, the Portfolio may be more volatile than a less concentrated
portfolio. Although Global Technology Portfolio does not "concentrate"
in a specific group of industries, it may, at times, have significant
exposure to companies in a variety of technology-related industries.
28 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 U.S. dollar denominated debt obligations.
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 29
<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.
30 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 31
<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 certain administrative services relating to the Portfolios
and Janus Capital or the Portfolios may pay those companies for such
services.
32 Janus Aspen Series
<PAGE>
MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Portfolio pays Janus Capital a management fee which is calculated
daily and paid monthly. 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> <C>
Growth Portfolio All Asset Levels 0.65 N/A
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------
Global Life Sciences Portfolio All Asset Levels 0.65 1.25(1)
Global Technology Portfolio
- ------------------------------------------------------------------------------------------------------------------
Equity Income Portfolio All Asset Levels 0.65 1.25(2)
- ------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio First $300 Million 0.65 1.00(1)
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(1)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements. The
distribution fee described on page 38 is not included in the expense limit.
As noted in the fee table on page 15, however, the Portfolios' expenses
without waivers are not expected to exceed the expense limit.
(2) Janus Capital has agreed to limit the Portfolios' expenses as indicated
until at least the next annual renewal of the advisory agreements. The
distribution fee described on page 38 is not included in the expense limit.
For the fiscal year ended December 31, 1999, each Portfolio paid Janus
Capital the following management fees based upon each Portfolio's
average net assets: 0.67% for Growth Portfolio, 0.68% for Aggressive
Growth Portfolio, 0.75% for Capital Appreciation Portfolio, 0.67% for
Balanced Portfolio, 0.75% for Equity Income Portfolio, 0.75% for
Growth and Income Portfolio, 0.73% for International Growth Portfolio,
0.66% for Worldwide Growth Portfolio, 0.65% for Flexible Income
Portfolio, 0.75% for High-Yield Portfolio and 0.25% for Money Market
Portfolio. These rates were based on a higher fee rate that was
previously in effect for certain of these Portfolios.
Management of the portfolios 33
<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 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 as a research analyst. He received
an undergraduate degree with honors in Religion with a
concentration in Philosophy from Dartmouth College and a Masters
Degree in Political Science from Stanford University. He has
earned the right to use the Chartered Financial Analyst
designation.
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 is 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 1997. He holds a
Bachelor of Arts in Economics from Yale University and he has
earned the right to use the Chartered Financial Analyst
designation.
HELEN YOUNG HAYES
- --------------------------------------------------------------------------------
is Executive Vice President and co-manager of International
Growth Portfolio and Worldwide 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 she has
earned the right to use the Chartered Financial Analyst
designation.
34 Janus Aspen Series
<PAGE>
C. MIKE LU
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Global
Technology Portfolio and Janus Global Technology Fund, which he
has managed since inception. He joined Janus Capital in 1991 as a
research analyst and has consistently focused on companies in the
technology industry. Mr. Lu has a Bachelor of Arts in History and
a Bachelor of Arts in Economics from Yale University. Mr. Lu has
earned the right to use the Chartered Financial Analyst
designation.
THOMAS R. MALLEY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Global Life
Sciences Portfolio and Janus Global Life Sciences Fund, which he
has managed since inception. He joined Janus Capital in 1991 as a
research analyst and has focused on companies in the health care,
pharmaceutical and biotechnology industries. Mr. Malley has a
Bachelor of Science in Biology from Stanford University and has
earned the right to use the Chartered Financial Analyst
designation.
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 has earned the
right to use the Chartered Financial Analyst designation.
KAREN L. REIDY
- --------------------------------------------------------------------------------
is Executive Vice President and portfolio manager of Balanced
Portfolio and Equity Income Portfolio as of January 2000, and an
assistant portfolio manager of Growth Portfolio since 1998. She
also manages Janus Balanced Fund and Janus 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 as a manager in both the Mergers and
Acquisitions and Audit business units. In this capacity, Ms.
Reidy performed due diligence work for corporate clients and
oversaw audit engagements. She received an undergraduate degree
in Accounting from the University of Colorado in 1989 and passed
the CPA exam in 1992. She has earned the right to use the
Chartered Financial Analyst designation.
Management of the portfolios 35
<PAGE>
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 he has earned the right to use the
Chartered Financial Analyst designation.
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.
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 he has earned the right to use the Chartered
Financial Analyst designation.
In January 1997, Mr. Speaker settled an SEC administrative action
involving two personal trades made by him in January of 1993.
Without admitting or denying the allegations, Mr. Speaker agreed
to civil money penalty, disgorgement, and interest payments
totaling $37,199 and to a 90-day suspension which ended on April
25, 1997.
36 Janus Aspen Series
<PAGE>
ASSISTANT PORTFOLIO MANAGERS
MATTHEW A. ANKRUM
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Aggressive Growth Portfolio.
He is also assistant portfolio manager of Janus Enterprise Fund.
Mr. Ankrum joined Janus Capital as an intern in June 1996, and
became an equity research analyst in August 1997. Prior to
joining Janus, Mr. Ankrum worked as a corporate finance analyst
at William Blair and Company from 1993 through 1995. He was also
a fixed-income research analyst at Conseco Capital Management.
Mr. Ankrum has an undergraduate degree in Business Administration
from the University of Wisconsin and a Master of Business
Administration from the University of Chicago. Mr. Ankrum has
earned the right to use the Chartered Financial Analyst
designation.
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 Strategic Value
Portfolio, Janus Strategic Value Fund and Janus Special
Situations Fund, each of which he has managed since its
inception. He obtained a Masters of Business Administration in
Finance from the Fuqua School of Business at Duke University and
a Bachelor of Arts in Economics and Political Science from Tufts
University. Mr. Decker has earned the right to use the Chartered
Financial Analyst designation.
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 has earned the right to use the
Chartered Financial Analyst designation.
DANIEL D. SCHOEN
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Money Market Portfolio. He
joined Janus in July 1993 and has worked as a trader and credit
analyst on Janus Money Market Funds. He holds a Bachelor of Arts
in Economics from the University of Colorado.
JOHN H. SCHREIBER
- --------------------------------------------------------------------------------
is an assistant portfolio manager of Growth Portfolio. Mr.
Schreiber joined Janus Capital 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 an MBA from Harvard University.
Management of the portfolios 37
<PAGE>
Other information
CLASSES OF SHARES
Each Portfolio currently offers two or 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 that require a fee from
Portfolio assets to procure distribution and administrative services
to contract owners and plan participants. Institutional Shares of each
Portfolio are available only in connection with investment in and
payments under variable insurance contracts, as well as certain
qualified retirement plans. Retirement Shares of certain Portfolios
are offered only to qualified plans using plan service providers that
are compensated for providing distribution and/or record keeping and
other administrative services provided to plan participants. 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.
During the third quarter of 2000, the Retirement Shares shareholders
will be asked to approve the spin-off of the Retirement Shares into a
separate Delaware business trust, Janus Adviser Series. In connection
with this spin-off, each Portfolio will distribute all of its ordinary
income and capital gain income earned through the date of the
spin-off. The distributions will be made for all classes, including
Service Shares. It is anticipated that the spin-off and distributions
will occur during the third quarter of 2000.
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.
38 Janus Aspen Series
<PAGE>
DISTRIBUTION OF EACH PORTFOLIO
Each Portfolio is distributed by Janus Distributors, Inc., a member of
the National Association of Securities Dealers, Inc. ("NASD"). To
obtain information about NASD member firms and their associated
persons, you may contact NASD Regulation, Inc. at www.nasdr.com, or
the Public Disclosure Hotline at 800-289-9999. An investor brochure
containing information describing the Public Disclosure Program is
available from NASD Regulation, Inc.
Other information 39
<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 tax withholding or other 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 as a foreign tax credit. 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.
40 Janus Aspen Series
<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 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.
Distributions and taxes 41
<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.
The Portfolios do not permit frequent trading or market timing.
Excessive purchases of Portfolio Shares disrupt portfolio management
and drive Portfolio expenses higher. 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
42 Janus Aspen Series
<PAGE>
investments if the plan loses (or in the opinion of Janus Capital, is
at risk of losing) its qualified plan status.
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.
FREQUENT TRADING
Frequent trading of Portfolio shares in response in short-term
fluctuations in the market -- also known as "market timing" -- may
make it very difficult to manage a Portfolio's investments. The
Portfolios do not permit frequent trading or market timing. When
market timing occurs, a Portfolio may have to sell portfolio
securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell
any securities, which may harm a Portfolio's performance. When large
dollar amounts are involved, market timing can also make it difficult
to use long-term investment strategies because the portfolio manager
cannot predict how much cash a Portfolio will have to invest. When in
Janus Capital's opinion such activity would have a disruptive effect
on portfolio management, a Portfolio reserves the right to refuse
purchase orders and exchanges into a Portfolio by any person, group or
commonly controlled account. A Portfolio may notify a market timer of
rejection of a purchase or exchange order after the day the order is
placed. If a Portfolio allows a market timer to trade Portfolio
shares, it may require the market timer to enter into a written
agreement to follow certain procedures and limitations.
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.
Shareholder's guide 43
<PAGE>
Financial highlights
No Financial Highlights are presented for the Service Shares because
the Shares did not commence operations until December 31, 1999.
44 Janus Aspen Series
<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 BONDS are bonds 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 bonds include "lower rated bonds," "noninvestment grade
bonds" and "junk bonds."
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of
mortgages or other debt. These securities are generally pass-through
securities, which means that principal and interest payments on the
underlying securities (less servicing fees) are passed through to
shareholders on a pro rata basis. These securities involve prepayment
risk, which is the risk that the underlying mortgages or other debt
may be refinanced or paid off prior to their maturities during periods
of declining interest rates. In that case, a portfolio manager may
have to reinvest the proceeds from the securities at a lower rate.
Potential market gains on a security subject to prepayment risk may be
more limited than potential market gains on a comparable security that
is not subject to prepayment risk.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are any foreign
corporations which generate certain amounts of passive income or hold
certain amounts of assets for the production of passive income.
Passive income includes dividends, interest, royalties, rents and
annuities. To avoid taxes and interest that the
Glossary of investment terms 45
<PAGE>
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.
46 Janus Aspen Series
<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
Glossary of investment terms 47
<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.
48 Janus Aspen Series
<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>
Explanation of rating categories 49
<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.
50 Janus Aspen Series
<PAGE>
SECURITIES HOLDINGS BY RATING CATEGORY
During the fiscal period ended December 31, 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 5%
AA 6%
A 10%
BBB 23%
BB 12%
B 19%
CCC 2%
CC 0%
C 0%
Not Rated 6%
Preferred Stock 2%
Cash and Options 15%
TOTAL 100%
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIGH-YIELD PORTFOLIO
----------------------------------------------------------------------------------------
<S> <C>
BONDS-S&P RATING:
AAA 0%
AA 0%
A 0%
BBB 0%
BB 5%
B 61%
CCC 4%
CC 0%
C 0%
Not Rated 7%
Preferred Stock 1%
Cash and Options 22%
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, 1999.
Explanation of rating categories 51
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janus.com
You can request other information, including a Statement of
Additional Information, free of charge, by contacting your plan
sponsor or visiting our Web site at janus.com. 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 LOGO]
Janus Aspen Series
Institutional Shares
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Global Life Sciences Portfolio
Global Technology Portfolio
Flexible Income Portfolio
High-Yield Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus
for the Institutional Shares (the "Shares") of the portfolios
listed above, each of which is a separate series of Janus Aspen
Series, a Delaware business trust. The Shares are sold under
the name "Janus Aspen Series." 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 Shares of the Portfolios may be purchased only by the
separate accounts of insurance companies for the purpose of
funding variable life insurance policies and variable annuity
contracts (collectively, "variable insurance contracts") and by
certain qualified retirement plans. Each Portfolio also offers
a second class of shares to certain participant directed
qualified plans.
This SAI is not a Prospectus and should be read in conjunction
with the Portfolios' Prospectus dated May 1, 2000, which is
incorporated by reference into this SAI and may be obtained
from your insurance company. This SAI contains additional and
more detailed information about the Portfolios' operations and
activities than the Prospectus. 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.
<PAGE>
[JANUS 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
Redemptions.............................................. 36
Income Dividends, Capital Gains Distributions and Tax
Status...................................................... 37
Principal Shareholders...................................... 38
Miscellaneous Information................................... 41
Shares of the Trust...................................... 41
Shareholder Meetings..................................... 41
Voting Rights............................................ 41
Independent Accountants.................................. 42
Registration Statement................................... 42
Performance Information..................................... 43
Financial Statements........................................ 45
Appendix A.................................................. 46
Explanation of Rating Categories......................... 46
</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, Capital Appreciation Portfolio, Global
Life Sciences Portfolio and Global Technology 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, Balanced
Portfolio, Equity Income Portfolio, Growth and Income Portfolio,
International Growth Portfolio, Worldwide Growth 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 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio............................................ 53% 73%
Aggressive Growth Portfolio................................. 105% 132%
Capital Appreciation Portfolio.............................. 52% 91%
Balanced Portfolio.......................................... 92% 70%
Equity Income Portfolio..................................... 114% 79%
Growth and Income Portfolio................................. 59% 62%(1)
International Growth Portfolio.............................. 80% 93%
Worldwide Growth Portfolio.................................. 67% 77%
Global Life Sciences Portfolio(2)........................... N/A N/A
Global Technology Portfolio(2).............................. N/A N/A
Flexible Income Portfolio................................... 116% 145%
High-Yield Portfolio........................................ 554% 301%
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998, annualized.
(2) The Portfolio had not commenced operations as of December 31, 1999.
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, Capital Appreciation Portfolio, Global
Life Sciences Portfolio and Global Technology 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
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value of its total assets, Aggressive Growth Portfolio, Capital
Appreciation Portfolio, Global Life Sciences Portfolio and Global
Technology 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).
This policy does not apply to Global Life Sciences Portfolio or Global
Technology Portfolio.
(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
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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 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.
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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.
GLOBAL LIFE SCIENCES PORTFOLIO. As a fundamental policy, Global Life
Sciences Portfolio will normally invest at least 25% of its total
assets, in the aggregate, in the following industry groups: health
care; pharmaceuticals; agriculture; cosmetics/personal care; and
biotechnology.
FLEXIBLE INCOME PORTFOLIO. As a fundamental policy, this Portfolio may
not purchase a non-income-producing security if, after such purchase,
less than 80% of the Portfolio's total assets would be invested in
income-producing securities. Income-producing securities include
securities that make periodic interest payments as well as those that
make interest payments on a deferred basis or pay interest only at
maturity (e.g., Treasury bills or zero coupon bonds).
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.
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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 it will generally 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 SEC and policies approved
by the Trustees. Cash collateral may be invested in money market funds
advised by Janus 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
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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.
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
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them off sooner. Thus, the security holders frequently receive
prepayments of principal in addition to the principal that is part of
the regular monthly payments. A portfolio manager will consider
estimated prepayment rates in calculating the average-weighted
maturity of a Portfolio. A borrower is more likely to prepay a
mortgage that bears a relatively high rate of interest. This means
that in times of declining interest rates, higher yielding
mortgage-backed securities held by a Portfolio might be converted to
cash and that Portfolio will be forced to accept lower interest rates
when that cash is used to purchase additional securities in the
mortgage-backed securities sector or in other investment sectors.
Additionally, prepayments during such periods will limit a Portfolio's
ability to participate in as large a market gain as may be experienced
with a comparable security not subject to prepayment.
Asset-backed securities represent interests in pools of consumer loans
and are backed by paper or accounts receivables originated by banks,
credit card companies or other providers of credit. Generally, the
originating bank or credit provider is neither the obligor nor 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 and GDRs are
securities that are typically issued by foreign banks or foreign trust
companies, although U.S. banks or U.S. trust companies may issue them.
EDRs and GDRs are structured similarly to the arrangements of ADRs.
EDRs, in bearer form, are designed for use in European securities
markets.
Depositary Receipts are generally subject to the same sort of risks as
direct investments in a foreign country, such as, currency risk,
political and economic risk, and market risk, because their values
depend on the performance of a foreign security denominated in its
home currency. The risks of foreign investing are addressed in some
detail in the Portfolios' prospectus.
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Municipal Obligations
The Portfolios may invest in municipal obligations issued by states,
territories and possessions of the United States and the District of
Columbia. The value of municipal obligations can be affected by
changes in their actual or perceived credit quality. The credit
quality of municipal obligations can be affected by, among other
things, the financial condition of the issuer or guarantor, the
issuer's future borrowing plans and sources of revenue, the economic
feasibility of the revenue bond project or general borrowing purpose,
political or economic developments in the region where the security is
issued, and the liquidity of the security. Because municipal
securities are generally traded over-the-counter, the liquidity of a
particular issue often depends on the willingness of dealers to make a
market in the security. The liquidity of some municipal obligations
may be enhanced by demand features, which would enable a Portfolio to
demand payment on short notice from the issuer or a financial
intermediary.
Other Income-Producing Securities
Other types of income producing securities that the Portfolios may
purchase include, but are not limited to, the following types of
securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities 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.
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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 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 Bonds
Flexible Income Portfolio and High-Yield Portfolio may invest without
limit in bonds that are rated below investment grade (e.g., bonds
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 bonds. Lower rated bonds
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 bonds so affected.
Any Portfolio may also invest in unrated debt bonds of foreign and
domestic issuers. Unrated bonds, while not necessarily of lower
quality than rated bonds, 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 bond, in determining whether to purchase unrated
municipal bonds. Unrated bonds will be included in the 35% limit of
each Portfolio unless its manager deems such securities to be the
equivalent of investment grade bonds.
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
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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.
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.
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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 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 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 bonds in its portfolio.
If interest rates increase as anticipated, the value of the 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,
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investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between
the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions
rather than making or taking delivery of the instrument underlying a
futures contract. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced and prices
in the futures market distorted. Third, from the point of view of
speculators, the margin deposit requirements in the futures market are
less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures
market may cause temporary price distortions. Due to the possibility
of the foregoing distortions, a correct forecast of general price
trends by a portfolio manager still may not result in a successful use
of futures.
Futures contracts entail risks. Although the Portfolios believe that
use of such contracts will benefit the Portfolios, a Portfolio's
overall performance could be worse than if such Portfolio had not
entered into futures contracts if the portfolio manager's investment
judgement proves incorrect. For example, if a Portfolio has hedged
against the effects of a possible decrease in prices of securities
held in its portfolio and prices increase instead, that Portfolio will
lose part or all of the benefit of the increased value of these
securities because of offsetting losses in its futures positions. In
addition, if a Portfolio has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at
increased prices which reflect the rising market and may occur at a
time when the sales are disadvantageous to such Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures
contracts available to a Portfolio will not match exactly such
Portfolio's current or potential investments. A Portfolio may buy and
sell futures contracts based on underlying instruments with different
characteristics from the securities in which it typically
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
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moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached, it
may be impossible for a Portfolio to enter into new positions or close
out existing positions. If the secondary market for a futures contract
is not liquid because of price fluctuation limits or otherwise, a
Portfolio may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a
futures position until the delivery date, regardless of changes in its
value. As a result, such Portfolio's access to other assets held to
cover its futures positions also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Portfolios may buy and write put and
call options on futures contracts. An option on a future gives a
Portfolio the right (but not the obligation) to buy or sell a futures
contract at a specified price on or before a specified date. The
purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less
risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, when a
Portfolio is not fully invested it may buy a call option on a futures
contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign
currency which is deliverable under, or of the index comprising, the
futures contract. If the futures price at the expiration of the option
is below the exercise price, a Portfolio will retain the full amount
of the option premium which provides a partial hedge against any
decline that may have occurred in that Portfolio's holdings. The
writing of a put option on a futures contract constitutes a partial
hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures
contract. If the futures price at expiration of the option is higher
than the exercise price, a Portfolio will retain the full amount of
the option premium which provides a partial hedge against any increase
in the price of securities which that Portfolio is considering buying.
If a call or put option a Portfolio has written is exercised, such
Portfolio will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between
the change in the value of its portfolio securities and changes in the
value of the futures positions, a Portfolio's losses from existing
options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio
securities. For example, a Portfolio may buy a put option on a futures
contract to hedge its portfolio against the risk of falling prices or
rising interest rates.
The amount of risk a Portfolio assumes when it buys an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in
the value of the underlying futures contract will not be fully
reflected in the value of the options bought.
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
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of the parties that enter into them. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated
exchange.
The following discussion summarizes the Portfolios' principal uses of
forward foreign currency exchange contracts ("forward currency
contracts"). A Portfolio may enter into forward currency contracts
with stated contract values of up to the value of that Portfolio's
assets. A forward currency contract is an obligation to buy or sell an
amount of a specified currency for an agreed price (which may be in
U.S. dollars or a foreign currency). A Portfolio will exchange foreign
currencies for U.S. dollars and for other foreign currencies in the
normal course of business and may buy and sell currencies through
forward currency contracts in order to fix a price for securities it
has agreed to buy or sell ("transaction hedge"). A Portfolio also may
hedge some or all of its investments denominated in a foreign currency
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
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to buy the amount of foreign currency being hedged by a forward sale
contract or a Portfolio may buy put options permitting it to sell the
amount of foreign currency subject to a forward buy contract.
While forward contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward contracts.
In such event, the Portfolios' ability to utilize forward contracts
may be restricted. In addition, a Portfolio may not always be able to
enter into forward contracts at attractive prices and may be limited
in its ability to use these contracts to hedge Portfolio assets.
OPTIONS ON FOREIGN CURRENCIES. The Portfolios may buy and write
options on foreign currencies in a manner similar to that in which
futures or forward contracts on foreign currencies will be utilized.
For example, a decline in the U.S. dollar value of a foreign currency
in which portfolio securities are denominated will reduce the U.S.
dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Portfolio may buy
put options on the foreign currency. 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
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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 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
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underlying security at the exercise price, which will usually exceed
the then market value of the underlying security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by
buying an option of the same series as the option previously written.
The effect of the purchase is that the writer's position will be
canceled by the clearing corporation. However, a writer may not effect
a closing purchase transaction after being notified of the exercise of
an option. Likewise, an investor who is the holder of an option may
liquidate its position by effecting a "closing sale transaction." This
is accomplished by selling an option of the same series as the option
previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction
will permit a Portfolio to write another call option on the underlying
security with either a different exercise price or expiration date or
both. In the case of a written put option, such transaction will
permit a Portfolio to write another put option to the extent that the
exercise price 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
18
<PAGE>
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. 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
19
<PAGE>
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 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.
20
<PAGE>
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature of
the foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In
addition, exchange-traded options on foreign currencies involve
certain risks not presented by the over-the-counter market. For
example, exercise and settlement of such options must be made
exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign
currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on
exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in
foreign countries. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic
factors, (ii) lesser availability than in the United States of data on
which to make trading decisions, (iii) delays in a Portfolio's ability
to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) low trading volume.
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, Balanced Portfolio, Equity Income Portfolio, Growth and
Income Portfolio, International Growth Portfolio, Worldwide Growth
Portfolio, Global Life Sciences Portfolio and Global Technology
Portfolio have each agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of 0.65%
of the average daily net assets of each Portfolio. This fee is the
same or lower than the fee that each of the Equity Portfolios paid
under its old agreement during its most recent fiscal year.
Janus Capital has agreed to reimburse Equity Income Portfolio, Global
Life Sciences Portfolio and Global Technology Portfolio by the amount,
if any, that such Portfolio's normal operating expenses in any fiscal
year, including the investment advisory fee but excluding 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 excluded from the above expense
limitation.
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. Janus Capital has agreed to waive the
advisory fee payable of High-Yield Portfolio and Flexible Income
Portfolio in an amount equal to the amount, if any, that the
Portfolio's normal operating expenses in any fiscal year, including
the investment advisory fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, exceed 1% of the average
daily net assets for a fiscal year. Mortality risk, expense risk and
other charges imposed by participating insurance companies are
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.
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<PAGE>
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. The
information presented in the table below reflects the management fees
in effect during each of the periods shown. Effective May 1, 2000, the
Equity Portfolios' management fees were changed to 0.65% of the
average daily net assets of each Portfolio. This fee is the same as or
lower than the fee that each Equity Portfolio paid under its old
agreement.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ---------------------------- --------------------------
Portfolio Name Advisory Fees Waivers(1) Advisory Fees Waivers(1) Advisory Fees Waivers(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $11,643,196 -- $ 5,144,931 -- $3,119,619 --
Aggressive Growth Portfolio $10,080,519 -- $ 4,159,741 -- $3,036,239 --
Capital Appreciation Portfolio $ 1,716,060 -- $ 181,285 -- $ 12,832(2) $ 9,172(2)
Balanced Portfolio $10,804,814 -- $ 4,020,954 -- $1,348,363 --
Equity Income Portfolio $ 106,069 $14,279 $ 42,337 $34,357 $ 5,959(2) $ 5,959(2,3)
Growth and Income Portfolio $ 201,847 -- $ 12,900 $12,900(3,4) -- --
International Growth Portfolio $ 2,829,430 -- $ 1,547,572 -- $ 645,307 --
Worldwide Growth Portfolio $25,509,504 -- $14,485,092 -- $7,532,715 --
Global Life Sciences Portfolio(5) N/A -- N/A -- N/A --
Global Technology Portfolio(5) N/A -- N/A -- N/A --
Flexible Income Portfolio $ 1,051,109 -- $ 563,148 -- $ 237,601 --
High-Yield Portfolio $ 18,446 $18,446(3) $ 24,691 $24,691(3) $ 11,790 $11,790(3)
</TABLE>
(1) In addition to these fee waivers, Janus Capital has agreed to reduce the
advisory fee of the Growth, Aggressive Growth, Capital Appreciation,
Balanced, Equity Income, Growth and Income Portfolios, International Growth
and Worldwide Growth 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) The Portfolio had not commenced operations as of December 31, 1999.
The Advisory Agreement for each of the Portfolios is dated July 1,
1997 (except Global Life Sciences Portfolio and Global Technology
Portfolio, which are dated December 14, 1999). The Equity Portfolios'
Advisory Agreements were each amended effective May 1, 2000 to
decrease the management fees. Each Advisory Agreement will continue in
effect until July 1, 2001, and thereafter from year to year so long as
such continuance is approved annually by a majority of the Portfolios'
Trustees who are not parties to the Advisory Agreements or interested
persons of any such party, and by either a majority of the outstanding
voting shares or the Trustees of the Portfolios. Each Advisory
Agreement (i) may be terminated without the payment of any penalty by
any Portfolio or Janus Capital on 60 days' written notice; (ii)
terminates automatically in the event of its assignment; and (iii)
generally, may not be amended without the approval by vote of a
majority of the Trustees of the affected Portfolio, including the
Trustees who are not interested persons of that Portfolio or Janus
Capital and, to the extent required by the 1940 Act, the vote of a
majority of the outstanding voting securities of that Portfolio.
Janus Capital 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
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
23
<PAGE>
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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. 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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board, subject to the approval of Stilwell Financial, which cannot be
unreasonably withheld.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolios' Code of Ethics
("Code"). The Portfolios' Code of Ethics is on file with and available
through the SEC Web site at www.sec.gov. The Code applies to
Directors/Trustees of Janus Capital and the Portfolios, and employees
of Janus Capital and the Trust, and requires investment personnel,
inside Directors/Trustees of Janus Capital and the Portfolios and
certain other designated employees deemed to have access to current
trading information to pre-clear all transactions in securities not
otherwise exempt under the Code. Requests for trading authorization
will be denied when, among other reasons, the proposed personal
transaction would be contrary to the provisions of the Code 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 Code
subjects such personnel to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code 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 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 annual rate of $3.06 per shareholder account for the
equity 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 a
distributor of the Portfolios. 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, 1999, 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 $ 972,059 $1,043,385,823
Aggressive Growth Portfolio $ 853,240 $ 646,562,742
Capital Appreciation Portfolio $ 143,650 $ 174,669,374
Balanced Portfolio $ 530,904 $ 499,553,931
Equity Income Portfolio $ 4,697 $ 4,680,446
Growth and Income Portfolio $ 12,117 $ 9,878,778
International Growth Portfolio $ 86,547 $ 61,003,752
Worldwide Growth Portfolio $ 841,652 $ 808,050,621
</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 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio $1,800,731 $1,062,104 $1,249,908
Aggressive Growth Portfolio $1,664,794 $1,157,439 $ 974,825
Capital Appreciation Portfolio $ 232,858 $ 39,464 $ 2,570(2)
Balanced Portfolio $1,254,757 $ 337,008 $ 408,226
Equity Income Portfolio $ 15,272 $ 6,415 $ 1,055(2)
Growth and Income Portfolio $ 39,174 $ 3,844(1) $ N/A
International Growth Portfolio $1,084,559 $ 810,115 $ 512,690
Worldwide Growth Portfolio $7,327,446 $5,334,034 $4,223,192
Global Life Sciences Portfolio(3) N/A N/A N/A
Global Technology Portfolio(3) N/A N/A N/A
Flexible Income Portfolio $ 1,200 $ 4,050 $ 2,841
High-Yield Portfolio $ 60 $ 679 $ 103
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998.
(2) May 1, 1997 (inception) to December 31, 1997.
(3) The Portfolio had not commenced operations as of December 31, 1999.
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, 1999* Expenses* Commissions+ Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $7,244 $5,433 0.40% 0.33%
Balanced Portfolio $2,294 $1,721 0.18% 0.10%
Growth and Income Portfolio $ 55 $ 41 0.14% 0.08%
</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 Commission
through DSTS for the Paid through DSTS
Period Ended Reduction of for the Period Ended Reduction
Portfolio Name December 31, 1998* Expenses* December 31, 1997* of Expenses*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $6,937 $5,203 $2,819 $2,114
Aggressive Growth Portfolio $9,626 $7,219 $6,780 $5,085
Balanced Portfolio $ -- $ -- $ 391 $ 293
Equity Income Portfolio $ 7 $ 6 $ 15 $ 11
Worldwide Growth Portfolio $ -- $ -- $6,697 $5,023
</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, 1999, 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 $42,087,398
Balanced Portfolio Charles Schwab Corporation $24,595,881
Equity Income Portfolio Charles Schwab Corporation $ 254,388
Growth and Income Portfolio Charles Schwab Corporation $ 126,637
</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 Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
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).
- --------------------------------------------------------------------------------
*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 of
International Growth Portfolio, Co-Manager of
100 Fillmore Street Worldwide Growth Portfolio*
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Co-Manager of Janus Investment Fund.
Formerly (1998-1999), an assistant portfolio manager at Janus Capital.
Formerly (1993-1998), a research analyst at Janus Capital.
David J. Corkins, Age 33 - Executive Vice President, Portfolio Manager of Growth
and Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President of Janus Investment Fund. Vice President of
Janus Capital. Formerly (1995-1997), research analyst and assistant
portfolio manager at Janus Capital. Formerly (1993-1995), Chief
Financial Officer of Chase U.S. Consumer Services, Inc., a Chase
Manhattan mortgage business.
James P. Goff, Age 36 - 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 of Worldwide
Growth Portfolio, Co-Manager of 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.
#Member of the Trust's Executive Committee.
31
<PAGE>
C. Mike Lu, Age 30 - Executive Vice President, Portfolio Manager of Global
Technology Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Formerly (1991-1998), research analyst at Janus Capital.
Thomas R. Malley, Age 31 - Executive Vice President, Portfolio Manager of Global
Technology Portfolio*
100 Fillmore Street
Denver, CO 80906-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1991-1998), research
analyst at Janus Capital.
Karen L. Reidy, Age 32 - Executive Vice President, Portfolio Manager of Balanced
Portfolio and Equity Income Portfolio*
100 Fillmore Street
Denver, CO 80906-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1995-1999), equity
analyst at Janus Capital.
Blaine P. Rollins, Age 33 - Executive Vice President, Portfolio Manager of
Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1996-1999), Executive
Vice President and Portfolio Manager of Equity Income and Balanced
Portfolios. Formerly (1990-1995), fixed-income trader and equity
securities analyst at Janus Capital.
Sandy R. Rufenacht, Age 35 - 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 (1990-1995), senior
accountant, fixed-income trader and fixed-income research analyst at
Janus Capital.
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.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
32
<PAGE>
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.
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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
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. and Janus International
(UK) Limited. Formerly (1992-1996), Treasurer of Janus Investment Fund
and Janus Aspen Series.
Kelley Abbott Howes, Age 34 - Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Secretary of Janus Investment Fund. Vice President
and Assistant General Counsel of Janus Capital. Vice President of
Janus Distributors, Inc. Assistant Vice President of Janus Service
Corporation.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
33
<PAGE>
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.
- --------------------------------------------------------------------------------
*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.
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, 1999 December 31, 1999**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ 0 $ 0
James P. Craig, III, Trustee* $ 0 $ 0
William D. Stewart, Trustee $8,342 $107,333
Gary O. Loo, Trustee $7,685 $107,333
Dennis B. Mullen, Trustee $7,379 $107,333
Martin H. Waldinger, Trustee $8,342 $107,333
James T. Rothe, Trustee $7,685 $107,333
</TABLE>
* An interested person of the Portfolios and of Janus Capital. Compensated by
Janus Capital and not the Portfolios.
** As of December 31, 1999, 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) certain qualified
retirement plans. Participating insurance companies and certain other
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
35
<PAGE>
Determination." The prospectus for your insurance company's separate
account or your plan documents contain detailed information about
investing in the different Portfolios.
REDEMPTIONS
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified retirement
plans. 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 some or all of its Shares in kind under
unusual circumstances, in order to protect the interests of remaining
shareholders, or to accommodate a request by a particular shareholder
that does not adversely affect the interest of the remaining
shareholders, by delivery of securities selected from its assets at
its discretion. However, the Portfolios are governed by Rule 18f-1
under the 1940 Act, which requires each Portfolio to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the NAV of that
Portfolio during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, a Portfolio
will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The method of
valuing securities used to make redemptions in kind will be the same
as the method of valuing portfolio securities described under "Shares
of the Trust - Net Asset Value Determination" and such valuation will
be made as of the same time the redemption price is determined.
The right to require the Portfolios to redeem 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.
36
<PAGE>
Income dividends, capital gains distributions and tax
status
It is a policy of the Shares of the Portfolios to make distributions
of substantially all of their respective investment income and any net
realized capital gains. 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.
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
contracts or plans. See the prospectus for the separate account of the
related insurance company or the plan documents for additional
information.
37
<PAGE>
Principal shareholders
The officers and Trustees of the Portfolios cannot directly own Shares
of the Portfolios without purchasing an insurance contract through one
of the participating insurance companies or through a qualified plan.
As a result, such officers and Trustees as a group own less than 1% of
the outstanding Shares of each Portfolio. As of April 3, 2000, all of
the outstanding Shares of the Portfolios were owned by certain
insurance company separate accounts or qualified plans. The percentage
ownership of each separate account or plan owning more than 5% of the
Shares of any Portfolio is as follows:
Aetna Life Insurance & Annuity Company, 151 Farmington Avenue,
Hartford, CT 06156, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Aetna Insurance & Annuity
Portfolio Name Company
- -------------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 29.56%
Aggressive Growth Portfolio 58.36%
Balanced Portfolio 33.64%
Worldwide Growth Portfolio 35.55%
Flexible Income Portfolio 35.28%
</TABLE>
ADP, 1 ADP Boulevard, Roseland, NJ 07068, owned of record 5% or more
of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by ADP
- -------------------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio 8.64%
</TABLE>
American United Life Insurance Company, One American Square, Suite
209, Indianapolis, IN 46282, owned of record 5% or more of the
outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by American United
Portfolio Name Life Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 9.03%
</TABLE>
Citibank, N.A., Joseph E. Seagram & Sons Inc., 3800 Citibank Center
Tampa, Tampa, FL 33610, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Citibank, N.A.
- -------------------------------------------------------------------------------------------
<S> <C>
Global Technology Portfolio 99.98%
</TABLE>
Connecticut Mutual Life Insurance Company, 1295 State Street,
Springfield, MA 01111, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Connecticut Mutual
Portfolio Name Life Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 7.82%
</TABLE>
Kemper Investors Life Insurance Company, 1 Kemper Drive T-1, Long
Grove, IL 60049, owned of record 5% or more of the outstanding Shares
of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Kemper Investors Life
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Balanced Portfolio 5.66%
Growth and Income Portfolio 80.72%
</TABLE>
38
<PAGE>
The Life Insurance Company of Virginia, 6610 West Broad Street,
Richmond, VA 23230, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by The Life Insurance
Portfolio Name Company of Virginia
- -------------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 23.16%
Aggressive Growth Portfolio 15.68%
Capital Appreciation Portfolio 53.96%
Balanced Portfolio 18.99%
International Growth Portfolio 20.88%
Worldwide Growth Portfolio 14.10%
Flexible Income Portfolio 32.00%
</TABLE>
Lincoln Benefit Life Company, P.O. Box 82532, Lincoln, NE 68501, owned
of record 5% or more of the outstanding Shares of the Portfolios, as
follows:
<TABLE>
<CAPTION>
Held by Lincoln Benefit
Portfolio Name Life Company
- -------------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 5.35%
</TABLE>
Lincoln National Life Insurance Company, 1300 South Clinton Street,
Fort Wayne, IN 46802, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Lincoln National
Portfolio Name Life Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Worldwide Growth Portfolio 5.56%
</TABLE>
MONY Life Insurance Company, 1740 Broadway, Suite 635, New York, NY
10019, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by MONY Life
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 7.51%
</TABLE>
National Integrity Life Insurance Company, 515 West Market Street, 8th
Floor, Louisville, KY 40202, owned of record 5% or more of the
outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by National Integrity
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 6.39%
</TABLE>
New York Life Insurance & Annuity Corporation, Morris Corporate Center
1, Building A, 300 Interspace Parkway, Parsippany, NJ 07054, owned of
record 5% or more of the outstanding Shares of the Portfolios, as
follows:
<TABLE>
<CAPTION>
Held by New York Life
Insurance & Annuity
Portfolio Name Corporation
- -------------------------------------------------------------------------------------------
<S> <C>
Balanced Portfolio 22.50%
Worldwide Growth Portfolio 9.54%
</TABLE>
39
<PAGE>
Pruco Life Insurance Company, 100 Mulberry Street, Newark, NJ 07102,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Pruco
Portfolio Name Life Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 13.13%
International Growth Portfolio 34.23%
</TABLE>
State Street Bank and Trust Company, FBO Northwest Airlines Retirement
Savings Plan, 105 Rosemont Road, Westwood, MA 02090, owned of record
5% or more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by State Street Bank
Portfolio Name and Trust Company
- -------------------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio 9.48%
</TABLE>
Western Reserve Life Assurance Co. of Ohio, 201 Highland Avenue,
Clearwater, FL 34618, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Western Reserve Life
Portfolio Name Assurance Co. of Ohio
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 6.44%
Equity Income Portfolio 100.00%
Growth and Income Portfolio 17.85%
High-Yield Portfolio 98.97%
</TABLE>
No qualified plan owned more than 10% of the shares of the Trust as a
whole.
The Shares held by the separate accounts of each insurance company,
including Shares for which no voting instructions have been received,
will be voted by each insurance company in proportion to instructions
received from contract owners.
40
<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 fourteen series of shares, known as
"Portfolios," each of which consists of two or 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 two or 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. A second class of shares, Retirement Shares, is
offered only to certain participant directed qualified plans whose
service providers require a fee from the Trust assets for providing
certain services to plan participants.
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. 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 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
41
<PAGE>
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.
42
<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
December 31, 1999, is shown in the table below (with the exception of
Global Life Sciences Portfolio and Global Technology Portfolio, which
had not commenced operations as of December 31, 1999):
<TABLE>
<CAPTION>
Average Annual Total Return
Date Number -----------------------------------
Available of Months One Five Ten Life of
Portfolio Name for Sale in Lifetime Year Years Years Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio - Institutional Shares 9/13/93 75.5 43.98% 29.89% N/A 24.28%
Aggressive Growth Portfolio - Institutional Shares 9/13/93 75.5 125.40% 36.23% N/A 34.42%
Capital Appreciation Portfolio - Institutional Shares 5/1/97 32 67.00% N/A N/A 57.18%
Balanced Portfolio - Institutional Shares 9/13/93 75.5 26.76% 24.68% N/A 20.62%
Equity Income Portfolio - Institutional Shares 5/1/97 32 41.58% N/A N/A 46.87%
Growth and Income Portfolio - Institutional Shares 5/1/98 20 74.04% N/A N/A 55.33%
International Growth Portfolio - Institutional Shares 5/2/94 68 82.27% 33.25% N/A 28.19%
Worldwide Growth Portfolio - Institutional Shares 9/13/93 75.5 64.45% 33.60% N/A 29.71%
Flexible Income Portfolio - Institutional Shares 9/13/93 75.5 1.60% 10.88% N/A 8.50%
High-Yield Portfolio - Institutional Shares 5/1/96 44 6.85% N/A N/A 9.83%
</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
The yield for the 30-day period ending December 31, 1999, for the
Shares of the following Portfolios is shown below:
<TABLE>
<S> <C>
Flexible Income Portfolio - Institutional Shares - 8.22%
High-Yield Portfolio - Institutional Shares - 9.45%
</TABLE>
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.
("Lipper"), Ibbotson Associates, Micropal or Morningstar, Inc.,
("Morningstar") or by publications of general interest such as Forbes,
Money, The Wall Street Journal, Mutual Funds Magazine, Kiplinger's or
Smart Money. The Portfolios may also compare their performance to that
of
43
<PAGE>
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 MidCap
400 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 Capital International
World Index or Morgan Stanley Capital International Europe,
Australasia, Far East Index (EAFE(R) 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.
44
<PAGE>
Financial statements
The following audited financial statements for the period ended
December 31, 1999 are hereby incorporated into this Statement of
Additional Information by reference to the Portfolios' Annual Report
dated December 31, 1999 (with the exception of Global Life Sciences
Portfolio and Global Technology Portfolio, which had not commenced
operations as of December 31, 1999). A copy of such report accompanies
this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of December 31, 1999
Statements of Operations for the period ended December 31, 1999
Statements of Assets and Liabilities as of December 31, 1999
Statements of Changes in Net Assets for the periods ended December 31,
1999 and 1998
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
45
<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>
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.
46
<PAGE>
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<PAGE>
[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
[JANUS LOGO]
Janus Aspen Series
Retirement Shares
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Flexible Income Portfolio
High-Yield Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
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 Shares of the Portfolios may be purchased only by qualified
retirement plans. Each Portfolio also offers a second class of
shares to the separate account of insurance companies for the
purpose of funding variable life insurance policies and
variable annuity contracts and certain other qualified
retirement plans.
This SAI is not a Prospectus and should be read in conjunction
with the Portfolios' Prospectus dated May 1, 2000, which is
incorporated by reference into this SAI and may be obtained
from your 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 plan sponsor.
<PAGE>
[JANUS 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........................ 27
Trustees and Officers....................................... 31
Shares of the Trust......................................... 36
Net Asset Value Determination............................ 36
Purchases................................................ 36
Distribution Plan........................................ 37
Redemptions.............................................. 37
Income Dividends, Capital Gains Distributions and Tax
Status...................................................... 39
Principal Shareholders...................................... 40
Miscellaneous Information................................... 43
Shares of the Trust...................................... 43
Shareholder Meetings..................................... 43
Voting Rights............................................ 43
Independent Accountants.................................. 44
Registration Statement................................... 44
Performance Information..................................... 45
Financial Statements........................................ 47
Appendix A.................................................. 48
Explanation of Rating Categories......................... 48
</TABLE>
1
<PAGE>
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, Balanced
Portfolio, Equity Income Portfolio, Growth and Income Portfolio,
International Growth Portfolio, Worldwide Growth 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 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio............................................ 53% 73%
Aggressive Growth Portfolio................................. 105% 132%
Capital Appreciation Portfolio.............................. 52% 91%
Balanced Portfolio.......................................... 92% 70%
Equity Income Portfolio..................................... 114% 79%
Growth and Income Portfolio................................. 59% 62%(1)
International Growth Portfolio.............................. 80% 93%
Worldwide Growth Portfolio.................................. 67% 77%
Flexible Income Portfolio................................... 116% 145%
High-Yield Portfolio........................................ 554% 301%
</TABLE>
(1) 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).
2
<PAGE>
(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
<PAGE>
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 it will generally 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 SEC and
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policies approved by the Trustees. Cash collateral may be invested in
money market funds advised by Janus 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.
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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.
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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 and GDRs are
securities that are typically issued by foreign banks or foreign trust
companies, although U.S. banks or U.S. trust companies may issue them.
EDRs and GDRs are structured similarly to the arrangements of ADRs.
EDRs, in bearer form, are designed for use in European securities
markets.
Depositary Receipts are generally subject to the same sort of risks as
direct investments in a foreign country, such as, currency risk,
political and economic risk, and market risk, because their values
depend on the performance of a foreign security denominated in its
home currency. The risks of foreign investing are addressed in some
detail in the 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
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15% limit on illiquid investments. While it is not possible to
eliminate all risks from these transactions, it is the policy of the
Portfolios to limit repurchase agreements to those parties whose
creditworthiness has been reviewed and found satisfactory by Janus
Capital.
A Portfolio may use reverse repurchase agreements to 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 Bonds
Flexible Income Portfolio and High-Yield Portfolio may invest without
limit in bonds that are rated below investment grade (e.g., bonds
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 bonds. Lower rated bonds
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 bonds so affected.
Any Portfolio may also invest in unrated bonds of foreign and domestic
issuers. Unrated bonds, while not necessarily of lower quality than
rated bonds, 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 bond, in determining whether to purchase unrated
municipal bonds. Unrated bonds will be included in the 35% limit of
each Portfolio unless its manager deems such securities to be the
equivalent of investment grade bonds.
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 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 bonds in its portfolio.
If interest rates increase as anticipated, the value of the 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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<PAGE>
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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<PAGE>
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
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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.
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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
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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.
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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.
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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, Balanced Portfolio, Equity Income Portfolio and Growth and
Income Portfolio, International Growth Portfolio and Worldwide Growth
Portfolio have each agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of 0.65%
of the average daily net assets of each Portfolio. This fee is the
same or lower than the fee that each of the Equity Portfolios paid
under its old agreement during its most recent fiscal year.
Janus Capital has agreed to reimburse Equity 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 and participant administration 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.
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. Janus Capital has agreed to waive the
advisory fee payable of High Yield Portfolio and Flexible Income
Portfolio in an amount equal to 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 and
participant administration fee described below, brokerage commissions,
interest, taxes and extraordinary expenses, exceed 1% of the average
daily net assets for a fiscal year. Janus Capital has agreed to
continue such waivers until at least the next annual renewal of the
advisory agreements.
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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>
1999 1998 1997
-------------------------- -------------------------- --------------------------
Portfolio Name Advisory Fees Waivers(1) Advisory Fees Waivers(1) Advisory Fees Waivers(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $11,643,196 $ -- $ 5,144,931 -- $3,119,619 --
Aggressive Growth Portfolio $10,080,519 $ -- $ 4,159,741 -- $3,036,239 --
Capital Appreciation Portfolio $ 1,716,060 $ -- $ 181,285 -- $ 12,832(2) $ 9,172(2)
Balanced Portfolio $10,804,814 $ -- $ 4,020,954 -- $1,348,363 --
Equity Income Portfolio $ 106,069 $14,279 $ 42,337 $34,357 $ 5,959(2) $ 5,959(2,3)
Growth and Income Portfolio $ 201,847 $ -- $ 12,900 $12,900(3,4) -- --
International Growth Portfolio $ 2,829,430 $ -- $ 1,547,572 -- $ 645,307 --
Worldwide Growth Portfolio $25,509,504 $ -- $14,485,092 -- $7,532,715 --
Flexible Income Portfolio $ 1,051,109 $ -- $ 563,148 -- $ 237,601 --
High-Yield Portfolio $ 18,446 $18,446(3) $ 24,691 $24,691(3) $ 11,790 $11,790(3)
</TABLE>
(1) In addition to these fee waivers, Janus Capital has agreed to reduce the
advisory fee of the Growth, Aggressive Growth, Capital Appreciation,
Balanced, Equity Income, Growth and Income, International Growth and
Worldwide Growth 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.
The Advisory Agreement for each of the Portfolios is dated July 1,
1997. The Equity Portfolios' Advisory Agreements were each amended
effective May 1, 2000 to decrease the management fees. Each Advisory
Agreement will continue in effect from July 1, 2001, and thereafter
from year to year so long as such continuance is approved annually by
a majority of the Portfolios' Trustees who are not parties to the
Advisory Agreements or interested persons of any such party, and by
either a majority of the outstanding voting shares or the Trustees of
the Portfolios. Each Advisory Agreement (i) may be terminated without
the payment of any penalty by any Portfolio or Janus Capital on 60
days' written notice; (ii) terminates automatically in the event of
its assignment; and (iii) generally, may not be amended without the
approval by vote of a majority of the Trustees of the affected
Portfolio, including the Trustees who are not interested persons of
that Portfolio or Janus Capital and, to the extent required by the
1940 Act, the vote of a majority of the outstanding voting securities
of that Portfolio.
Janus Capital 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
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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. KCSI is a
23
<PAGE>
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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board, subject to the approval of Stilwell Financial, which cannot be
unreasonably withheld.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolios' Code of Ethics
("Code"). The Portfolios' Code of Ethics is on file with and available
through the SEC Web site at www.sec.gov. The Code applies to
Directors/Trustees of Janus Capital and the Portfolios, and employees
of Janus Capital and the Trust, and requires investment personnel,
inside Directors/Trustees of Janus Capital and the Portfolios and
certain other designated employees deemed to have access to current
trading information to pre-clear all transactions in securities not
otherwise exempt under the Code. Requests for trading authorization
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 Code
subjects such personnel to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code 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 receives a
participant administration fee at an annual rate of up to 0.25% of the
average daily net assets of each Portfolio for providing or procuring
recordkeeping, subaccounting and other administrative services to
plans and plan participants who invest in the shares of the
Portfolios. Janus Service expects to use this fee to compensate
qualified plan service providers for providing these services (at an
annual rate of up to 0.25% of the average daily net assets of the
Shares attributable to plan participants receiving services from each
service provider). Services provided by qualified plan service
providers may include but are not limited to participant
recordkeeping, processing and aggregating purchase and redemption
transactions, providing periodic statements, forwarding prospectuses,
shareholder reports and other materials to existing plan participants,
and other participant administrative services.
For the year ended December 31, 1998, the total amounts paid by the
Shares to Janus Service (substantially all of which Janus Service paid
out as to qualified plan service providers) are summarized below:
<TABLE>
<CAPTION>
Participant
Administration
Portfolio Name Fees
- ----------------------------------------------------------------------------
<S> <C>
Balanced Portfolio - Retirement Shares $6,081
Worldwide Growth Portfolio - Retirement Shares $3,438
</TABLE>
For the year ended December 31, 1999, the total amounts paid by the
Shares to Janus Service (substantially all of which Janus Service paid
out as to qualified plan service providers) are summarized below:
<TABLE>
<CAPTION>
Participant
Administration
Portfolio Name Fees
- ----------------------------------------------------------------------------
<S> <C>
Growth Portfolio - Retirement Shares $ 30,523
Aggressive Growth Portfolio - Retirement Shares $ 24,465
Capital Appreciation Portfolio - Retirement Shares $ 11,005
Balanced Portfolio - Retirement Shares $ 71,244
Growth and Income Portfolio - Retirement Shares $ 4,565
International Growth Portfolio - Retirement Shares $ 9,346
Worldwide Growth Portfolio - Retirement Shares $123,561
</TABLE>
Note: These Portfolios and the other Portfolios that are not included in the
tables above paid a de minimis amount of participant administration fees
in connection with seed capital invested by Janus Capital in the Shares of
such Portfolios. This amount was rebated back to Janus Capital.
The Portfolios pay DST Systems, Inc., a subsidiary of KCSI, license
fees at the annual rate of $3.06 per shareholder account for the
equity 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
25
<PAGE>
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.
26
<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.
27
<PAGE>
For the year ended December 31, 1999, 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 $972,059 $1,043,385,823
Aggressive Growth Portfolio $853,240 $ 646,562,742
Capital Appreciation Portfolio $143,650 $ 174,669,374
Balanced Portfolio $530,904 $ 499,553,931
Equity Income Portfolio $ 4,697 $ 4,680,446
Growth and Income Portfolio $ 12,117 $ 9,878,778
International Growth Portfolio $ 86,547 $ 61,003,752
Worldwide Growth Portfolio $841,652 $ 808,050,621
</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.
28
<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 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio $1,800,731 $1,062,104 $1,249,908
Aggressive Growth Portfolio $1,664,794 $1,157,439 $ 974,825
Capital Appreciation Portfolio $ 232,858 $ 39,464 $ 2,570(2)
Balanced Portfolio $1,254,757 $ 337,008 $ 408,226
Equity Income Portfolio $ 15,272 $ 6,415 $ 1,055(2)
Growth and Income Portfolio $ 39,174 $ 3,844(1) N/A
International Growth Portfolio $1,084,559 $ 810,115 $ 512,690
Worldwide Growth Portfolio $7,327,446 $5,334,034 $4,223,192
Flexible Income Portfolio $ 1,200 $ 4,050 $ 2,841
High-Yield Portfolio $ 60 $ 679 $ 103
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998.
(2) May 1, 1997 (inception) to December 31, 1997.
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, 1999* Expenses* Commissions+ Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $7,244 $5,433 0.40% 0.33%
Balanced Portfolio $2,294 $1,721 0.18% 0.10%
Growth and Income Portfolio $ 55 $ 41 0.14% 0.08%
</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, 1998* Expenses* December 31, 1997* of Expenses*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $6,937 $5,203 $2,819 $2,114
Aggressive Growth Portfolio $9,626 $7,219 $6,780 $5,085
Balanced Portfolio $ -- $ -- $ 391 $ 293
Equity Income Portfolio $ 7 $ 6 $ 15 $ 11
Worldwide Growth Portfolio $ -- $ -- $6,697 $5,023
</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.
29
<PAGE>
As of December 31, 1999, 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 $42,087,398
Balanced Portfolio Charles Schwab Corporation $24,595,881
Equity Income Portfolio Charles Schwab Corporation $ 254,388
Growth and Income Portfolio Charles Schwab Corporation $ 126,637
</TABLE>
30
<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 Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
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).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Trust's Executive Committee.
31
<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 of
International Growth Portfolio, Co-Manager of
100 Fillmore Street Worldwide Growth Portfolio*
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Co-Manager of Janus Investment Fund.
Formerly (1998-1999), an assistant portfolio manager at Janus Capital.
Formerly (1993-1998), a research analyst at Janus Capital.
David J. Corkins, Age 33 - Executive Vice President, Portfolio Manager of Growth
and Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President of Janus Investment Fund. Vice President of
Janus Capital. Formerly (1995-1997), research analyst and assistant
portfolio manager at Janus Capital. Formerly (1993-1995), Chief
Financial Officer of Chase U.S. Consumer Services, Inc., a Chase
Manhattan mortgage business.
James P. Goff, Age 36 - 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 of Worldwide
Growth Portfolio, Co-Manager of 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.
#Member of the Trust's Executive Committee.
32
<PAGE>
Karen L. Reidy, Age 32 - Executive Vice President, Portfolio Manager of Balanced
Portfolio and Equity Income Portfolio*
100 Fillmore Street
Denver, CO 80906-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1995-1999), equity
analyst at Janus Capital.
Blaine P. Rollins, Age 33 - Executive Vice President, Portfolio Manager of
Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1996-1999), Executive
Vice President and Portfolio Manager of Equity Income and Balanced
Portfolios. Formerly (1990-1995), fixed-income trader and equity
securities analyst at Janus Capital.
Sandy R. Rufenacht, Age 35 - 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 (1990-1995), senior
accountant, fixed-income trader and fixed-income research analyst at
Janus Capital.
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.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
33
<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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
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. and Janus International
(UK) Limited. Formerly (1992-1996), Treasurer of Janus Investment Fund
and Janus Aspen Series.
Kelley Abbott Howes, Age 34 - Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Secretary of Janus Investment Fund. Vice President
and Assistant General Counsel of Janus Capital. Vice President of
Janus Distributors, Inc. Assistant Vice President of Janus Service
Corporation.
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.
- --------------------------------------------------------------------------------
*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.
34
<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, 1999 December 31, 1999**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ 0 $ 0
James P. Craig, III, Trustee* $ 0 $ 0
William D. Stewart, Trustee $8,342 $107,333
Gary O. Loo, Trustee $7,685 $107,333
Dennis B. Mullen, Trustee $7,379 $107,333
Martin H. Waldinger, Trustee $8,342 $107,333
James T. Rothe, Trustee $7,685 $107,333
</TABLE>
* An interested person of the Portfolios and of Janus Capital. Compensated by
Janus Capital and not the Portfolios.
** As of December 31, 1999, Janus Funds consisted of two registered investment
companies comprised of a total of 32 funds.
35
<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 qualified retirement
plans. 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." Your plan documents contain detailed
information about investing in the different Portfolios.
36
<PAGE>
DISTRIBUTION PLAN
Under a distribution 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 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 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 plan participants;
responding to inquiries by qualified plan participants; receiving and
answering correspondence and similar activities. On December 10, 1996,
Trustees unanimously approved the Plan which became effective May 1,
1997. 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.
For the year ended December 31, 1999, the total amounts paid by the
Shares to Janus Distributors (substantially all of which Janus
Distributors paid out as compensation to broker-dealers and other
service providers) under the 12b-1 plan are summarized below:
<TABLE>
<CAPTION>
Portfolio Name 12b-1 Distribution Fees
- -------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio - Retirement Shares $ 30,523
Aggressive Growth Portfolio - Retirement Shares $ 24,465
Capital Appreciation Portfolio - Retirement Shares $ 11,005
Balanced Portfolio - Retirement Shares $ 71,244
Growth and Income - Retirement Shares $ 4,565
International Growth Portfolio - Retirement Shares $ 9,346
Worldwide Growth Portfolio - Retirement Shares $123,561
</TABLE>
Note: These Portfolios and the other Portfolios that are not included in the
table paid a de minimis amount of 12b-1 fees in connection with seed
capital invested by Janus Capital in the Shares of such Portfolios. This
amount was rebated back to Janus Capital.
REDEMPTIONS
Redemptions, like purchases, may only be effected through 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 some or all of its Shares in kind under
unusual
37
<PAGE>
circumstances, in order to protect the interests of remaining
shareholders, or to accommodate a request by a particular shareholder
that does not adversely affect the interest of the remaining
shareholders, by delivery of securities selected from its assets at
its discretion. However, the Portfolios are governed by Rule 18f-1
under the 1940 Act, which requires each Portfolio to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the NAV of that
Portfolio during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, a Portfolio
will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The method of
valuing securities used to make redemptions in kind will be the same
as the method of valuing portfolio securities described under "Shares
of the Trust - Net Asset Value Determination" and such valuation will
be made as of the same time the redemption price is determined.
The right to require the Portfolios to redeem 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.
38
<PAGE>
Income dividends, capital gains distributions and tax status
It is a policy of the Shares of the Portfolios to make distributions
of substantially all of their respective investment income and any net
realized capital gains. 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.
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
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 plan documents for
additional information.
39
<PAGE>
Principal shareholders
The officers and Trustees of the Portfolios cannot directly own Shares
of the Portfolios without purchasing through a qualified plan. As a
result, such officers and Trustees as a group own less than 1% of the
outstanding Shares of each Portfolio. As of April 3, 2000, all of the
outstanding Shares of the Portfolios were owned by qualified plans and
by Janus Capital, which provided seed capital for the Portfolios. The
percentage ownership of each qualified plan owning more than 5% of the
Shares of any Portfolio is as follows:
American Express Trust Company, P.O. Box 534, Minneapolis, MN 55440,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by American Express
Portfolio Name Trust Company
- --------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 10.96%
Aggressive Growth Portfolio 8.64%
Balanced Portfolio 7.96%
International Growth Portfolio 41.53%
</TABLE>
Arrowhead Trust, Inc., 303 East Vanderbilt Way, Suite 150, San
Bernardino, CA 92402, owned of record 5% or more of the outstanding
shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Arrowhead Trust, Inc.
- -----------------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 29.16%
</TABLE>
The Bank of New York, One Wall Street, Floor 14, New York, NY 10286,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by The Bank of New York
- -----------------------------------------------------------------------------------------------
<S> <C>
Balanced Portfolio 24.66%
</TABLE>
Carn & Company, P.O. Box 96211, Washington, DC 20090, owned of record
5% or more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Carn & Company
- ------------------------------------------------------------------------------------
<S> <C>
Growth and Income Portfolio 16.21%
</TABLE>
Columbus Circle Trust Company, One Station Place, Stamford, CT 06902,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Columbus Circle
Portfolio Name Trust Company
- -------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 14.85%
</TABLE>
Commerce Bank, P.O. Box 13366, Kansas City, MO 64199, owned of record
5% or more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Commerce Bank
- -----------------------------------------------------------------------------------
<S> <C>
Growth and Income Portfolio 11.95%
</TABLE>
Connecticut General Life Insurance Company, P.O. Box 2975, Hartford,
CT 06104, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Connecticut General
Portfolio Name Life Insurance Company
- -----------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 25.47%
Worldwide Growth Portfolio 19.94%
</TABLE>
40
<PAGE>
DAI-ICHI Kangyo Bank of California, 555 West Fifth Street, Los
Angeles, CA 90013, owned of record 5% or more of the outstanding
Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by DAI-ICHI Kangyo
Portfolio Name Bank of California
- -------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 7.16%
Aggressive Growth Portfolio 8.67%
</TABLE>
Delaware Charter Guarantee & Trust, P.O. Box 8706, Wilmington, DE,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Delaware Charter
Portfolio Name Guarantee & Trust
- --------------------------------------------------------------------------------------
<S> <C>
Aggressive Growth Portfolio 28.89%
Capital Appreciation Portfolio 27.89%
</TABLE>
Delaware Management Trust Company, P.O. Box 8708, Philadelphia, PA
19101, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Delaware Management
Portfolio Name Trust Company
- -----------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 30.68%
</TABLE>
Fidelity Investments Institutional Operations Company, 100 Magellan
Way, Covington, KY 41015, owned of record 5% or more of the
outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Fidelity
Investments
Institutional
Portfolio Name Operations Company
- ------------------------------------------------------------------------------------------
<S> <C>
Equity Income Portfolio 65.08%
International Growth Portfolio 5.29%
</TABLE>
First Union National Bank, 1525 West W.T. Harris Boulevard, Charlotte,
NC 28288, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by First Union National Bank
- -----------------------------------------------------------------------------------------------
<S> <C>
Worldwide Growth Portfolio 23.85%
</TABLE>
Kemper Service Company, 811 Main Street, Kansas City, MO 64105, owned
of record 5% or more of the outstanding Shares of the Portfolios, as
follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Kemper Service Company
- --------------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 11.48%
Capital Appreciation Portfolio 44.76%
</TABLE>
Ohio National Life Insurance Company, One Financial Way, Cincinnati,
OH 45242, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Ohio National Life
Portfolio Name Insurance Company
- ----------------------------------------------------------------------------------------
<S> <C>
Balanced Portfolio 6.11%
</TABLE>
41
<PAGE>
Penfirn Company, P.O. Box 3128, Omaha, NE 68103, owned of record 5% or
more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Penfirn Company
- -------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio 12.04%
Aggressive Growth Portfolio 9.39%
Balanced Portfolio 5.68%
Growth Income Portfolio 58.65%
International Growth Portfolio 10.29%
</TABLE>
Provident Mutual Life Insurance Company, P.O. Box 1717, Valley Forge,
PA 19482, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Provident Mutual Life
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 11.94%
</TABLE>
Putnam, 859 Willard Street, Quincy, MA 02169, owned of record 5% or
more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Putnam
- ----------------------------------------------------------------------------
<S> <C>
Balanced Portfolio 12.21%
</TABLE>
Regions Bank, 417 North 20th Street, Birmingham, AL 35203, owned of
record 5% or more of the outstanding Shares of the Portfolios, as
follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Regions Bank
- ----------------------------------------------------------------------------------
<S> <C>
Equity Income Portfolio 22.95%
</TABLE>
Rextex, P.O. Box 387, Saint Louis, MO 63166, owned of record 5% or
more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Rextex
- ----------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 6.27%
International Growth Portfolio 7.21%
</TABLE>
Rogers & Company, P.O. Box 821, Hackensack, NJ 07602, owned of record
5% or more of the outstanding Shares of the Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Rogers & Company
- --------------------------------------------------------------------------------------
<S> <C>
Flexible Income Portfolio 20.64%
</TABLE>
Security Trust Company, 2390 East Camelback Road, Phoenix, AZ 85016,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Portfolio Name Held by Security Trust Company
- --------------------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio 8.20%
</TABLE>
None of the qualified plans owned 10% or more of the shares of the
Trust as a whole.
42
<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 fourteen series of shares, known as
"Portfolios," each of which consists of two or 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 two or three classes of shares. The Shares
discussed in this SAI are offered only to qualified plans whose
service providers require a fee from the Trust assets for providing
certain services to plan participants. A second 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
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 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.
43
<PAGE>
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.
44
<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
December 31, 1999, is shown in the table below.
The Growth, Aggressive Growth, International Growth, Worldwide Growth,
Balanced, Flexible Income, and High-Yield Portfolios Retirement Shares
commenced operations on May 1, 1997. The returns shown for the
Retirement Shares of these Portfolios reflect the historical
performance of a different class of shares (the Institutional Shares)
prior to May 1, 1997, restated based on the Retirement Shares' fees
and expenses on May 1, 1997 (ignoring any fee and expense
limitations).
<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 - Retirement Shares 9/13/93 75.5 43.98% 29.25 N/A 23.49%
Aggressive Growth Portfolio - Retirement Shares 9/13/93 75.5 124.34% 35.47 N/A 33.53%
Capital Appreciation Portfolio - Retirement Shares 5/1/97 32 66.16% N/A N/A 56.43%
Balanced Portfolio - Retirement Shares 9/13/93 75.5 26.13% 23.98 N/A 19.82%
Equity Income Portfolio - Retirement Shares 5/1/97 32 40.94% N/A N/A 46.15%
Growth and Income Portfolio - Retirement Shares 5/1/98 20 73.20% N/A N/A 54.57%
International Growth Portfolio - Retirement Shares 5/2/94 68 81.32% 32.06 N/A 27.11%
Worldwide Growth Portfolio - Retirement Shares 9/13/93 75.5 63.66% 32.78 N/A 28.77%
Flexible Income Portfolio - Retirement Shares 9/13/93 75.5 0.90% 10.24 N/A 7.89%
High-Yield Portfolio - Retirement Shares 5/1/96 44 6.35% N/A N/A 6.19%
</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
The yield for the 30-day period ending December 31, 1999, for the
Shares of the following Portfolios is shown below:
<TABLE>
<S> <C>
Flexible Income Portfolio - Retirement Shares - 7.56%
High-Yield Portfolio - Retirement Shares - 8.80%
</TABLE>
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
45
<PAGE>
limited to, Lipper Analytical Services, Inc. ("Lipper"), Ibbotson
Associates, Micropal or Morningstar, Inc. ("Morningstar") or by
publications of general interest such as Forbes, Money, The Wall
Street Journal, Mutual Funds Magazine, Kiplinger's or Smart Money. The
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 MidCap 400 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 Capital International
World Index or Morgan Stanley Capital International Europe,
Australasia, Far East Index (EAFE(R) 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.
46
<PAGE>
Financial statements
The following audited financial statements for the period ended
December 31, 1999 are hereby incorporated into this Statement of
Additional Information by reference to the Portfolios' Annual Report
dated December 31, 1999. A copy of such report accompanies this SAI.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of December 31, 1999
Statements of Operations for the period ended December 31, 1999
Statements of Assets and Liabilities as of December 31, 1999
Statements of Changes in Net Assets for the periods ended December 31,
1999 and 1998
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
47
<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>
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.
48
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<PAGE>
[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
[JANUS LOGO]
Janus Aspen Series
Service Shares
Growth Portfolio
Aggressive Growth Portfolio
Capital Appreciation Portfolio
Balanced Portfolio
Equity Income Portfolio
Growth and Income Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Global Life Sciences Portfolio
Global Technology Portfolio
Flexible Income Portfolio
High-Yield Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus
for the Service 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 May 1, 2000, 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>
[JANUS 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.............. 36
Redemptions.............................................. 36
Income Dividends, Capital Gains Distributions and Tax
Status...................................................... 38
Principal Shareholders...................................... 39
Miscellaneous Information................................... 40
Shares of the Trust...................................... 40
Shareholder Meetings..................................... 40
Voting Rights............................................ 40
Independent Accountants.................................. 41
Registration Statement................................... 41
Performance Information..................................... 42
Financial Statements........................................ 44
Appendix A.................................................. 45
Explanation of Rating Categories......................... 45
</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, Capital Appreciation Portfolio, Global
Life Sciences Portfolio and Global Technology 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, Balanced
Portfolio, Equity Income Portfolio, Growth and Income Portfolio,
International Growth Portfolio, Worldwide Growth 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 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio............................................ 53% 73%
Aggressive Growth Portfolio................................. 105% 132%
Capital Appreciation Portfolio.............................. 52% 91%
Balanced Portfolio.......................................... 92% 70%
Equity Income Portfolio..................................... 114% 79%
Growth and Income Portfolio................................. 59% 62%(1)
International Growth Portfolio.............................. 80% 93%
Worldwide Growth Portfolio.................................. 67% 77%
Global Life Sciences Portfolio(2)........................... N/A N/A
Global Technology Portfolio(2).............................. N/A N/A
Flexible Income Portfolio................................... 116% 145%
High-Yield Portfolio........................................ 554% 301%
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998, annualized.
(2) The Portfolio had not commenced operations as of December 31, 1999.
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, Capital Appreciation Portfolio, Global
Life Sciences Portfolio and Global Technology 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
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value of its total assets, Aggressive Growth Portfolio, Capital
Appreciation Portfolio, Global Life Sciences Portfolio and Global
Technology 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).
This policy does not apply to Global Life Sciences Portfolio or Global
Technology Portfolio.
(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
3
<PAGE>
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 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.
4
<PAGE>
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.
GLOBAL LIFE SCIENCES PORTFOLIO. As a fundamental policy, Global Life
Sciences Portfolio will normally invest at least 25% of its total
assets, in the aggregate, in the following industry groups: health
care; pharmaceuticals; agriculture; cosmetics/personal care; and
biotechnology.
FLEXIBLE INCOME PORTFOLIO. As a fundamental policy, this Portfolio may
not purchase a non-income-producing security if, after such purchase,
less than 80% of the Portfolio's total assets would be invested in
income-producing securities. Income-producing securities include
securities that make periodic interest payments as well as those that
make interest payments on a deferred basis or pay interest only at
maturity (e.g., Treasury bills or zero coupon bonds).
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.
5
<PAGE>
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 it will generally 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 SEC and policies approved
by the Trustees. Cash collateral may be invested in money market funds
advised by Janus 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
6
<PAGE>
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.
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
7
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them off sooner. Thus, the security holders frequently receive
prepayments of principal in addition to the principal that is part of
the regular monthly payments. A portfolio manager will consider
estimated prepayment rates in calculating the average-weighted
maturity of a Portfolio. A borrower is more likely to prepay a
mortgage that bears a relatively high rate of interest. This means
that in times of declining interest rates, higher yielding
mortgage-backed securities held by a Portfolio might be converted to
cash and that Portfolio will be forced to accept lower interest rates
when that cash is used to purchase additional securities in the
mortgage-backed securities sector or in other investment sectors.
Additionally, prepayments during such periods will limit a Portfolio's
ability to participate in as large a market gain as may be experienced
with a comparable security not subject to prepayment.
Asset-backed securities represent interests in pools of consumer loans
and are backed by paper or accounts receivables originated by banks,
credit card companies or other providers of credit. Generally, the
originating bank or credit provider is neither the obligor nor 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 and GDRs are
securities that are typically issued by foreign banks or foreign trust
companies, although U.S. banks or U.S. trust companies may issue them.
EDRs and GDRs are structured similarly to the arrangements of ADRs.
EDRs, in bearer form, are designed for use in European securities
markets.
Depositary Receipts are generally subject to the same sort of risks as
direct investments in a foreign country, such as, currency risk,
political and economic risk, and market risk, because their values
depend on the performance of a foreign security denominated in its
home currency. The risks of foreign investing are addressed in some
detail in the Portfolios' prospectus.
8
<PAGE>
Municipal Obligations
The Portfolios may invest in municipal obligations issued by states,
territories and possessions of the United States and the District of
Columbia. The value of municipal obligations can be affected by
changes in their actual or perceived credit quality. The credit
quality of municipal obligations can be affected by, among other
things, the financial condition of the issuer or guarantor, the
issuer's future borrowing plans and sources of revenue, the economic
feasibility of the revenue bond project or general borrowing purpose,
political or economic developments in the region where the security is
issued, and the liquidity of the security. Because municipal
securities are generally traded over-the-counter, the liquidity of a
particular issue often depends on the willingness of dealers to make a
market in the security. The liquidity of some municipal obligations
may be enhanced by demand features, which would enable a Portfolio to
demand payment on short notice from the issuer or a financial
intermediary.
Other Income-Producing Securities
Other types of income producing securities that the Portfolios may
purchase include, but are not limited to, the following types of
securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities 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.
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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 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 Bonds
Flexible Income Portfolio and High-Yield Portfolio may invest without
limit in bonds that are rated below investment grade (e.g., bonds
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 bonds. Lower rated bonds
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 bonds so affected.
Any Portfolio may also invest in unrated bonds of foreign and domestic
issuers. Unrated bonds, while not necessarily of lower quality than
rated bonds, 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 bond, in determining whether to purchase unrated
municipal bonds. Unrated bonds will be included in the 35% limit of
each Portfolio unless its manager deems such securities to be the
equivalent of investment grade bonds.
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
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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.
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.
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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 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 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 bonds in its portfolio.
If interest rates increase as anticipated, the value of the 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,
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investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between
the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions
rather than making or taking delivery of the instrument underlying a
futures contract. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced and prices
in the futures market distorted. Third, from the point of view of
speculators, the margin deposit requirements in the futures market are
less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures
market may cause temporary price distortions. Due to the possibility
of the foregoing distortions, a correct forecast of general price
trends by a portfolio manager still may not result in a successful use
of futures.
Futures contracts entail risks. Although the Portfolios believe that
use of such contracts will benefit the Portfolios, a Portfolio's
overall performance could be worse than if such Portfolio had not
entered into futures contracts if the portfolio manager's investment
judgement proves incorrect. For example, if a Portfolio has hedged
against the effects of a possible decrease in prices of securities
held in its portfolio and prices increase instead, that Portfolio will
lose part or all of the benefit of the increased value of these
securities because of offsetting losses in its futures positions. In
addition, if a Portfolio has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at
increased prices which reflect the rising market and may occur at a
time when the sales are disadvantageous to such Portfolio.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures
contracts available to a Portfolio will not match exactly such
Portfolio's current or potential investments. A Portfolio may buy and
sell futures contracts based on underlying instruments with different
characteristics from the securities in which it typically
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
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moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached, it
may be impossible for a Portfolio to enter into new positions or close
out existing positions. If the secondary market for a futures contract
is not liquid because of price fluctuation limits or otherwise, a
Portfolio may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a
futures position until the delivery date, regardless of changes in its
value. As a result, such Portfolio's access to other assets held to
cover its futures positions also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Portfolios may buy and write put and
call options on futures contracts. An option on a future gives a
Portfolio the right (but not the obligation) to buy or sell a futures
contract at a specified price on or before a specified date. The
purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less
risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, when a
Portfolio is not fully invested it may buy a call option on a futures
contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign
currency which is deliverable under, or of the index comprising, the
futures contract. If the futures price at the expiration of the option
is below the exercise price, a Portfolio will retain the full amount
of the option premium which provides a partial hedge against any
decline that may have occurred in that Portfolio's holdings. The
writing of a put option on a futures contract constitutes a partial
hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures
contract. If the futures price at expiration of the option is higher
than the exercise price, a Portfolio will retain the full amount of
the option premium which provides a partial hedge against any increase
in the price of securities which that Portfolio is considering buying.
If a call or put option a Portfolio has written is exercised, such
Portfolio will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between
the change in the value of its portfolio securities and changes in the
value of the futures positions, a Portfolio's losses from existing
options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio
securities. For example, a Portfolio may buy a put option on a futures
contract to hedge its portfolio against the risk of falling prices or
rising interest rates.
The amount of risk a Portfolio assumes when it buys an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in
the value of the underlying futures contract will not be fully
reflected in the value of the options bought.
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
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of the parties that enter into them. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated
exchange.
The following discussion summarizes the Portfolios' principal uses of
forward foreign currency exchange contracts ("forward currency
contracts"). A Portfolio may enter into forward currency contracts
with stated contract values of up to the value of that Portfolio's
assets. A forward currency contract is an obligation to buy or sell an
amount of a specified currency for an agreed price (which may be in
U.S. dollars or a foreign currency). A Portfolio will exchange foreign
currencies for U.S. dollars and for other foreign currencies in the
normal course of business and may buy and sell currencies through
forward currency contracts in order to fix a price for securities it
has agreed to buy or sell ("transaction hedge"). A Portfolio also may
hedge some or all of its investments denominated in a foreign currency
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
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to buy the amount of foreign currency being hedged by a forward sale
contract or a Portfolio may buy put options permitting it to sell the
amount of foreign currency subject to a forward buy contract.
While forward contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward contracts.
In such event, the Portfolios' ability to utilize forward contracts
may be restricted. In addition, a Portfolio may not always be able to
enter into forward contracts at attractive prices and may be limited
in its ability to use these contracts to hedge Portfolio assets.
OPTIONS ON FOREIGN CURRENCIES. The Portfolios may buy and write
options on foreign currencies in a manner similar to that in which
futures or forward contracts on foreign currencies will be utilized.
For example, a decline in the U.S. dollar value of a foreign currency
in which portfolio securities are denominated will reduce the U.S.
dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Portfolio may buy
put options on the foreign currency. 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
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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 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
17
<PAGE>
underlying security at the exercise price, which will usually exceed
the then market value of the underlying security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by
buying an option of the same series as the option previously written.
The effect of the purchase is that the writer's position will be
canceled by the clearing corporation. However, a writer may not effect
a closing purchase transaction after being notified of the exercise of
an option. Likewise, an investor who is the holder of an option may
liquidate its position by effecting a "closing sale transaction." This
is accomplished by selling an option of the same series as the option
previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing transaction
will permit a Portfolio to write another call option on the underlying
security with either a different exercise price or expiration date or
both. In the case of a written put option, such transaction will
permit a Portfolio to write another put option to the extent that the
exercise price 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
18
<PAGE>
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. 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
19
<PAGE>
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 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.
20
<PAGE>
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature of
the foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In
addition, exchange-traded options on foreign currencies involve
certain risks not presented by the over-the-counter market. For
example, exercise and settlement of such options must be made
exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign
currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on
exercise.
In addition, options on U.S. government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in
foreign countries. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic
factors, (ii) lesser availability than in the United States of data on
which to make trading decisions, (iii) delays in a Portfolio's ability
to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) low trading volume.
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, Balanced Portfolio, Equity Income Portfolio, Growth and
Income Portfolio, International Growth Portfolio, Worldwide Growth
Portfolio, Global Life Sciences Portfolio and Global Technology
Portfolio have each agreed to compensate Janus Capital for its
services by the monthly payment of a fee at the annual rate of 0.65%
of the average daily net assets of each Portfolio. This fee is the
same or lower than the fee that each of the Equity Portfolios paid
under its old agreement during its most recent fiscal year.
Janus Capital has agreed to reimburse Equity Income Portfolio, Global
Life Sciences Portfolio and Global Technology 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.
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. Janus Capital has agreed to waive the
advisory fee payable of High-Yield Portfolio and Flexible Income
Portfolio in an amount equal to 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 1% of the average daily net assets for
a fiscal year. 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.
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<PAGE>
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. The
information presented in the table below reflects the management fees
in effect during each of the periods shown. Effective May 1, 2000, the
Equity Portfolios' management fees were changed to 0.65% of the
average daily net assets of each Portfolio. This fee is the same as or
lower than the fee that each Equity Portfolio paid under its old
agreement.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
Portfolio Name Advisory Fees Waivers(1) Advisory Fees Waivers(1) Advisory Fees Waivers(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio $11,643,196 -- $ 5,144,931 -- $3,119,619 --
Aggressive Growth Portfolio $10,080,519 -- $ 4,159,741 -- $3,036,239 --
Capital Appreciation Portfolio $ 1,716,060 -- $ 181,285 -- $ 12,832(2) $ 9,172(2)
Balanced Portfolio $10,804,814 -- $ 4,020,954 -- $1,348,363 --
Equity Income Portfolio $ 106,069 $14,279 $ 42,337 $34,357 $ 5,959(2) $ 5,959(2,3)
Growth and Income Portfolio $ 201,847 -- $ 12,900 $12,900(3,4) -- --
International Growth Portfolio $ 2,829,430 -- $ 1,547,572 -- $ 645,307 --
Worldwide Growth Portfolio $25,509,504 -- $14,485,092 -- $7,532,715 --
Global Life Sciences Portfolio(5) N/A -- N/A -- N/A --
Global Technology Portfolio(5) N/A -- N/A -- N/A --
Flexible Income Portfolio $ 1,051,109 -- $ 563,148 -- $ 237,601 --
High-Yield Portfolio $ 18,446 $18,446(3) $ 24,691 $24,691(3) $ 11,790 $11,790(3)
</TABLE>
(1) In addition to these fee waivers, Janus Capital has agreed to reduce the
advisory fee of the Growth, Aggressive Growth, Capital Appreciation,
Balanced, Equity Income, Growth and Income, International Growth and
Worldwide Growth 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) The Portfolio had not commenced operations as of December 31, 1999.
The Advisory Agreement for each of the Portfolios is dated July 1,
1997 (except Global Life Sciences Portfolio and Global Technology
Portfolio, which are dated December 14, 1999). The Equity Portfolios'
Advisory Agreements were each amended effective May 1, 2000 to
decrease the management fees. Each Advisory Agreement will continue in
effect until July 1, 2001, and thereafter from year to year so long as
such continuance is approved annually by a majority of the Portfolios'
Trustees who are not parties to the Advisory Agreements or interested
persons of any such party, and by either a majority of the outstanding
voting shares or the Trustees of the Portfolios. Each Advisory
Agreement (i) may be terminated without the payment of any penalty by
any Portfolio or Janus Capital on 60 days' written notice; (ii)
terminates automatically in the event of its assignment; and (iii)
generally, may not be amended without the approval by vote of a
majority of the Trustees of the affected Portfolio, including the
Trustees who are not interested persons of that Portfolio or Janus
Capital and, to the extent required by the 1940 Act, the vote of a
majority of the outstanding voting securities of that Portfolio.
Janus Capital 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
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
23
<PAGE>
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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. 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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board, subject to the approval of Stilwell Financial, which cannot be
unreasonably withheld.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolios' Code of Ethics
("Code"). The Portfolios' Code of Ethics is on file with and available
through the SEC Web site at www.sec.gov. The Code applies to
Directors/Trustees of Janus Capital and the Portfolios, and employees
of Janus Capital and the Trust, and requires investment personnel,
inside Directors/Trustees of Janus Capital and the Portfolios and
certain other designated employees deemed to have access to current
trading information to pre-clear all transactions in securities not
otherwise exempt under the Code. Requests for trading authorization
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 Code
subjects such personnel to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code are administered by and subject to
exceptions authorized by Janus Capital.
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<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 annual rate of $3.06 per shareholder account for the
equity 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.
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<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, 1999, 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 $972,059 $1,043,385,823
Aggressive Growth Portfolio $853,240 $ 646,562,742
Capital Appreciation Portfolio $143,650 $ 174,669,374
Balanced Portfolio $530,904 $ 499,553,931
Equity Income Portfolio $ 4,697 $ 4,680,446
Growth and Income Portfolio $ 12,117 $ 9,878,778
International Growth Portfolio $ 86,547 $ 61,003,752
Worldwide Growth Portfolio $841,652 $ 808,050,621
</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 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Portfolio $1,800,731 $1,062,104 $1,249,908
Aggressive Growth Portfolio $1,664,794 $1,157,439 $ 974,825
Capital Appreciation Portfolio $ 232,858 $ 39,464 $ 2,570(2)
Balanced Portfolio $1,254,757 $ 337,008 $ 408,226
Equity Income Portfolio $ 15,272 $ 6,415 $ 1,055(2)
Growth and Income Portfolio $ 39,174 $ 3,844(1) N/A
International Growth Portfolio $1,084,559 $ 810,115 $ 512,690
Worldwide Growth Portfolio $7,327,446 $5,334,034 $4,223,192
Global Life Sciences Portfolio(3) N/A N/A N/A
Global Technology Portfolio(3) N/A N/A N/A
Flexible Income Portfolio $ 1,200 $ 4,050 $ 2,841
High-Yield Portfolio $ 60 $ 679 $ 103
</TABLE>
(1) May 1, 1998 (inception) to December 31, 1998.
(2) May 1, 1997 (inception) to December 31, 1997.
(3) The Portfolio had not commenced operations as of December 31, 1999.
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, 1999* Expenses* Commissions+ Transactions
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $7,244 $5,433 0.40% 0.33%
Balanced Portfolio $2,294 $1,721 0.18% 0.10%
Growth and Income Portfolio $ 55 $ 41 0.14% 0.08%
</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 Commission
DSTS for the Paid through DSTS
Period Reduction of for the Period Ended Reduction
Portfolio Name December 31, 1998* Expenses* December 31, 1997* of Expenses*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio $6,937 $5,203 $2,819 $2,114
Aggressive Growth Portfolio $9,626 $7,219 $6,780 $5,085
Balanced Portfolio $ -- $ -- $ 391 $ 293
Equity Income Portfolio $ 7 $ 6 $ 15 $ 11
Worldwide Growth Portfolio $ -- $ -- $6,697 $5,023
</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, 1999, 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 $42,087,398
Balanced Portfolio Charles Schwab Corporation $24,595,881
Equity Income Portfolio Charles Schwab Corporation $ 254,388
Growth and Income Portfolio Charles Schwab Corporation $ 126,637
</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 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
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).
- --------------------------------------------------------------------------------
*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-Portfolio Manager of
International Growth Portfolio, Co-Manager of
100 Fillmore Street Worldwide Growth Portfolio*
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Co-Manager of Janus Investment Fund.
Formerly (1998-1999), an assistant portfolio manager at Janus Capital.
Formerly (1993-1998) a research analyst at Janus Capital.
David J. Corkins, Age 33 - Executive Vice President, Portfolio Manager of Growth
and Income Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President of Janus Investment Fund. Vice President of
Janus Capital. Formerly (1995-1997), research analyst and assistant
portfolio manager at Janus Capital. Formerly (1993-1995), Chief
Financial Officer of Chase U.S. Consumer Services, Inc., a Chase
Manhattan mortgage business.
James P. Goff, Age 36 - 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.
- --------------------------------------------------------------------------------
#Member of the Trust's Executive Committee.
*Interested person of the Trust and of Janus Capital.
31
<PAGE>
Helen Young Hayes, Age 37 - Executive Vice President, Co-Manager of Worldwide
Growth Portfolio, Co-Manager of International Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President, Co-Manager of Janus Investment Fund. Vice
President of Janus Capital.
C. Mike Lu, Age 30 - Executive Vice President, Portfolio Manager of Global
Technology Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Formerly (1991-1998), research analyst at Janus Capital.
Thomas R. Malley, Age 31 - Executive Vice President, Portfolio Manager of Global
Technology Portfolio*
100 Fillmore Street
Denver, CO 80906-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1991-1998), research
analyst at Janus Capital.
Karen L. Reidy, Age 32 - Executive Vice President, Portfolio Manager of Balanced
Portfolio and Equity Income Portfolio*
100 Fillmore Street
Denver, CO 80906-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1995-1999), equity
analyst at Janus Capital.
Blaine P. Rollins, Age 33 - Executive Vice President, Portfolio Manager of
Growth Portfolio*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Executive Vice President and Portfolio Manager of Janus Investment
Fund. Vice President of Janus Capital. Formerly (1996-1999), Executive
Vice President and Portfolio Manager of Equity Income and Balance
Portfolios. Formerly (1990-1995), fixed-income trader and equity
securities analyst at Janus Capital.
Sandy R. Rufenacht, Age 35 - 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 (1990-1995), senior
accountant, fixed-income trader and fixed-income research analyst at
Janus Capital.
32
<PAGE>
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.
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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
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. and Janus International
(UK) Limited. 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.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
33
<PAGE>
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.
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, 1999 December 31, 1999**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ -- $ --
James P. Craig, III, Trustee* $ -- $ --
William D. Stewart, Trustee $8,342 $107,333
Gary O. Loo, Trustee $7,685 $107,333
Dennis B. Mullen, Trustee $7,379 $107,333
Martin H. Waldinger, Trustee $8,342 $107,333
James T. Rothe, Trustee $7,685 $107,333
</TABLE>
* An interested person of the Portfolios and of Janus Capital. Compensated by
Janus Capital and not the Portfolios.
** As of December 31, 1999, 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 December 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 some or all of its Shares in kind under
unusual circumstances, in order to protect the interests of remaining
shareholders, or to accommodate a request by a particular shareholder
that does not adversely affect the interest of the 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 make distributions
of substantially all of their respective investment income and any net
realized capital gains. 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.
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>
Principal shareholders
The officers and Trustees of the Portfolios cannot directly own Shares
of the Portfolios without purchasing an insurance contract through one
of the participating insurance companies or through a qualified plan.
As a result, such officers and Trustees as a group own less than 1% of
the outstanding Shares of each Portfolio. As of April 3, 2000, all of
the outstanding Shares of the Portfolios were owned by certain
insurance company separate accounts or qualified plans. The percentage
ownership of each separate account or plan owning more than 5% of the
Shares of any Portfolio is as follows:
Minnesota Life Insurance Company, 400 North Robert Street, St. Paul,
MN 55101, owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Minnesota Life
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 15.27%
International Growth Portfolio 14.43%
</TABLE>
Nationwide Insurance Company, P.O. Box 182029, Columbus, OH 43218,
owned of record 5% or more of the outstanding Shares of the
Portfolios, as follows:
<TABLE>
<CAPTION>
Held by Nationwide
Portfolio Name Insurance Company
- -------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation Portfolio 82.19%
International Growth Portfolio 81.07%
Global Technology Portfolio 95.31%
</TABLE>
No qualified plan owned more than 10% of the shares of the Trust as a whole.
The Shares held by the separate accounts of each insurance company, including
Shares for which no voting instructions have been received, will be voted by
each insurance company in proportion to instructions received from contract
owners.
39
<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 fourteen series of shares, known as
"Portfolios," each of which consists of two or 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 two or 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 normally will be held, unless otherwise required by the
Trust Instrument or the 1940 Act. Subject to the
40
<PAGE>
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.
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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
December 31, 1999, is shown in the table below (with the exception of
Global Life Sciences Portfolio and Global Technology Portfolio, which
had not commenced operations as of December 31, 1999).
The Service Shares commenced operations on December 31, 1999. 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 December 31, 1999, restated based on
the Service Shares' estimated fees and expenses (ignoring any fee and
expense limitations).
<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 75.5 43.01% 29.53% N/A 23.86%
Aggressive Growth Portfolio - Service Shares 9/13/93 75.5 123.16% 35.83% N/A 33.98%
Capital Appreciation Portfolio - Service Shares 5/1/97 32 64.60% N/A N/A 56.39%
Balanced Portfolio - Service Shares 9/13/93 75.5 26.03% 24.55% N/A 20.51%
Equity Income Portfolio - Service Shares 5/1/97 32 40.39% N/A N/A 46.19%
Growth and Income Portfolio - Service Shares 5/1/98 20 73.09% N/A N/A 54.92%
International Growth Portfolio - Service Shares 5/2/94 68 79.52% 33.17% N/A 28.19%
Worldwide Growth Portfolio - Service Shares 9/13/93 75.5 63.49% 33.28% N/A 29.35%
Flexible Income Portfolio - Service Shares 9/13/93 75.5 1.30% 10.68% N/A 8.36%
High-Yield Portfolio - Service Shares 5/1/96 44 2.74% N/A N/A 5.13%
</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
42
<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.
("Lipper"), Ibbotson Associates, Micropal or Morningstar, Inc.
("Morningstar"), or by publications of general interest such as
Forbes, Money, The Wall Street Journal, Mutual Funds Magazine,
Kiplinger's or Smart Money. The 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 MidCap 400 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 Capital International
World Index or Morgan Stanley Capital International Europe,
Australasia, Far East Index (EAFE(R) 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.
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<PAGE>
Financial statements
The following audited financial statements for Institutional Shares and
Retirement Shares for the period ended December 31, 1999 are hereby
incorporated into this Statement of Additional Information by reference to
the Portfolios' Annual Report dated December 31, 1999 (with the exception
of Global Life Sciences Portfolio and Global Technology Portfolio, which
had not commenced operations as of December 31, 1999). A copy of such
report accompanies this SAI. The Service Shares commenced operations on
December 31, 1999 and were not reflected in the Portfolios' Annual Report.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT AND SEMIANNUAL REPORT
Schedules of Investments as of December 31, 1999
Statements of Operations for the period ended December 31, 1999
Statements of Assets and Liabilities as of December 31, 1999
Statements of Changes in Net Assets for the periods ended December 31,
1999 and 1998
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
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<PAGE>
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>
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.
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<PAGE>
[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
[JANUS LOGO]
Janus Aspen Series
Institutional Shares
Money Market Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus
for the Institutional Shares (the "Shares") of Money Market
Portfolio. The Shares are sold under the name "Janus Aspen
Series." The Portfolio is a separate series of Janus Aspen
Series, a Delaware business trust.
The Shares of the Portfolios may be purchased only by the
separate accounts of insurance companies for the purpose of
funding variable life insurance policies and variable annuity
contracts (collectively, "variable insurance contracts") and by
certain qualified retirement plans. Each Portfolio also offers
a second class of shares to certain participant directed
qualified plans.
This SAI is not a Prospectus and should be read in conjunction
with the Prospectus dated May 1, 2000, which is incorporated by
reference into this SAI and may be obtained from the Trust at
the above phone number or address. This SAI contains additional
and more detailed information about the 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.
<PAGE>
[JANUS LOGO]
<PAGE>
Table of contents
<TABLE>
<S> <C>
Investment Restrictions and
Investment Strategies....................................... 2
Performance Data............................................ 10
Determination of Net Asset Value............................ 12
Investment Adviser.......................................... 13
Custodian, Transfer Agent
and Certain Affiliations.................................... 15
Portfolio Transactions and Brokerage........................ 16
Trustees and Officers....................................... 18
Purchase of Shares.......................................... 22
Redemption of Shares........................................ 23
Dividends and Tax Status.................................... 24
Principal Shareholders...................................... 25
Miscellaneous Information................................... 26
Shares of the Trust...................................... 26
Shareholder Meetings..................................... 26
Voting Rights............................................ 26
Independent Accountants.................................. 27
Registration Statement................................... 27
Financial Statements........................................ 28
Appendix A.................................................. 29
Description of Securities Ratings........................ 29
Appendix B.................................................. 32
Description of Municipal Securities...................... 32
</TABLE>
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<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.
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
6
<PAGE>
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 U.S. dollar denominated debt
obligations. In general, sales of these securities may not be made
absent registration under the Securities Act of 1933 or the
availability of an appropriate exemption. Pursuant to Section 4(2) of
the 1933 Act or Rule 144A adopted under the 1933 Act, however, some of
these securities are eligible for resale to institutional investors,
and accordingly, Janus Capital may determine that a liquid market
exists for such a security pursuant to guidelines adopted by the
Trustees.
Obligations of Financial Institutions
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
7
<PAGE>
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.
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."
8
<PAGE>
In evaluating municipal lease obligations, Janus Capital will consider
such factors as it deems appropriate, including: (a) whether the lease
can be canceled; (b) the ability of the lease obligee to direct the
sale of the underlying assets; (c) the general creditworthiness of the
lease obligor; (d) the likelihood that the municipality will
discontinue appropriating funding for the leased property in the event
such property is no longer considered essential by the municipality;
(e) the legal recourse of the lease obligee in the event of such a
failure to appropriate funding; (f) whether the security is backed by
a credit enhancement such as insurance; and (g) any limitations which
are imposed on the lease obligor's ability to utilize substitute
property or services other than those covered by the lease obligation.
If a lease is backed by an unconditional letter of credit or other
unconditional credit enhancement, then Janus Capital may determine
that a lease is an eligible security solely on the basis of its
evaluation of the credit enhancement.
Municipal leases, like other municipal debt obligations, are subject
to the risk of non-payment. The ability of issuers of municipal leases
to make timely lease payments may be adversely impacted in general
economic downturns and as relative governmental cost burdens are
allocated and reallocated among federal, state and local governmental
units. Such non-payment would result in a reduction of income to the
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.
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.
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. Also, because Shares of the Portfolio may only
be purchased through variable insurance contracts, the prospectus of
the participating insurance company sponsoring such contract should be
carefully reviewed for information on relevant charges and expenses.
The 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
10
<PAGE>
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.
The Shares' current yield and effective yield for the seven day period
ended December 31, 1999, were 5.70% and 5.86%, respectively.
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.
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<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 brokerage commissions,
interest, taxes and extraordinary expenses, exceed .50% of average
daily net assets. Mortality risk, expense risk and other charges
imposed by participating insurance companies are excluded from the
above expense limitation. Janus Capital has agreed to continue such
waivers until at least the next annual renewal of the advisory
agreements.
For the fiscal year ended December 31, 1999, the advisory fee was
$137,596. For the fiscal years ended December 31, 1998 and December
31, 1997, the advisory fees were $79,201 and $22,333, respectively.
For the fiscal year ended December 31, 1997, Janus Capital waived
$2,184.
The Advisory Agreement is dated July 1, 1997 and will continue in
effect until July 1, 2001, and thereafter from year to year so long as
such continuance is approved annually by a majority of the Portfolio's
Trustees who are not parties to the Advisory Agreement or interested
persons of any such party, and by either a majority of the outstanding
voting shares or the Trustees. The Advisory Agreement (i) may be
terminated without the payment of any penalty by the Portfolio or
Janus Capital on 60 days' written notice; (ii) terminates
automatically in the event of its assignment; and (iii) generally, may
not be amended without the approval by vote of a majority of the
Trustees, including the Trustees who are not interested persons of the
Portfolio or Janus Capital and, to the extent required by the 1940
Act, the vote of a majority of the outstanding voting securities of
the Portfolio.
Janus Capital also acts as sub-adviser for a number of private-label
mutual funds and provides separate account advisory services for
institutional accounts. Investment decisions for each account managed
by Janus Capital, including the Portfolio, are made independently from
those for any other account that is or may in the future become
managed by Janus Capital or its affiliates. If, however, a number of
accounts managed by Janus Capital are contemporaneously engaged in the
purchase or sale of the same security, the orders may be aggregated
and/or the transactions may be averaged as to price and allocated
equitably to each account. In some cases, this policy might adversely
affect the price paid or received by an account or
13
<PAGE>
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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. 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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolio's Code of Ethics ("Code"). The Portfolio's
Code of Ethics is on file with and available from the SEC through the
SEC Web site at www.sec.gov. The Code applies to Directors/ Trustees
of Janus Capital and the Portfolios and employees of Janus Capital and
the Trust, and requires investment personnel and officers of Janus
Capital, inside Directors/Trustees of Janus Capital and the Portfolio
and certain other designated employees deemed to have access to
current trading information to pre-clear all transactions in
securities not otherwise exempt under the Code. Requests for trading
authorization will be denied when, among other reasons, the proposed
personal transaction would be contrary to the provisions of the Code
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 Code
subjects such personnel, to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code 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 with respect to the Shares except for out-of-pocket costs.
Janus Distributors, Inc., 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 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 annual rate of $3.98 per shareholder account for the use
of DST's 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, 1999, December 31, 1998 and
December 31, 1997, the Portfolio did not incur any brokerage
commissions. The Portfolio generally buys and sells securities in
principal 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 principle 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.
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As of December 31, 1999, 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 Morgan Stanley, Dean Witter, Discover & Co. $11,000,000
</TABLE>
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<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.
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 Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
Gary O. Loo, Age 59 - Trustee#
102 N. Cascade Avenue, Suite 500
Colorado Springs, CO 80903
- --------------------------------------------------------------------------------
Trustee of Janus Investment Fund. President and a Director of High
Valley Group, Inc., Colorado Springs, 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 to 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).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Executive Committee.
18
<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
to 1996), Director of Run Technologies, Inc., a software development
firm, San Carlos, CA.
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.
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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
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. and Janus International
(UK) Limited. Formerly (1992-1996), Treasurer of Janus Investment Fund
and Janus Aspen Series.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
19
<PAGE>
Kelley Abbott Howes, Age 34 - Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Secretary of Janus Investment Fund. Vice President
and Assistant General Counsel of Janus Capital. Vice President of
Janus Distributors, Inc. Assistant Vice President of Janus Service
Corporation.
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.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
20
<PAGE>
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.
The Money Market Funds Committee, consisting of Messrs. Loo, Mullen,
and Rothe monitors the compliance with policies and procedures adopted
particularly for money market funds.
The following table shows the aggregate compensation earned by and
paid to each Trustee by the 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, 1999 December 31, 1999**
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ -- $ --
James P. Craig, III, Trustee* $ -- $ --
William D. Stewart, Trustee $ 47 $107,333
Gary O. Loo, Trustee $101 $107,333
Dennis B. Mullen, Trustee $127 $107,333
Martin H. Waldinger, Trustee $ 47 $107,333
James T. Rothe, Trustee $101 $107,333
</TABLE>
*An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
**As of December 31, 1999, 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) certain qualified
retirement plans. Participating insurance companies and certain other
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>
Redemption of Shares
Redemptions, like purchases, may only be effected through the separate
accounts of participating insurance companies or qualified retirement
plans. Participating insurance companies and 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 some or all
of its shares in kind under unusual circumstances, in order to protect
the interests of remaining shareholders, or to accommodate a request
by a particular shareholder that does not adversely affect the
interest of the remaining shareholders by delivery of securities
selected from its assets at its discretion. However, the Portfolio is
governed by Rule 18f-1 under the 1940 Act, which requires the
Portfolio to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Portfolio during any 90-day period
for any one shareholder. Should redemptions by any shareholder exceed
such limitation, their Portfolio will have the option of redeeming the
excess in cash or in kind. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage costs in converting the
assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "Determination of Net Asset
Value" and such valuation will be made as of the same time the
redemption price is determined.
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.
23
<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, 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 contracts or plans.
See the prospectus for the separate account of the related insurance
company or the plan documents for additional information.
24
<PAGE>
Principal shareholders
The officers and Trustees of the Portfolio cannot directly own Shares
of the Portfolio without purchasing an insurance contract through one
of the participating insurance companies or through a qualified plan.
As a result, such officers and Trustees as a group own less than 1% of
the outstanding Shares of the Portfolio. As of April 3, 2000, all of
the outstanding Shares of the Portfolio were owned by certain
insurance company separate accounts or qualified plans. The percentage
ownership of each separate account or qualified plan owning more than
5% of the Shares of the Portfolio is as follows:
Western Reserve Life, 201 Highland Avenue, Clearwater, FL 34618, owned
57.66% of the outstanding Shares of the Portfolio. National Integrity
Life Insurance Company, 515 West Market Street, 8th Floor, Louisville,
KY 40202, owned 42.34% of the outstanding Shares of the Portfolio.
No qualified plan owned more than 10% of the shares of the Trust as a
whole.
The Shares held by the separate accounts of each insurance company,
including Shares for which no voting instructions have been received,
will be voted by each insurance company in proportion to instructions
received from contract owners.
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 fourteen series of
shares, known as "portfolios," in two or 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 two or three classes of shares. The
Shares discussed in this SAI are offered only in connection with
investment in and payments under variable contracts and life insurance
contracts, as well as certain qualified retirement plans. A second
class of shares, Retirement Shares, are offered only to certain other
participant directed qualified plans whose service providers require a
fee from Trust assets for providing certain services to plan
participants.
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 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 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 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
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
26
<PAGE>
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 the interest of a portfolio or class in the
matter differs from the interests of other portfolios or classes of
the Trust.
INDEPENDENT ACCOUNTANTS
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 the period ended
December 31, 1999 are hereby incorporated into this Statement of
Additional Information by reference to the Portfolio's Annual Report
dated December 31, 1999. A copy of such report accompanies this
Statement of Additional Information.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedule of Investments as of December 31, 1999
Statement of Operations for the period ended December 31, 1999
Statement of Assets and Liabilities as of December 31, 1999
Statement of Changes in Net Assets for the periods ended December 31,
1999 and 1998
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
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.
FITCHIBCA
<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>
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
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<PAGE>
mortgages, rent subsidized and/or collateralized mortgages, and/or the
net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see 3 below).
3. Private Activity Bonds are considered municipal bonds if the
interest paid thereon is exempt from Federal income tax and are issued
by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing,
housing and health. These bonds are also used to finance public
facilities such as airports, mass transit systems and ports. The
payment of the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property as
security for such payment.
While, at one time, the pertinent provisions of the Internal Revenue
Code permitted private activity bonds to bear tax-exempt interest in
connection with virtually any type of commercial or industrial project
(subject to various restrictions as to authorized costs, size
limitations, state per capita volume restrictions, and other matters),
the types of qualifying projects under the Code have become
increasingly limited, particularly since the enactment of the Tax
Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain
privately owned and operated rental multi-family housing facilities,
nonprofit hospital and nursing home projects, airports, docks and
wharves, mass commuting facilities and solid waste disposal projects,
among others, and for the refunding (that is, the tax-exempt
refinancing) of various kinds of other private commercial projects
originally financed with tax-exempt bonds. In future years, the types
of projects qualifying under the Code for tax-exempt financing are
expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to
as an "industrial development bond," but more and more frequently
revenue bonds have become classified according 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.
32
<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.
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[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
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[JANUS LOGO]
Janus Aspen Series
Retirement Shares
Money Market Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
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 Shares of the Portfolios may be purchased only by qualified
retirement plans. Each Portfolio also offers a second class of
shares to the separate account of insurance companies for the
purpose of funding variable life insurance policies and
variable annuity contracts and certain other qualified
retirement plans.
This SAI is not a Prospectus and should be read in conjunction
with the Prospectus dated May 1, 2000, which is incorporated by
reference into this SAI and may be obtained from the Trust at
the above phone number or address. This SAI contains additional
and more detailed information about the 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 plan sponsor.
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[JANUS LOGO]
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Table of contents
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Investment Restrictions and
Investment Strategies....................................... 2
Performance Data............................................ 10
Determination of Net Asset Value............................ 12
Investment Adviser.......................................... 13
Custodian, Transfer Agent
and Certain Affiliations.................................... 15
Portfolio Transactions and Brokerage........................ 16
Trustees and Officers....................................... 18
Purchase of Shares.......................................... 21
Distribution Plan........................................... 22
Redemption of Shares........................................ 23
Dividends and Tax Status.................................... 24
Principal Shareholders...................................... 25
Miscellaneous Information................................... 26
Shares of the Trust...................................... 26
Shareholder Meetings..................................... 26
Voting Rights............................................ 26
Independent Accountants.................................. 27
Registration Statement................................... 27
Financial Statements........................................ 28
Appendix A.................................................. 29
Description of Securities Ratings........................ 29
Appendix B.................................................. 32
Description of Municipal Securities...................... 32
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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.
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(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.
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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
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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
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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.
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
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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 U.S. dollar denominated debt
obligations. In general, sales of these securities may not be made
absent registration under the Securities Act of 1933 or the
availability of an appropriate exemption. Pursuant to Section 4(2) of
the 1933 Act or Rule 144A adopted under the 1933 Act, however, some of
these securities are eligible for resale to institutional investors,
and accordingly, Janus Capital may determine that a liquid market
exists for such a security pursuant to guidelines adopted by the
Trustees.
Obligations of Financial Institutions
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
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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.
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."
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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.
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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.
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.
The Shares' current yield and effective yield for the seven day period
ended December 31, 1999, were 5.20% and 5.33%, respectively.
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 and
participant administration 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.
For the fiscal year ended December 31, 1999, the advisory fee was
$137,596. For the fiscal year ended December 31, 1998 and December 31,
1997, the advisory fees were $79,201 and $22,333, respectively. For
the fiscal year ended December 31, 1997, Janus Capital waived $2,184.
The Advisory Agreement is dated July 1, 1997 and will continue in
effect until July 1, 2001, and thereafter from year to year so long as
such continuance is approved annually by a majority of the Portfolio's
Trustees who are not parties to the Advisory Agreement or interested
persons of any such party, and by either a majority of the outstanding
voting shares or the Trustees. The Advisory Agreement i) may be
terminated without the payment of any penalty by the Portfolio or
Janus Capital on 60 days' written notice; ii) terminates automatically
in the event of its assignment; and iii) generally, may not be amended
without the approval by vote of a majority of the Trustees, including
the Trustees who are not interested persons of the Portfolio or Janus
Capital and, to the extent required by the 1940 Act, the vote of a
majority of the outstanding voting securities of the Portfolio.
Janus Capital also 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 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
13
<PAGE>
the SEC, the Portfolios 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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. 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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolio's Code of Ethics ("Code"). The Portfolio's
Code of Ethics is on file with and available from the SEC through the
SEC Web site at www.sec.gov. The Code applies to Directors/ Trustees
of Janus Capital and the Portfolios and employees of Janus Capital and
the Trust, and requires investment personnel and officers of Janus
Capital, inside Directors/Trustees of Janus Capital and the Portfolio
and certain other designated employees deemed to have access to
current trading information to pre-clear all transactions in
securities not otherwise exempt under the Code. Requests for trading
authorization will be denied when, among other reasons, the proposed
personal transaction would be contrary to the provisions of the Code
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 Code
subjects such personnel, to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code 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 receives a participant
administration fee at an annual rate of up to .25% of the average
daily net assets of the Shares of the Portfolio for providing or
procuring recordkeeping, subaccounting and other administrative
services to plans and plan participants who invest in the Shares of
the Portfolio. Janus Service expects to use substantially all of this
fee to compensate qualified plan service providers for providing these
services (at an annual rate of up to .25% of the average daily net
assets of the Shares attributable to plan participants receiving
services from each service provider). Services provided by qualified
plan service providers may include but are not limited to participant
recordkeeping, processing and aggregating purchase and redemption
transactions, providing periodic statements, forwarding prospectuses,
shareholder reports and other materials to existing plan participants,
and other participant administrative services.
For each of the fiscal years ended December 31, 1998 and December 31,
1999, the Shares paid a de minimus amount in participant
administration fees to qualified plan service providers including
Janus Service. Participant administration fees earned by Janus Service
are in connection with seed capital invested by Janus Capital in the
Shares and have been rebated to Janus Capital.
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 annual 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, 1999, December 31, 1998 and
December 31, 1997, 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, 1999, 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 Morgan Stanley, Dean Witter, Discover & Co. $11,000,000
</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.
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 Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
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, CO.
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).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Executive Committee.
18
<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
to 1996), Director of Run Technologies, Inc., a software development
firm, San Carlos, CA.
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.
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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
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. and Janus International
(UK) Limited. Formerly (1992-1996), Treasurer of Janus Investment Fund
and Janus Aspen Series.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
19
<PAGE>
Kelley Abbott Howes, Age 34 - Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Secretary of Janus Investment Fund. Vice President
and Assistant General Counsel of Janus Capital. Vice President of
Janus Distributors, Inc. Assistant Vice President of Janus Service
Corporation.
Glenn P. O'Flaherty, Age 40 - Treasurer and Chief Accounting Officer*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Treasurer and Chief Accounting Officer of Janus Investment Fund. Vice
President of Janus Capital. Formerly (1991-1997), Director of Fund
Accounting, Janus Capital.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
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.
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 Portfolios for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position December 31, 1999 December 31, 1999**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ -- $ --
James P. Craig, III, Trustee* $ -- $ --
William D. Stewart, Trustee $ 47 $107,333
Gary O. Loo, Trustee $101 $107,333
Dennis B. Mullen, Trustee $127 $107,333
Martin H. Waldinger, Trustee $ 47 $107,333
James T. Rothe, Trustee $101 $107,333
</TABLE>
* An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
** As of December 31, 1999, Janus Funds consisted of two registered investment
companies comprised of a total of 32 funds.
20
<PAGE>
Purchase of Shares
Shares of the Portfolio can be purchased only by qualified plans.
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. Your plan documents contain detailed information about investing
in the Portfolio.
21
<PAGE>
Distribution plan
Under a distribution 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
qualified plan service providers as compensation for distribution and
shareholder servicing performed by such 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 the
Portfolio for 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 plan participants; responding to inquiries by qualified plan
participants; receiving and answering correspondence and similar
activities. On December 10, 1996, Trustees unanimously approved the
Plan which became effective May 1, 1997. 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.
For the fiscal year ended December 31, 1999, the Shares of the
Portfolio paid a de minimus amount in 12b-1 fees as compensation to
broker-dealers and other service providers including Janus
Distributors. Fees earned by Janus Distributors are in connection with
seed capital invested by Janus Capital in the Shares and have been
rebated to Janus Capital.
22
<PAGE>
Redemption of Shares
Redemptions, like purchases, may only be effected through 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 some or all of its shares in kind under
unusual circumstances, in order to protect the interests of remaining
shareholders, or to accommodate a request by a particular shareholder
that does not adversely affect the interest of the remaining
shareholders by delivery of securities selected from its assets at its
discretion. However, the Portfolio is governed by Rule 18f-1 under the
1940 Act, which requires the Portfolio to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net asset value of the
Portfolio during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, their Portfolio
will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The method of
valuing securities used to make redemptions in kind will be the same
as the method of valuing portfolio securities described under
"Determination of Net Asset Value" and such valuation will be made as
of the same time the redemption price is determined.
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.
23
<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
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 plan documents for
additional information.
24
<PAGE>
Principal shareholders
The officers and Trustees of the Portfolio cannot directly own Shares
of the Portfolio without purchasing through a participant directed
qualified plan. As a result, such officers and Trustees as a group own
less than 1% of the outstanding Shares of the Portfolio. As of April
3, 2000, all of the outstanding Shares of the Portfolio were owned by
qualified plans and by Janus Capital, which provided seed capital for
the Portfolio. The percentage ownership of each qualified plan owning
more than 5% of the Shares of the Portfolio is as follows:
Columbus Circle Trust, Metro Center One Station Place, Stamford, CT
06902:
<TABLE>
<S> <C>
FBO American Ambulance Providers 8.14%
FBO Consulting Inc. 8.75%
FBO Investors Inc. 27.07%
FBO Lamar Bank and Trust Co. 5.41%
FBO Madsen Kneppers & Associates 9.42%
FBO Maxon Inc. 18.03%
FBO Peoria Pulmonary Associates, Ltd. 8.33%
FBO Sedan Floral, Inc. 12.27%
</TABLE>
None of the qualified plans owned 10% or more of the shares of the
Trust as a whole.
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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 fourteen series of
shares, known as "portfolios," in two or 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 two or three classes of shares. The
Shares discussed in this SAI are offered only to qualified plans whose
service providers require a fee from Trust assets for providing
certain services to plan participants. A second 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 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 the other portfolios or class of the Trust. A shareholder
is entitled to one vote for each Share owned.
VOTING RIGHTS
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 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
26
<PAGE>
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 ACCOUNTANTS
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 the period ended
December 31, 1999 are hereby incorporated into this Statement of
Additional Information by reference to the Portfolio's Annual Report
dated December 31, 1999. A copy of such report accompanies this
Statement of Additional Information.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT
Schedules of Investments as of December 31, 1999
Statement of Operations for the period ended December 31, 1999
Statement of Assets and Liabilities as of December 31, 1999
Statement of Changes in Net Assets for the periods ended December 31,
1999 and 1998
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
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.
FITCHIBCA
<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>
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
31
<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.
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<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.
33
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<PAGE>
[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
<PAGE>
[JANUS LOGO]
Janus Aspen Series
Service Shares
Money Market Portfolio
100 Fillmore Street
Denver, CO 80206-4928
(800) 525-0020
Statement of Additional Information
May 1, 2000
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 Portfolios may be purchased only by
the separate accounts of insurance companies for the purpose of
funding variable life insurance policies and variable annuity
contracts (collectively, "variable insurance contracts") and by
certain qualified retirement plans.
This SAI is not a Prospectus and should be read in conjunction
with the Prospectus dated May 1, 2000, 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>
[JANUS 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
Principal Shareholders...................................... 25
Miscellaneous Information................................... 26
Shares of the Trust...................................... 26
Shareholder Meetings..................................... 26
Voting Rights............................................ 26
Independent Accountants.................................. 27
Registration Statement................................... 27
Financial Statements........................................ 28
Appendix A.................................................. 29
Description of Securities Ratings........................ 29
Appendix B.................................................. 32
Description of Municipal Securities...................... 32
</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
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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
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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.
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
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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 U.S. dollar denominated debt
obligations. In general, sales of these securities may not be made
absent registration under the Securities Act of 1933 or the
availability of an appropriate exemption. Pursuant to Section 4(2) of
the 1933 Act or Rule 144A adopted under the 1933 Act, however, some of
these securities are eligible for resale to institutional investors,
and accordingly, Janus Capital may determine that a liquid market
exists for such a security pursuant to guidelines adopted by the
Trustees.
Obligations of Financial Institutions
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
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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.
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."
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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.
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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.
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.
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.
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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.
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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, 1999, the advisory fee was
$137,596. For the fiscal year ended December 31, 1998 and December 31,
1997, the advisory fees were $79,201 and $22,333, respectively. For
the fiscal year ended December 31, 1997, Janus Capital waived $2,184.
The Advisory Agreement is dated July 1, 1997 and will continue in
effect until July 1, 2001, and thereafter from year to year so long as
such continuance is approved annually by a majority of the Portfolio's
Trustees who are not parties to the Advisory Agreement or interested
persons of any such party, and by either a majority of the outstanding
voting shares or the Trustees. The Advisory Agreement i) may be
terminated without the payment of any penalty by the Portfolio or
Janus Capital on 60 days' written notice; ii) terminates automatically
in the event of its assignment; and iii) generally, may not be amended
without the approval by vote of a majority of the Trustees, including
the Trustees who are not interested persons of the Portfolio or Janus
Capital and, to the extent required by the 1940 Act, the vote of a
majority of the outstanding voting securities of the Portfolio.
Janus Capital also 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 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
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the SEC, the Portfolios 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"), indirectly through its
wholly owned subsidiary, Stilwell Financial Inc., owns approximately
81% of the outstanding voting stock of Janus Capital. 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 Janus Capital's voting stock and,
by agreement with KCSI, selects at least a majority of Janus Capital's
Board.
KCSI has announced its intention to separate its transportation and
financial services businesses. KCSI anticipates the separation to be
completed in the first half of 2000.
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 the Portfolio's Code of Ethics ("Code"). The Portfolio's
Code of Ethics is on file with and available from the SEC through the
SEC Web site at www.sec.gov. The Code applies to Directors/Trustees of
Janus Capital and the Portfolios and employees of Janus Capital and
the Trust, and requires investment personnel and officers of Janus
Capital, inside Directors/Trustees of Janus Capital and the Portfolio
and other certain designated employees deemed to have access to
current trading information to pre-clear all transactions in
securities not otherwise exempt under the Code. Requests for trading
authorization will be denied when, among other reasons, the proposed
personal transaction would be contrary to the provisions of the Code
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 Code
subjects such personnel, to various trading restrictions and reporting
obligations. All reportable transactions are required to be reviewed
for compliance with the Code. Those persons also may be required under
certain circumstances to forfeit their profits made from personal
trading.
The provisions of the Code are administered by and subject to
exceptions authorized by Janus Capital.
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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 annual 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."
14
<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, 1999, December 31, 1998 and
December 31, 1997, 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.
15
<PAGE>
As of December 31, 1999, 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 Morgan Stanley, Dean Witter, Discover & Co. $11,000,000
</TABLE>
16
<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.
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 Vice President*#
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Trustee and 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. Formerly Executive Vice President and
Co-Manager of Janus Venture Fund. Formerly Executive Vice President
and Portfolio Manager of Balanced Portfolio and Janus Balanced Fund.
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, CO.
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).
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Executive Committee.
<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, CO. Principal, Phillips-Smith Retail
Group, Colorado Springs, Colorado (a venture capital firm).
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
to 1996), Director of Run Technologies, Inc., a software development
firm, San Carlos, CA.
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.
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., Janus Capital International, Ltd. and Janus
International (UK) Limited. Director of Janus World Funds Plc.
Formerly (1997 to 1998), Executive Vice President and General Counsel
of Prudential Investments Fund Management LLC, Newark, NJ. Formerly
(1994 to 1997), Vice President and General Counsel of Prudential
Retirement Services, Newark, NJ.
- --------------------------------------------------------------------------------
*Interested person of the Trust and of Janus Capital.
#Member of the Executive Committee.
<PAGE>
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. and Janus International
(UK) Limited. Formerly (1992-1996), Treasurer of Janus Investment Fund
and Janus Aspen Series.
Kelley Abbott Howes, Age 34 - Vice President and Secretary*
100 Fillmore Street
Denver, CO 80206-4928
- --------------------------------------------------------------------------------
Vice President and Secretary of Janus Investment Fund. Vice President
and Assistant General Counsel of Janus Capital. Vice President of
Janus Distributors, Inc. Assistant Vice President of Janus Service
Corporation.
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.
- --------------------------------------------------------------------------------
*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.
<PAGE>
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.
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 Portfolios for from the Janus Funds for
fiscal year ended calendar year ended
Name of Person, Position December 31, 1999 December 31, 1999**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas H. Bailey, Chairman and Trustee* $ -- $ --
James P. Craig, III, Trustee* $ -- $ --
William D. Stewart, Trustee $ 47 $107,333
Gary O. Loo, Trustee $101 $107,333
Dennis B. Mullen, Trustee $127 $107,333
Martin H. Waldinger, Trustee $ 47 $107,333
James T. Rothe, Trustee $101 $107,333
</TABLE>
* An interested person of the Portfolio and of Janus Capital. Compensated by
Janus Capital and not the Portfolio.
** As of December 31, 1999, Janus Funds consisted of two registered investment
companies comprised of a total of 32 funds.
20
<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.
21
<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 December 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.
22
<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
some or all of its shares in kind under unusual circumstances, in
order to protect the interests of remaining shareholders, or to
accommodate a request by a particular shareholder that does not
adversely affect the interest of the remaining shareholders by
delivery of securities selected from its assets at its discretion.
However, the Portfolio is governed by Rule 18f-1 under the 1940 Act,
which requires the Portfolio to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Portfolio
during any 90-day period for any one shareholder. Should redemptions
by any shareholder exceed such limitation, their Portfolio will have
the option of redeeming the excess in cash or in kind. If shares are
redeemed in kind, the redeeming shareholder might incur brokerage
costs in converting the assets to cash. The method of valuing
securities used to make redemptions in kind will be the same as the
method of valuing portfolio securities described under "Determination
of Net Asset Value" and such valuation will be made as of the same
time the redemption price is determined.
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.
23
<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.
24
<PAGE>
Principal shareholders
The officers and Trustees of the Portfolio cannot directly own Shares
of the Portfolio without purchasing an insurance contract through one
of the participating insurance companies or through a qualified plan.
As a result, such officers and Trustees as a group own less than 1% of
the outstanding Shares of the Portfolio. As of April 3, 2000, all of
the outstanding Shares of the Portfolio were owned by certain
insurance company separate accounts, qualified plans and by Janus
Capital, which provided seed capital for the Portfolio. None of the
separate accounts or qualified plans owned more than 5% of the Shares
of the Portfolio.
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 fourteen series of
shares, known as "portfolios," in two or 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 two or 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 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 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
26
<PAGE>
remaining Trustees, subject to the 1940 Act. Therefore, no annual or
regular meetings of shareholders normally will be held, unless
otherwise required by the Trust Instrument or the 1940 Act. Subject to
the foregoing, shareholders have the power to vote to elect or remove
Trustees, to terminate or reorganize the Portfolio, to amend the Trust
Instrument, to bring certain derivative actions and on any other
matters on which a shareholder vote is required by the 1940 Act, the
Trust Instrument, the Trust's Bylaws or the Trustees.
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 ACCOUNTANTS
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 the period ended
December 31, 1999 are hereby incorporated into this Statement of
Additional Information by reference to the Portfolio's Annual Report
dated December 31, 1999 (with the exception of Service Shares which
commenced operations on December 31, 1999). A copy of such report
accompanies this Statement of Additional Information.
DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT AND SEMIANNUAL REPORT
Schedules of Investments as of December 31, 1999
Statement of Operations for the period ended December 31, 1999
Statement of Assets and Liabilities as of December 31, 1999
Statement of Changes in Net Assets for the periods ended December 31,
1999
Financial Highlights for each of the periods indicated
Notes to Financial Statements
Report of Independent Accountants dated December 31, 1999
The portions of the Annual Report that are not specifically listed
above are not incorporated by reference into this Statement of
Additional Information and are not part of the Registration Statement.
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.
FITCHIBCA
<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>
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
31
<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.
32
<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.
33
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[JANUS LOGO]
1-800-525-0020
100 Fillmore Street
Denver, Colorado 80206-4928
janus.com
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 incorporated herein by reference to
Exhibit 1(d) to Post-Effective Amendment No. 20,
filed on October 26, 1999.
(e) Amendment to Trust Instrument dated December 14,
1999 is incorporated herein by reference to
Exhibit 1(e) to Post-Effective Amendment No. 23,
filed on February 16, 2000.
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)
<PAGE>
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) 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.
(h) Investment Advisory Agreement for Global Life
Sciences Portfolio is incorporated herein by
reference to Exhibit 4(h) to Post-Effective
Amendment No. 22, filed on January 14, 2000.
(i) Investment Advisory Agreement for Global
Technology Portfolio is incorporated herein by
reference to Exhibit 4(i) to Post-Effective
Amendment No. 22, filed on January 14, 2000.
(j) Investment Advisory Agreement for Strategic Value
Portfolio is incorporated herein by reference to
Exhibit 4(j) to Post-Effective Amendment 23, filed
on February 16, 2000.
(k) Amendment to Investment Advisory Agreement for
Growth Portfolio, dated May 1, 2000, is filed
herein as Exhibit 4(k).
<PAGE>
(l) Amendment to Investment Advisory Agreement for
Aggressive Growth Portfolio, dated May 1, 2000, is
filed herein as Exhibit 4(l).
(m) Amendment to Investment Advisory Agreement for
Capital Appreciation Portfolio, dated May 1, 2000,
is filed herein as Exhibit 4(m).
(n) Amendment to Investment Advisory Agreement for
Balanced Portfolio, dated May 1, 2000, is filed
herein as Exhibit 4(n).
(o) Amendment to Investment Advisory Agreement for
Equity Income Portfolio, dated May 1, 2000, is
filed herein as Exhibit 4(o).
(p) Amendment to Investment Advisory Agreement for
Growth and Income Portfolio, dated May 1, 2000, is
filed herein as Exhibit 4(p).
(q) Amendment to Investment Advisory Agreement for
International Growth Portfolio, dated May 1, 2000,
is filed herein as Exhibit 4(q).
(r) Amendment to Investment Advisory Agreement for
Worldwide Growth Portfolio, dated May 1, 2000, is
filed herein as Exhibit 4(r).
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 incorporated herein by reference to
Post-Effective Amendment No. 20, filed on October
26, 1999.
(e) Form of Distribution and Shareholder Services
<PAGE>
Agreement for Service Shares for Qualified Plans
is incorporated herein by reference to
Post-Effective Amendment No. 20, filed on
October 26, 1999.
(f) Form of Distribution and Shareholder Services
Agreement for Service Shares for Insurance
Companies is incorporated herein by reference to
Post-Effective Amendment No. 20, filed on October
26, 1999.
Exhibit 6 Not Applicable
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.
<PAGE>
(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.
(j) Form of Letter Agreement dated December 17, 1999
regarding State Street Custodian Contract is
incorporated herein by reference to Exhibit 7(j)
to Post-Effective Amendment No. 22, filed on
January 14, 2000.
(k) Amendment to Custodian Contract, dated April 3,
2000, is filed herein as Exhibit 7(k).
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
<PAGE>
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.
(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 is incorporated 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
incorporated herein by reference to Exhibit 9(i)
to Post-Effective 20, filed on October 26, 1999.
(j) Opinion and Consent of Fund Counsel with respect
to Global Life Sciences Portfolio and Global
Technology Portfolio for Service Shares and
Institutional Shares is incorporated herein by
reference to Exhibit 9(j) to Post-Effective
Amendment No. 21, filed on November 1, 1999.
(k) Opinion and Consent of Fund Counsel with respect
to Strategic Value Portfolio for Service Shares
and Institutional Shares is incorporated herein by
reference to Exhibit 9(k) to Post-Effective
Amendment No. 23, filed on February 16, 2000.
<PAGE>
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 between Janus
Distributors, Inc. and Janus Aspen Series is
incorporated herein by reference to Exhibit 13(b)
to Post-Effective Amendment No. 20, filed on
October 26, 1999.
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) Amendment to Rule 18f-3 Plan dated June 15, 1999
is incorporated herein by reference to Exhibit 15
to Post-Effective Amendment No. 19, filed on
June 21, 1999.
(c) Amendment to Rule 18f-3 Plan dated September 14,
1999 is incorporated herein by reference to
Exhibit 15(c) to Post-Effective Amendment No. 20,
filed on October 26, 1999.
Exhibit 16 Code of Ethics are filed herein as Exhibit 16.
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
<PAGE>
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; Stephen L. Stieneker, Vice
President of Public Affairs of Janus Capital Corporation; and David Kowalski,
Vice President and Chief Compliance Officer of Janus Capital Corporation. Mr.
Michael E. Herman, a director of Janus Capital Corporation, is Chairman of the
Finance Committee (1990 to present) of Ewing Marion Kauffman Foundation, 4900
Oak, Kansas City, Missouri 64112. Mr. Michael N. Stolper, a director of Janus
Capital Corporation, is President of Stolper & Company, Inc., 525 "B" Street,
Suite 1080, San Diego, California 92101, an investment performance consultant.
Mr. Thomas A. McDonnell, a director of Janus Capital Corporation, is President,
Chief Executive Officer and a Director of DST Systems, Inc., 333 West 11th
Street, 5th Floor, Kansas City, Missouri 64105, provider of data processing and
recordkeeping services for various mutual funds, and is Executive Vice President
and a director of Kansas City Southern Industries, Inc., 114 W. 11th Street,
Kansas City, Missouri 64105, a publicly traded holding company whose primary
subsidiaries are engaged in transportation 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.
<PAGE>
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 Marjorie 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 certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933, and the
Trust 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 14th of April, 2000.
JANUS ASPEN SERIES
By: /s/ Thomas H. Bailey
Thomas H. Bailey, President
Janus Aspen Series is organized under a Trust Instrument dated May 19,
1993. The obligations of the Registrant hereunder are not binding upon any of
the Trustees, shareholders, nominees, officers, agents or employees of the
Registrant personally, but bind only the trust property of the Registrant, as
provided in the Trust Instrument. The execution of this Amendment to the
Registration Statement has been authorized by the Trustees of the Registrant and
this Amendment to the Registration Statement has been signed by an authorized
officer of the Registrant, acting as such, and neither such authorization by
such Trustees nor such execution by such officer shall be deemed to have been
made by any of them personally, but shall bind only the trust property of the
Registrant as provided in its Trust Instrument.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Thomas H. Bailey President April 14, 2000
Thomas H. Bailey (Principal Executive
Officer) and Trustee
/s/ Steven R. Goodbarn Vice President and April 14, 2000
Steven R. Goodbarn Chief Financial Officer
(Principal Financial Officer)
/s/ Glenn P. O'Flaherty Treasurer and Chief April 14, 2000
Glenn P. O'Flaherty Accounting Officer
(Principal Accounting Officer)
<PAGE>
/s/ James P. Craig, III Trustee April 14, 2000
James P. Craig, III
GARY O. LOO* Trustee April 14, 2000
Gary O. Loo
Dennis B. Mullen* Trustee April 14, 2000
Dennis B. Mullen
James T. Rothe* Trustee April 14, 2000
James T. Rothe
William D. Stewart* Trustee April 14, 2000
William D. Stewart
Martin H. Waldinger* Trustee April 14, 2000
Martin H. Waldinger
/s/ Steven R. Goodbarn
*By Steven R. Goodbarn
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE
Exhibit 4(k) Amendment to Investment Advisory
Agreement for Growth Portfolio
Exhibit 4(l) Amendment to Investment Advisory
Agreement for Aggressive Growth
Portfolio
Exhibit 4(m) Amendment to Investment Advisory
Agreement for Capital Appreciation
Portfolio
Exhibit 4(n) Amendment to Investment Advisory
Agreement for Balanced Portfolio
Exhibit 4(o) Amendment to Investment Advisory
Agreement for Equity Income Portfolio
Exhibit 4(p) Amendment to Investment Advisory
Agreement for Growth and Income
Portfolio
Exhibit 4(q) Amendment to Investment Advisory
Agreement for International Growth
Portfolio
Exhibit 4(r) Amendment to Investment Advisory
Agreement for Worldwide Growth Portfolio
Exhibit 7(k) Amendment to Custodian Contract
Exhibit 10 Consent of PricewaterhouseCoopers LLP
Exhibit 16 Code of Ethics
Exhibit 4(k)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Growth Portfolio
(the "Fund"), and Janus Capital Corporation, a Colorado corporation ("JCC"). The
Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(l)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Aggressive Growth
Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado corporation
("JCC"). The Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(m)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Aggressive Growth
Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado corporation
("JCC"). The Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(n)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Balanced Portfolio
(the "Fund"), and Janus Capital Corporation, a Colorado corporation ("JCC"). The
Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(o)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Equity Income
Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado corporation
("JCC"). The Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(p)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Growth and Income
Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado corporation
("JCC"). The Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated September 9, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(q)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of International
Growth Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado
corporation ("JCC"). The Trust and JCC are collectively referred to herein as
the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 4(r)
AMENDMENT
THIS AMENDMENT IS made as of May 1, 2000, by and between Janus Aspen
Series, a Delaware business trust (the "Trust") on behalf of Worldwide Growth
Portfolio (the "Fund"), and Janus Capital Corporation, a Colorado corporation
("JCC"). The Trust and JCC are collectively referred to herein as the "Parties."
WHEREAS, the Trust and JCC are parties to an Investment Advisory Agreement
dated July 1, 1997 (hereinafter referred to as the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement as set forth in greater
detail below; and
WHEREAS, pursuant to Section 12 of the Agreement, any amendment to the
Agreement is subject to the approval by (i) a majority of the Trustees,
including a majority of the Trustees who are not interested persons (as that
phrase is defined in Section 2(a)(19) of the 1940 Act) of JCC and, if required
by applicable law, (ii) by the affirmative vote of a majority of the outstanding
voting securities of the Fund (as that phrase is defined in Section 2(a)(42) of
the 1940 Act); and
WHEREAS, the Parties have obtained Trustee approval as set forth above and
the Parties agree that a shareholder vote is not required to amend the
Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, the Parties agree to amend the Agreement as follows:
1. Section 4 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"4. Compensation. The Trust shall pay to JCC for its investment
advisory services a fee, calculated and payable for each day that this
Agreement is in effect, of 1/365 of 0.65% of the daily closing net
asset value of the Fund (1/366 of 0.65% of the daily closing net asset
value of the Fund in a leap year)."
2. The Parties acknowledge that the Agreement, as amended, remains in full
force and effect as of the date of this Amendment, and that this Amendment,
together with the Agreement, contain the entire understanding and the full
and complete agreement of the Parties and supercedes and replaces any prior
understandings and agreements among the Parties respecting the subject
matter hereof.
3. This Amendment to the Agreement may be contemporaneously executed in one
or more counterparts, each of which shall be deemed an original but all of
which together
<PAGE>
shall constitute one and the same instrument.
4. Each of the undersigned is duly authorized to sign this Amendment on
behalf of the respective Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment to the
Agreement as of the date first above written.
JANUS CAPITAL CORPORATION
By:
Name: Steven R. Goodbarn
Title: Vice President
JANUS ASPEN SERIES
By :
Name: Thomas H. Bailey
Title: President
Exhibit 7(k)
AMENDMENT TO CUSTODIAN CONTRACT
Amendment dated April 3, 2000, to the custody contract, dated September 13,
1993, as amended, by and between State Street Bank and Trust Company (the
"Custodian") and Janus Aspen Series, on behalf of each of its Portfolios (each,
a "Fund") (the "Custody Contract").
In consideration of the promises and covenants contained herein, the
Custodian and the Fund hereby agree to amend and replace Article 5 of the
Custody Contract as follows:
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed or
initialed by two or more persons as the Board of Trustees shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believed them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices; provided that the Fund has followed
any security procedures agreed to from time to time by Fund and the Custodian,
including, but not limited to, the security procedures selected by the Fund in
the Fund Transfer Agreement. For purposes of this Section, Proper Instructions
shall include instructions received by the Custodian pursuant to any multi-party
agreement which requires a segregated [deleted asset] account in accordance with
Section 2.12.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the 3rd day of April, 2000.
JANUS ASPEN SERIES
By: _______________________
Its: _______________________
STATE STREET BANK AND TRUST COMPANY
By: _________________________
Its: _________________________
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 2, 2000, relating to the
financial statements and financial highlights which appear in the December 31,
1999 Annual Report to Shareholders of the Janus Aspen Series, which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
April 13, 2000
Exhibit 16
[GRAPHIC OMITTED][GRAPHIC OMITTED]
JANUS ETHICS RULES
"ACT IN THE BEST INTEREST OF OUR INVESTORSCEARN THEIR
CONFIDENCE WITH EVERY ACTION"
________________________________________________________________________________
CODE OF ETHICS
INSIDER TRADING POLICY
GIFT POLICY
OUTSIDE EMPLOYMENT POLICY
________________________________________________________________________________
LAST REVISED MARCH 1, 2000
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
DEFINITIONS....................................................................1
INTRODUCTION...................................................................4
CAUTION REGARDING PERSONAL TRADING ACTIVITIES.........................4
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS........................4
CODE OF ETHICS.................................................................5
OVERVIEW..............................................................5
GENERAL PROHIBITIONS..................................................5
TRADING RESTRICTIONS..................................................6
EXCLUDED TRANSACTIONS........................................6
DISCLOSURE OF CONFLICTS......................................7
PRECLEARANCE.................................................7
TRADING BAN ON PORTFOLIO MANAGERS AND ASSISTANT PORTFOLIO
MANAGERS.....................................................8
BAN ON IPOs AND HOT ISSUES...................................8
60 DAY RULE..................................................8
BLACKOUT PERIOD..............................................8
FIFTEEN DAY RULE.............................................8
SEVEN DAY RULE...............................................9
SHORT SALES..................................................9
HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER INVESTMENTS.........9
PRECLEARANCE PROCEDURES...............................................9
GENERAL PRECLEARANCE.........................................9
PRECLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL..........10
PRECLEARANCE OF COMPANY STOCK...............................10
PRECLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS......11
FOUR DAY EFFECTIVE PERIOD...................................11
REPORTING REQUIREMENTS...............................................11
ACCOUNT STATEMENTS..........................................11
HOLDINGS REPORTS............................................12
PERSONAL SECURITIES TRANSACTION REPORTS.....................12
NON-INFLUENCE AND NON-CONTROL ACCOUNTS......................12
OTHER REQUIRED FORMS.................................................13
ACKNOWLEDGMENT OF RECEIPT FORM..............................13
ANNUAL CERTIFICATION FORM...................................13
OUTSIDE DIRECTOR/TRUSTEE REPRESENTATION FORM................13
INSIDER TRADING POLICY........................................................14
BACKGROUND INFORMATION...............................................14
WHO IS AN INSIDER?..........................................15
WHEN IS INFORMATION NONPUBLIC?..............................15
WHAT IS MATERIAL INFORMATION?...............................15
WHEN IS INFORMATION MISAPPROPRIATED?........................15
PENALTIES FOR INSIDER TRADING...............................16
WHO IS A CONTROLLING PERSON?................................16
PROCEDURES TO IMPLEMENT POLICY.......................................16
<PAGE>
IDENTIFYING MATERIAL INSIDE INFORMATION.....................16
REPORTING INSIDE INFORMATION................................17
WATCH AND RESTRICTED LISTS..................................17
PROTECTING INFORMATION......................................18
RESPONSIBILITY TO MONITOR TRANSACTIONS......................19
RECORD RETENTION............................................19
TENDER OFFERS...............................................19
GIFT POLICY...................................................................20
GIFT GIVING..........................................................20
GIFT RECEIVING.......................................................20
CUSTOMARY BUSINESS AMENITIES.........................................20
OUTSIDE EMPLOYMENT POLICY.....................................................21
PENALTY GUIDELINES............................................................22
OVERVIEW.............................................................22
PENALTY GUIDELINES ................................................22
SUPERVISORY AND COMPLIANCE PROCEDURES.........................................23
SUPERVISORY PROCEDURES...............................................23
PREVENTION OF VIOLATIONS....................................23
DETECTION OF VIOLATIONS.....................................23
COMPLIANCE PROCEDURES................................................24
REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS...............24
ANNUAL REPORTS..............................................24
RECORDS 24
INSPECTION..................................................25
CONFIDENTIALITY.............................................25
FILING OF REPORTS...........................................25
THE ETHICS COMMITTEE.................................................25
MEMBERSHIP OF THE COMMITTEE.................................25
COMMITTEE MEETINGS..........................................25
SPECIAL DISCRETION..........................................26
GENERAL INFORMATION ABOUT THE ETHICS RULES....................................27
DESIGNEES...................................................27
ENFORCEMENT.................................................27
INTERNAL USE................................................27
FORMS.........................................................................28
<PAGE>
JANUS ETHICS RULES
"ACT IN THE BEST INTEREST OF OUR INVESTORS - EARN THEIR
CONFIDENCE WITH EVERY ACTION"
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
The following definitions are used throughout this document. You are responsible
for reading and being familiar with each definition.
1. "Access Person" shall mean:
1) Any trustee, director, officer or Advisory Person of the Janus Funds
or JCC;
2) Any director or officer of JDI who in the ordinary course of his or
her business makes, participates in or obtains information regarding
the purchase or sale of securities for the Janus Funds or for the
advisory clients or whose functions or duties as part of the ordinary
course of his or her business relate to the making of any
recommendation to the Janus Funds or advisory clients regarding the
purchase or sale of securities; and
3) Any other persons designated by the Ethics Committee as having access
to current trading information.
2. "Advisory Person" shall mean:
1) ANY EMPLOYEE OF THE JANUS FUNDS OR JCC (OR OF ANY COMPANY IN A CONTROL
relationship to the Janus Funds or JCC) who in connection with his or
her regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of a security by the Funds
or for the account of advisory clients, or whose functions relate to
the making of any recommendations with respect to such purchases and
sales; and
2) Any natural person in a control relationship to the Funds or JCC who
obtains information concerning recommendations made to the Funds or
for the account of Clients with regard to the purchase or sale of a
security.
3. "Beneficial Ownership" shall be interpreted in the same manner as it would
be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in
determining whether a person is subject to the provisions of Section 16
except that the determination of direct or indirect Beneficial Ownership
shall apply to all Covered Securities which an Access Person has or
acquires. For example, in addition to a person's own accounts the term
"Beneficial Ownership" encompasses securities held in the name of a spouse
or equivalent domestic partnership, minor children, a relative sharing your
home, or certain trusts under which you or a related party is a
beneficiary, or held under other arrangements indicating a sharing of
financial interest.
4. "Company Stock" is any stock or option issued by Janus, Stilwell Financial,
Inc. ("Stilwell") or Kansas City Southern Industries, Inc. ("KCSI").
1
<PAGE>
5. "Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the 1940 Act.
6. "Covered Persons" are all Directors, Trustees, officers, and full-time,
part-time or temporary employees of Janus, and persons working at Janus on
a contract basis.
7. "Covered Securities" generally include all securities (including Company
Stock), whether publicly or privately traded, and any option, future,
forward contract or other obligation involving a security or index thereof,
including an instrument whose value is derived or based on any of the above
(a "derivative"). The term Covered Security includes any separate security,
which is convertible into or exchangeable for, or which confers a right to
purchase such security. The following investments are not Covered
Securities:
o shares of registered open-end investment companies (e.g., mutual
funds);
o direct obligations of the U.S. government (e.g., Treasury securities),
or any derivative thereof;
o securities representing a limited partnership interest in a real
estate limited partnership;
o high-quality money market instruments, such as certificates of
deposit, bankers acceptances, repurchase agreements, commercial paper,
and U.S. government agency obligations;
o insurance contracts, including life insurance or annuity contracts;
o direct investments in real estate, business franchises or similar
ventures; and
o physical commodities (including foreign currencies), or any
derivatives thereof.
8. "Designated Compliance Representatives" are David Kowalski and Ernie
Overholt or their designee(s).
9. "Designated Legal Representatives" are Bonnie Howe and Heidi Walter or
their designee(s).
10. "Designated Trading Operations Representatives" are Lesa Finney, John
Porro, and Mark Farrell.
11. "Directors" are directors of JCC.
12. "Executive Committee" is comprised of Thomas Bailey, Jim Craig, Thomas
Early, Steve Goodbarn, Margie Hurd, and Mark Whiston.
13. "Executive Investment Committee" is comprised of Jim Craig, Jim Goff, Helen
Hayes, Warren Lammert, and Scott Schoelzel.
14. "Ethics Committee" is comprised of Thomas Early, Steve Goodbarn, David
Kowalski and Ernie Overholt.
15. "Initial Public Offering" means an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13
or 15(d) of the Securities Exchange Act of 1934.
16. "Inside Trustees and Directors" are Trustees and Directors who are also
employed by Janus.
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17. "Investment Personnel" shall mean (i) a person who makes decisions
regarding the purchase or sale of securities by or on behalf of the Janus
Funds or advisory clients and any person such as an analyst or trader who
directly assists in the process, and (ii) any natural person who controls
the Janus Funds or JCC and who obtains information concerning
recommendations made to the Funds regarding the purchase or sale of Covered
Securities by the Funds.
18. "Janus" is Janus Investment Fund, Janus Aspen Series, Janus Capital
Corporation, Janus Service Corporation, Janus Distributors, Inc., Janus
Capital International Ltd., Janus International (UK) Ltd., Janus Capital
Trust Manager Ltd., Janus Universal Funds, and Janus World Funds Plc.
19. "Janus Funds" are Janus Investment Fund, Janus Aspen Series, Janus
Universal Funds, and Janus World Funds Plc.
20. "JCC" is Janus Capital Corporation, Janus Capital International Ltd., Janus
International (UK) Ltd. and Janus Capital Trust Manager Ltd.
21. "JDI" is Janus Distributors, Inc.
22. "JDI's Operations Manager" is Dana Stephens and/or her designee(s).
23. "Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or
pursuant to rule 504, rule 505 or rule 506 thereunder.
24. "NASD" is the National Association of Securities Dealers, Inc.
25. "Non-Access Person" is any person that is not an Access Person.
26. "Outside Directors" are Directors who are not employed by Janus.
27. "Outside Trustees" are Trustees who are not "interested persons" of the
Janus Funds within the meaning of Section 2(a)(9) of the 1940 Act.
28. "Registered Persons" are persons registered with the NASD by JDI.
29. "Security Held or to be Acquired" means any Covered Security which, within
the most recent 15 days (i) is or has been held by the Janus Funds; or (ii)
is being or has been considered by the Janus Funds or JCC for purchase.
30. "SEC" is Securities and Exchange Commission.
31. "Trustees" are trustees of Janus Investment Fund and Janus Aspen Series.
These definitions may be updated from time to time to reflect changes in
personnel.
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INTRODUCTION
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These Ethics Rules ("Rules") apply to all Covered Persons. The Rules apply
to transactions for your personal accounts and any other accounts you
Beneficially Own. You may be deemed the beneficial owner of any account in which
you have a direct or indirect financial interest. Such accounts include, among
others, accounts held in the name of your spouse or equivalent domestic
partnership, your minor children, a relative sharing your home, or certain
trusts under which you or such persons are a beneficiary.
The Rules are intended to ensure that you (i) at all times place first the
interests of the Janus Funds, investment companies for which Janus serves as
subadviser, and other advisory clients ("Clients"); (ii) conduct all personal
trading consistent with the Rules and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of your position of trust and
responsibility; and (iii) not use any material nonpublic information in
securities trading. The Rules also establish policies regarding other matters,
such as outside employment and the giving or receiving of gifts.
You are required to read and retain these Rules and to sign and return the
attached Acknowledgment of Receipt Form to Compliance upon commencement of
employment or other services. On an annual basis thereafter, you will be
required to complete an Annual Certification Form. The Annual Certification Form
confirms that (i) you have received, read and asked any questions necessary to
understand the Rules; (ii) you agree to conduct yourself in accordance with the
Rules; and (iii) you have complied with the Rules during such time as you have
been associated with Janus. Depending on your status, you may be required to
submit additional reports and/or obtain clearances as discussed more fully
below.
Unless otherwise defined, all capitalized terms shall have the same meaning
as set forth in the Definitions section.
CAUTION REGARDING PERSONAL TRADING ACTIVITIES
Certain personal trading activities may be risky not only because of the
nature of the transactions, but also because action necessary to close out a
position may become prohibited for some Covered Persons while the position
remains open. For example, you may not be able to close out short sales and
transactions in derivatives. Furthermore, if JCC becomes aware of material
nonpublic information, or if a Client is active in a given security, some
Covered Persons may find themselves "frozen" in a position. JCC will not bear
any losses in personal accounts resulting from the application of these Rules.
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS
As a regular business practice, JCC attempts to keep Directors and Trustees
informed with respect to its investment activities through reports and other
information provided to them in connection with board meetings and other events.
In addition, Janus personnel are encouraged to respond to inquiries from
Directors and Trustees, particularly as they relate to general strategy
considerations or economic or market conditions affecting Janus. However, it is
JCC's policy not to communicate specific trading information and/or advice on
specific issues to Outside Directors and Outside Trustees (i.e., no information
should be given on securities for which current activity is being considered for
Clients). Any pattern of repeated requests by such Directors or Trustees should
be reported to the Chief Compliance Officer or the Compliance Manager.
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CODE OF ETHICS
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OVERVIEW
In general, it is unlawful for persons affiliated with investment
companies, their principal underwriters or their investment advisers to engage
in personal transactions in securities held or to be acquired by a registered
investment company, if such personal transactions are made in contravention of
rules which the SEC has adopted to prevent fraudulent, deceptive and
manipulative practices. Such rules require each registered investment company,
investment adviser and principal underwriter to adopt its own written code of
ethics containing provisions reasonably necessary to prevent its employees from
engaging in such conduct, and to maintain records, use reasonable diligence, and
institute such procedures as are reasonably necessary to prevent violations of
such code. This Code of Ethics ("Code") and information reported hereunder will
enable Janus to fulfill these requirements.
GENERAL PROHIBITIONS
The following activities are prohibited for applicable Covered Persons
(remember, if you work at Janus full-time, part-time, temporarily or on a
contract basis, or you are a Trustee or Director, you are a Covered Person).
Persons who violate any prohibition may be required to disgorge any profits
realized in connection with such violation to a charitable organization selected
by the Ethics Committee and may be subject to other sanctions imposed by the
Ethics Committee, as outlined in the Penalty Guidelines.
1. Covered Persons may not cause a Client to take action, or to fail to take
action, for personal benefit, rather than to benefit such Client. For
example, a Covered Person would violate this Code by causing a Client to
purchase a security owned by the Covered Person for the purpose of
supporting or increasing the price of that security or by causing a Client
to refrain from selling a security in an attempt to protect a personal
investment, such as an option on that security.
2. Covered Persons may not use knowledge of portfolio transactions made or
contemplated for Clients to profit, or cause others to profit, by the
market effect of such transactions.
3. Covered Persons may not disclose current portfolio transactions made or
contemplated for Clients as well as any other nonpublic information to
anyone outside of Janus.
4. Covered Persons may not engage in fraudulent conduct in connection with the
purchase or sale of a Security Held or to be Acquired by a Client,
including without limitation:
1) Employing any device, scheme or artifice to defraud any Client;
2) Making to any Client any untrue statement of material fact or omitting
to state to any Client a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
3) Engaging in any act, practice or course of business which operates or
would operate as a fraud or deceit upon any Client;
4) Engaging in any manipulative practice with respect to any Client; or
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5) Investing in derivatives to evade the restrictions of this Code.
Accordingly, individuals may not use derivatives to take positions in
securities that would be otherwise prohibited by the Code if the
positions were taken directly.
5. Investment Personnel may not serve on the board of directors of a publicly
traded company without prior written authorization from the Ethics
Committee. No such service shall be approved without a finding by the
Ethics Committee that the board service would not be inconsistent with the
interests of Clients. If board service is authorized by the Ethics
Committee, the Investment Personnel serving as director normally should be
isolated from those making investment decisions with respect to the company
involved through "Chinese Walls" or other procedures.
TRADING RESTRICTIONS
The trading restrictions of the Code apply to all direct or indirect
acquisitions or dispositions of Covered Securities, whether by purchase, sale,
tender offers, stock purchase plan, gift, inheritance, or otherwise. Unless
otherwise noted, the following trading restrictions are applicable to any
transaction in a Covered Security Beneficially Owned by a Covered Person.
Outside Directors and Outside Trustees are exempt from certain trading
restrictions because of their limited access to current information regarding
Client investments.
Any disgorgement of profits required under any of the following provisions
shall be donated to a charitable organization selected by the Ethics Committee,
as outlined in the Penalty Guidelines. However, if disgorgement is required as a
result of trades by a portfolio manager that conflicted with that manager's own
Clients, disgorgement proceeds shall be paid directly to such Clients. If
disgorgement is required under more than one provision, the Ethics Committee
shall determine in its sole discretion the provision that shall control.1
EXCLUDED TRANSACTIONS
Some or all of the trading restrictions listed below do not apply to the
following transactions; however, these transactions must still be reported to
Compliance (see Reporting Requirements):
o Tender offer transactions are exempt from all trading restrictions
except preclearance.
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1 Unless otherwise noted, restrictions on personal transactions apply
to transactions involving Covered Securities, including any derivative thereof.
When determining the amount of disgorgement required with respect to a
derivative, consideration will be given to price differences in both the
derivative and the underlying securities, with the lesser amount being used for
purposes of computing disgorgement. For example, in determining whether
reimbursement is required when the applicable personal trade is in a derivative
and the Client transaction is in the underlying security, the amount shall be
calculated using the lesser of (a) the difference between the price paid or
received for the derivative and the closing bid or ask price (as appropriate)
for the derivative on the date of the Client transaction, or (b) the difference
between the last sale price, or the last bid or ask price (as appropriate) of
the underlying security on the date of the derivative transaction, and the price
received or paid by the Client for the underlying security. Neither preclearance
nor disgorgement shall be required if such person=s transaction is to close,
sell or exercise a derivative within five days of its expiration.
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o The acquisition of securities through stock purchase plans are exempt
from all trading restrictions except preclearance, the trading ban on
portfolio managers and assistant portfolio managers, and the seven day
rule. (Note: the sales of securities acquired through a stock purchase
plan are subject to all of the trading restrictions of the Code).
o The acquisition of securities through stock dividends, automatic
dividend reinvestment plans, stock splits, reverse stock splits,
mergers, consolidations, spin-offs, or other similar corporate
reorganizations or distributions generally applicable to all holders
of the same class of such securities are exempt from all trading
restrictions. The acquisition of securities through the EXERCISE OF
RIGHTS ISSUED BY AN ISSUER PRO RATA to all holders of a class of
securities, to the extent the rights were acquired in the issue are
exempt from all trading restrictions.
o Non-discretionary transactions in Company Stock (e.g., the acquisition
of securities through Stilwell or KCSI's Employee Stock Purchase Plan
("ESPP") or the receipt of options in Company Stock as part of a
compensation or benefit plan) are exempt from all trading
restrictions. Discretionary transactions in Company Stock issued by
JCC are exempt from all trading restrictions. Discretionary
transactions in Company Stock issued by Stilwell or KCSI (e.g.,
exercising options or selling ESPP Stock) are exempt from all trading
restrictions except preclearance (See procedures for Preclearance of
Company Stock).
o The acquisition of securities by gift or inheritance is exempt from
all trading restrictions. (Note: the sales of securities acquired by
gift or inheritance ARE subject to all trading restrictions of the
Code).
o Transactions in options on and securities based on the following
indexes are exempt from all trading restrictions: S&P 500 Index, S&P
MidCap 400 Index, S&P 100 Index, FTSE 100 Index or Nikkei 225 Index.
DISCLOSURE OF CONFLICTS
If an Investment Person is planning to invest or make a recommendation to
invest in a security for a Client, and such person has a material interest in
the security, such person must first disclose such interest to his or her
manager or the Chief Investment Officer. The manager or Chief Investment Office
shall conduct an independent review of the recommendation to purchase the
security for Clients. The manager or Chief Investment Officer may review the
recommendation only if he or she has no material interest in the security. A
material interest is Beneficial Ownership of any security (including
derivatives, options, warrants or rights), offices, directorships, significant
contracts, or interests or relationships that are likely to affect such person's
judgment.
PRECLEARANCE
Access Persons (except Outside Directors and Outside Trustees) must obtain
preclearance prior to engaging in any personal transaction in Covered
Securities. (See Preclearance Procedures below).
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TRADING BAN ON PORTFOLIO MANAGERS AND ASSISTANT PORTFOLIO MANAGERS
Portfolio managers and their assistants are prohibited from trading
personally in Covered Securities. However, the following types of transactions
are exempt from this policy, but are subject to all applicable provisions of the
Rules, including preclearance:
o Purchases or sales of Company Stock;
o The sale of any security that is not held by any Client; and
o The sale of any security in order to raise capital to fund a
significant life event. For example, purchasing a home or automobile,
or paying medical or education expenses.
BAN ON IPOs AND HOT ISSUES
Covered Persons (except Outside Directors and Outside Trustees) may not
purchase securities in an initial public offering or in a secondary offering
that constitutes a "hot issue" as defined in NASD rules. Such securities may be
purchased or received, however, where the individual has an existing right to
purchase the security based on his or her status as an investor, policyholder or
depositor of the issuer. In addition, securities issued in reorganizations are
also outside the scope of this prohibition if the transaction involves no
investment decision on the part of the Covered Person except in connection with
a shareholder vote.
60 DAY RULE
Access Persons (except Outside Directors and Outside Trustees) shall
disgorge any profits realized in the purchase and sale, or sale and purchase, of
the same or equivalent Covered Securities within sixty (60) calendar days if a
Client held or traded the security during the sixty (60) calendar day period.
BLACKOUT PERIOD
No Access Person may engage in a transaction in a Covered Security when
such person knows or should have known at the time there to be pending, on
behalf of any Client, a "buy" or "sell" order in that same security. The
existence of pending orders will be checked by Compliance as part of the
Preclearance process. Preclearance may be given when any pending Client order is
completely executed or withdrawn.
FIFTEEN DAY RULE
Any Access Person (except Outside Directors and Outside Trustees) who buys
or sells a Covered Security within fifteen calendar days before such security is
bought or sold on behalf of any Client must disgorge any price advantage
realized. The price advantage shall be the favorable spread, if any, between the
price paid or received by such person and the least favorable price paid or
received by a client during such period.2 The Ethics Committee has the authority
by unanimous action to exempt any person from the fifteen-day rule if such
person is selling a security to raise capital to fund a significant life event.
For example, purchasing a home or automobile, or paying medical or education
expenses. In order for the Ethics
___________________________
2 Personal purchases are matched only against subsequent Client purchases
and personal sales are matched only against subsequent Client sales for purposes
of this restriction.
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Committee to consider such exemption, the life event must occur within thirty
(30) calendar days of the security transaction, and the person must provide
written confirmation of the event.
SEVEN DAY RULE
Any portfolio manager or assistant portfolio manager who buys or sells a
Covered Security within seven calendar days before or after he or she trades in
that security on behalf of a Client shall disgorge any profits realized on such
transaction.
SHORT SALES
Any Access Person who sells short a Covered Security that such person knows
or should have known is held long by any Client shall disgorge any profit
realized on such transaction. This prohibition shall not apply, however, to
securities indices or derivatives thereof (such as futures contracts on the S&P
500 index). Client ownership of Covered Securities will be checked as part of
the Preclearance process.
HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER INVESTMENTS
No Access Person (except Outside Directors and Outside Trustees) may
participate in hedge funds, partnerships, investment clubs, or similar
investment vehicles, unless such person does not have any direct or indirect
influence or control over the trading. Covered Persons wishing to rely upon this
provision must submit a Certification of Non-Influence and Non-Control Form to
the Compliance Manager for approval. (See Non-Influence and Non-Control Accounts
section below.)
PRECLEARANCE PROCEDURES
Access Persons must obtain preclearance for all applicable transactions in
Covered Securities in which such person has a Beneficial Interest. A
Preclearance Form must be completed and forwarded to Compliance. Compliance
shall promptly notify the person of approval or denial of the transaction.
Notification of approval or denial of the transaction may be given verbally;
however, it shall be confirmed in writing within seventy-two (72) hours of
verbal notification. When preclearance has been approved, the person then has
four business days from and including the day of first notification to execute
the trade.
GENERAL PRECLEARANCE
General preclearance shall be obtained from an authorized person from each
of the following three groups:
o A DESIGNATED LEGAL OR COMPLIANCE REPRESENTATIVE, who will present the
personal investment to the attendees of the weekly investment meeting,
whereupon an opportunity will be given to orally object. An attendee
of the weekly investment meeting shall object to such clearance if
such person knows of a conflict with a pending Client transaction or a
transaction known by such attendee to be under consideration for a
Client. Objections to such clearance should also take into account,
among other factors, whether the investment opportunity should be
reserved for a Client. If no objections are raised, the Designated
Legal or Compliance Representative shall so indicate by signing the
Preclearance Form. Such approval shall not be required for sales of
securities not held by any Clients.
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In place of this authorization, Investment Personnel are required to
obtain approvals from all Executive Investment Committee members as
noted in the section below entitled Preclearance Requirements for
Investment Personnel.
o A DESIGNATED TRADING OPERATIONS REPRESENTATIVE, who may provide
clearance if such Representative knows at the time of the request of
no pending "buy" or "sell" order in the security on behalf of a Client
and no such trades are known by such person to be under consideration.
o The COMPLIANCE MANAGER, OR A DESIGNATED LEGAL OR COMPLIANCE
REPRESENTATIVE IF THE COMPLIANCE MANAGER IS NOT AVAILABLE, who may
provide clearance if no legal prohibitions are known by such person to
exist with respect to the proposed trade. Approvals for such clearance
should take into account, among other factors, the existence of any
Watch List or Restricted List and, to the extent reasonably
practicable, recent trading activity and holdings of Clients.
NO authorized person may preclear a transaction in which such person has a
Beneficial Interest.
PRECLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL
Trades by Investment Personnel may not be precleared by presentation at the
weekly investment meeting. Instead, Investment Personnel must obtain the
following management approvals. However, such approvals shall not be required
for sales of securities not held by any Clients:
o TRADES IN EQUITY SECURITIES require prior written approval from all
members of the Executive Investment Committee, Investment Person's
manager and either Ron Speaker or Sandy Rufenacht;
o TRADES IN DEBT SECURITIES require prior written approval from all
senior fixed income portfolio managers, either Jim Craig or two other
Executive Investment Committee members, and Investment Person's
manager.
A portfolio manager may not preclear his or her own transaction.
PRECLEARANCE OF COMPANY STOCK
Officers of Janus and certain persons designated by Compliance who wish to
make discretionary transactions in Stilwell or KCSI securities, or derivatives
thereon, must preclear such transactions. A Company Stock Preclearance Form must
be completed and forwarded to Compliance. Compliance shall promptly notify the
person of approval or denial for the transaction. Notification of approval or
denial for the transaction may be given verbally; however, it shall be confirmed
in writing within seventy-two (72) hours of verbal notification. When
preclearance has been approved, the person then has four business days from and
including the day of first notification to execute the trade.
If such persons are subject to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, trading will generally be allowed only in the
ten (10) business day period beginning seventy-two (72) hours after Stilwell or
KCSI files its quarterly results with the SEC (e.g., 10Q or 10K filing, not
earnings release). To preclear the trade, the Compliance Manager or such other
Representative shall discuss the transaction with Janus's General Counsel or
Chief Financial Officer.
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PRECLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS
Access Persons (other than Outside Directors and Outside Trustees) who wish
to participate in a tender offer or stock purchase plan must preclear such
trades only with the Compliance Manager prior to submitting notice to
participate in such tender offer or notice of participation in such stock
purchase plan to the applicable company. To preclear the trade, the Compliance
Manager shall consider all material factors relevant to a potential conflict of
interest between the Access Person and Clients. In addition, any increase of
$100 or more to a pre-existing stock purchase plan must be precleared.
FOUR DAY EFFECTIVE PERIOD
Clearances to trade will be in effect for only four trading/business days
from and including the date of the last Authorized Person's signature (which may
not be provided more than one day after the first Authorized Person's
signature). For tender offers, stock purchase plans, exercise of Company Stock
and similar transactions, the date the request is submitted to the company
processing the transaction will be considered the trade date for purposes of
this requirement. Open orders, including stop loss orders, will generally not be
allowed unless such order is expected to be completed within the four day
effective period. It is necessary to re-preclear transactions not executed
within the four day effective period.
REPORTING REQUIREMENTS
ACCOUNT STATEMENTS
ACCESS PERSONS (other than Outside Trustees) and REGISTERED PERSONS must
notify Compliance of each brokerage account in which they have a Beneficial
Interest and must arrange for their brokers or financial institutions to provide
to Compliance, on a timely basis, duplicate account statements and confirmations
showing all transactions in brokerage or commodities accounts in which they have
a Beneficial Interest. A Personal Brokerage Account Disclosure Form should be
completed for this purpose.
PLEASE NOTE THAT, EVEN IF SUCH PERSON DOES NOT TRADE COVERED SECURITIES IN
A PARTICULAR BROKERAGE OR COMMODITIES ACCOUNT (E.G., TRADING MUTUAL FUNDS IN A
SCHWAB ACCOUNT), THE REPORTING OF DUPLICATE ACCOUNT STATEMENTS AND CONFIRMATIONS
IS STILL REQUIRED. HOWEVER, IF SUCH PERSON ONLY USES A PARTICULAR BROKERAGE
ACCOUNT FOR CHECKING ACCOUNT PURPOSES, AND NOT INVESTMENT PURPOSES, HE OR SHE
MAY IN LIEU OF REPORTING DUPLICATE ACCOUNT STATEMENTS, REPORT DUPLICATE TRADE
CONFIRMATIONS AND MAKE A QUARTERLY REPRESENTATION TO COMPLIANCE INDICATING THAT
NO INVESTMENT TRANSACTIONS OCCURRED IN THE ACCOUNT DURING THE CALENDAR QUARTER.
Reporting of accounts that do not allow any trading in Covered Securities (e.g.,
a mutual fund account held directly with the fund sponsor) is not required.
Covered Persons must notify Compliance of each reportable account at the
time it is opened, and annually thereafter, including the name of the firm and
the name under which the account is carried. A Personal Brokerage Account
Disclosure Form should be completed for this purpose.
Certain transactions might not be reported through a brokerage account,
such as private placements, inheritances or gifts. In these instances, Access
Persons must report these transactions within ten (10) calendar days using a
Personal Securities Transaction Report as noted below.
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REGISTERED PERSONS ARE REMINDED THAT THEY MUST ALSO INFORM ANY BROKERAGE FIRM
WITH WHICH THEY OPEN AN ACCOUNT, AT THE TIME THE ACCOUNT IS OPENED, THAT THEY
ARE REGISTERED WITH JDI.
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NON-ACCESS PERSONS who engage in an aggregate of $25,000 or more of
transactions in Covered Securities within a calendar year must provide
Compliance with an Annual Transaction Report listing all such transactions in
all accounts in which such person has a Beneficial Interest. Compliance will
request this information annually and will spot check all or a portion of such
transactions or accounts.
HOLDINGS REPORTS
ACCESS PERSONS (other than Outside Trustees) must, within ten (10) calendar
days after becoming an Access Person, provide Compliance with a Holdings Report
which lists all Covered Securities beneficially held and any brokerage accounts
through which such securities are maintained. In addition, such persons must
provide a brief description of any positions held (e.g., director, officer,
other) with for-profit entities other than Janus. The report must contain
information current as of no more than thirty (30) calendar days from the time
the report is submitted.
PERSONAL SECURITIES TRANSACTION REPORTS
ACCESS PERSONS (other than Outside Trustees) must provide a Personal
Securities Transaction Report within ten (10) calendar days after any month end
showing all transactions in Covered Securities for which confirmations are known
by such person to not have been timely provided to Janus, and all such
transactions that are not effected in brokerage or commodities accounts,
including without limitation non-brokered private placements, and transactions
in securities that are in certificate form, which may include gifts,
inheritances, and other transactions in Covered Securities.
OUTSIDE TRUSTEES need only report a transaction in a Covered Security if
such person, at the time of that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a Trustee should have known, that,
during the fifteen-day period immediately preceding the date of his or her
personal transaction, such security was purchased or sold by, or was being
considered for purchase or sale on behalf of, any Janus Fund for which such
person acts as Trustee.
SUCH PERSONS MUST PROMPTLY COMPLY WITH ANY REQUEST OF THE COMPLIANCE MANAGER TO
PROVIDE TRANSACTION REPORTS REGARDLESS OF WHETHER THEIR BROKER HAS BEEN
INSTRUCTED TO PROVIDE DUPLICATE CONFIRMATIONS. SUCH REPORTS MAY BE REQUESTED,
FOR EXAMPLE, TO CHECK THAT ALL APPLICABLE CONFIRMATIONS ARE BEING RECEIVED OR TO
SUPPLEMENT THE REQUESTED CONFIRMATIONS WHERE A BROKER IS DIFFICULT TO WORK WITH
OR OTHERWISE FAILS TO PROVIDE DUPLICATE CONFIRMATIONS ON A TIMELY BASIS.
NON-INFLUENCE AND NON-CONTROL ACCOUNTS
The Rules shall not apply to any account, partnership, or similar
investment vehicle over which a Covered Person has no direct or indirect
influence or control. Covered Persons wishing to rely upon this provision are
required to receive approval from the Ethics Committee. In order to request such
approval, a Certification of Non-Influence and Non-Control Form must be
submitted to the Compliance Manager.
Any account beneficially owned by a Covered Person that is managed by JCC
in a discretionary capacity is not covered by these Rules so long as such person
has no direct or indirect influence or control over the account. The employment
relationship between the account-holder and the individual managing the
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account, in the absence of other facts indicating control, will not be deemed to
give such account-holder influence or control over the account.
OTHER REQUIRED FORMS
In addition to the Preclearance Form, Preclearance Form for Company Stock,
Personal Brokerage Account Disclosure Form, Holdings Report, Report of Personal
Securities Transactions, Annual Transaction Report, and Certification of
Non-Influence and Non-Control Form discussed above, the following forms
(available through Lotus Notes) must be completed if applicable to you:
ACKNOWLEDGMENT OF RECEIPT FORM
Each Covered Person must provide Compliance with an Acknowledgment of
Receipt Form within ten (10) calendar days of commencement of employment or
other services certifying that he or she has received a current copy of the
Rules and acknowledges, as a condition of employment, that he or she will comply
with the Rules in their entirety.
ANNUAL CERTIFICATION FORM
Each Covered Person must provide Compliance annually within thirty (30)
calendar days from date of request with an Annual Certification Form certifying
that he or she:
1) Has received, read and understands the Rules;
2) Has complied with the requirements of the Rules; and
3) Has disclosed or reported all open brokerage and commodities accounts,
personal holdings and personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Rules.
OUTSIDE DIRECTOR/TRUSTEE REPRESENTATION FORM
All Outside Directors and Outside Trustees must, upon commencement of
services and annually thereafter, provide Compliance with an Outside
Director/Trustee Representation Form. The Form declares that such persons agree
to refrain from trading in any securities when they are in possession of any
information regarding trading recommendations made or proposed to be made to any
Client by Janus or its officers or employees.
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INSIDER TRADING POLICY
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BACKGROUND INFORMATION
The term "insider trading" is not defined in the federal securities
statutes, but generally is used to refer to the use of material nonpublic
information to trade in securities (whether or not one is an "insider") or to
communications of material nonpublic information to others.
While the law concerning insider trading can be complex and unclear, you
should assume that the law prohibits:
o Trading by an insider, while in possession of material nonpublic
information,
o Trading by a non-insider, while in possession of material nonpublic
information, where the information was disclosed to the non-insider
(either directly or through one or more intermediaries) in violation
of an insider's duty to keep it confidential,
o Communicating material nonpublic information to others in breach of a
duty not to disclose such information, and
o Misappropriating confidential information for securities trading
purposes, in breach of a duty owed to the source of the information to
keep the information confidential.
Trading based on material nonpublic information about an issuer does not
violate this policy unless the trader (i) is an "insider" with respect to an
issuer; (ii) receives the information from an insider or from someone that the
trader knows received the information from an insider, either directly or
indirectly, or (iii) misappropriates the nonpublic information or obtains or
misuses it in breach of a duty of trust and confidence owed to the source of the
information. Accordingly, trading based on material nonpublic information about
an issuer can be, but is not necessarily, a violation of this Policy. Trading
while in possession of material nonpublic information relating to a tender offer
is prohibited under this Policy regardless of how such information was obtained.
Application of the law of insider trading to particular transactions can be
difficult, particularly if it involves a determination about trading based on
material nonpublic information. You legitimately may be uncertain about the
application of this Policy in particular circumstances. If you have any
questions regarding the application of the Policy or you have any reason to
believe that a violation of the Policy has occurred or is about to occur, you
should contact the Chief Compliance Officer or the Compliance Manager.
The following discussion is intended to help you understand the principal
concepts involved in insider trading.
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WHO IS AN INSIDER?
The concept of "insider" is broad. It includes officers, directors and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, one or more of the Janus entities may become a
temporary insider of a company it advises or for which it performs other
services. To be considered an insider, the company must expect the outsider to
keep the disclosed nonpublic information confidential and/or the relationship
must at least imply such a duty.
WHEN IS INFORMATION NONPUBLIC?
Information remains nonpublic until it has been made public. Information
becomes public when it has been effectively communicated to the marketplace,
such as by a public filing with the SEC or other governmental AGENCY, INCLUSION
IN THE DOW JONES "TAPE" OR PUBLICATION IN THE WALL STREET JOURNAL or another
publication of general circulation. Moreover, sufficient time must have passed
so that the information has been disseminated widely.
WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally means information for
which there is a substantial likelihood that a reasonable investor would
consider it important in making his or her investment decisions, or information
that is reasonably certain to have a substantial effect on the price of a
company's securities. Information that should be considered material includes,
but is not limited to: dividend changes, earnings estimates, changes in
previously released earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation problems, and
extraordinary management developments.
material information may also relate to the MARKET for a company's
securities. Information about a significant order to purchase or sell securities
may, in some contexts, be deemed material. Similarly, prepublication information
regarding reports in the financial press also may be deemed material. For
example, the Supreme Court upheld the criminal convictions of insider trading
defendants who capitalized on prepublication INFORMATION ABOUT THE WALL STREET
JOURNAL'S "Heard on the Street" column.
WHEN IS INFORMATION MISAPPROPRIATED?
The misappropriation theory prohibits trading on the basis of non-public
information by a corporate "outsider" in breach of a duty owed not to a trading
party, but to the source of confidential information. Misappropriation of
information occurs when a person obtains the non-public information through
deception or in breach of a duty of trust and loyalty to the source of the
information.
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PENALTIES FOR INSIDER TRADING
Penalties for trading on or communicating material nonpublic information
are severe, both for individuals involved in such unlawful conduct and their
employers or other controlling persons. A person can be subject to some or all
of the penalties below even if he or she does not personally benefit from the
violation.
Penalties include:
o Civil injunctions
o Treble damages
o Disgorgement of profits
o Jail sentences for up to 10 years
o Fines up to $1,000,000 (or $2,500,000 for corporations and other
entities)
o Civil penalties for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or not the
person actually benefited, and
o Civil penalties for the employer or other controlling person of up to
the greater of $1,000,000 or three times the amount of the profit
gained or loss avoided.
In addition, any violation of the law may result in serious sanctions by
Janus, including termination of employment.
WHO IS A CONTROLLING PERSON?
Included as controlling persons are Janus and its Directors, Trustees and
officers. If you are a Director, Trustee or officer, you have a duty to act to
prevent insider trading. Failure to fulfill such a duty may result in penalties
as described above.
PROCEDURES TO IMPLEMENT POLICY
The following procedures have been established to aid the Directors,
Trustees, officers and employees of Janus in avoiding insider trading, and to
aid Janus in preventing, detecting and imposing sanctions against insider
trading.
IDENTIFYING MATERIAL INSIDE INFORMATION
Before trading for yourself or others, including the Janus Funds or other
Clients, in the securities of a company about which you may have potential
inside information, ask yourself the following questions:
o To whom has this information been provided? Has the information been
effectively communicated to the marketplace?
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o Has this information been obtained from either the issuer or from
another source in breach of a duty to that source to keep the
information confidential?
o Is the information material? Is this information that an investor
would consider important in making his or her investment decisions? Is
this information that would affect the market price of the securities
if generally disclosed?
Special caution should be taken with respect to potential inside
information regarding JCC. Although JCC's shares are not publicly traded, JCC's
parent, KCSI, is a publicly traded company. KCSI owns 82% of the stock of JCC.
As a result, potential inside information regarding JCC may affect trading in
KCSI stock and should be reported pursuant to the procedures set forth below.
The following is a non-exclusive list of situations that Investment Personnel
should report immediately pursuant to the procedures below: (i) participation in
private placements; (ii) the receipt of any information from an issuer pursuant
to a confidentiality agreement; (iii) participation on or receipt of information
from a bankruptcy committee of an issuer; and (iv) receipt of information
regarding earnings or sales figures in advance of the public release of those
numbers.
REPORTING INSIDE INFORMATION
If, after consideration of the above, you believe that the information is
material and nonpublic, or if you have questions as to whether the information
is material and nonpublic, you should take the following steps:
o Do not purchase or sell the securities on behalf of yourself or
others, including Clients.
o Do not communicate the information inside or outside of Janus, other
than to the Chief Compliance Officer or the Compliance Manager.
o Immediately advise the Chief Compliance Officer or Compliance Manager
of the nature and source of such information. The Chief Compliance
Officer or Compliance Manager will review the information with the
Ethics Committee.
o Depending upon the determination made by the Ethics Committee, or by
the Chief Compliance Officer until the Committee can be convened, you
may be instructed to continue the prohibition against trading and
communication and the Compliance Manager will place the security on a
Restricted List or Watch List, as described below. Alternatively, if
it is determined that the information obtained is not material
nonpublic information, you may be allowed to trade and communicate the
information.
WATCH AND RESTRICTED LISTS
Whenever the Ethics Committee or the Chief Compliance Officer determines
that a Director, Trustee, officer or employee of Janus is in possession of
material nonpublic information with respect to a company (regardless of whether
it is currently owned by any Client) such company will either be placed on a
Watch List or on a Restricted List.
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WATCH LIST
If the security is placed on a Watch List, the flow of the information to
other Janus personnel will be restricted in order to allow such persons to
continue their ordinary investment activities. This procedure is commonly
referred to as a "Chinese Wall."
RESTRICTED LIST
If the Ethics Committee or the Chief Compliance Officer determines that
material nonpublic information is in the possession of a Director, Trustee,
officer, or employee of Janus and cannot be adequately isolated through the use
of a Chinese Wall, the company will be placed on the Restricted List. While a
company is on the Restricted List, no Investment Person shall initiate or
recommend any transaction in any Client account, and no Access Person shall be
precleared to transact in any account in which he or she has a beneficial
interest, with respect to the securities of such company. The Ethics Committee
or the Chief Compliance Officer will also have the discretion of placing a
company on the Restricted List even though no "break in the Chinese Wall" has or
is expected to occur with respect to the material nonpublic information about
the company. Such action may be taken by such persons for the purpose of
avoiding any appearance of the misuse of material nonpublic information.
The Ethics Committee or the Chief Compliance Officer will be responsible
for determining whether to remove a particular company from the Watch List or
Restricted List. The only persons who will have access to the Watch List or
Restricted List are members of the Ethics Committee, Designated Legal or
Compliance Representatives and such persons who are affected by the information.
The Watch List and Restricted List are highly confidential and should, under no
circumstances, be discussed with or disseminated to anyone other than the
persons noted above.
PROTECTING INFORMATION
Directors, Trustees, officers and employees of Janus shall not disclose any
nonpublic information (whether or not it is material) relating to Janus or its
securities transactions to any person outside Janus (unless such disclosure has
been authorized by the Chief Compliance Officer). Material nonpublic information
may not be communicated to anyone, including any Director, Trustee, officer or
employee of Janus, except as provided in this Policy. Access to such information
must be restricted. For example, access to files containing material nonpublic
information and computer files containing such information should be restricted,
and conversations containing such information, if appropriate at all, should be
conducted in private.
To insure the integrity of the Chinese Wall and to avoid unintended
disclosures, it is important that all employees take the following steps with
respect to confidential or nonpublic information:
o Do not discuss confidential information in public places such as
elevators, hallways or social gatherings.
o To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to employees
with a business need for being in the area.
o Avoid use of speakerphones in areas where unauthorized persons may
overhear conversations.
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o Avoid use of wireless and cellular phones, or other means of
communication, which may be intercepted.
o Where appropriate, maintain the confidentiality of Client identities
by using code names or numbers for confidential projects.
o Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons
and to store such documents in secure locations when they are not in
use.
o Destroy copies of confidential documents no longer needed for a
project unless required to be saved pursuant to applicable record
keeping policies or requirements.
RESPONSIBILITY TO MONITOR TRANSACTIONS
Compliance will monitor transactions of Clients and employees for which
reports are received to detect the existence of any unusual trading activities
with respect to companies on the Watch and Restricted Lists. Compliance will
immediately report any unusual trading activity directly to the Compliance
Manager, and in his or her absence, the Chief Compliance Officer, who will be
responsible for determining what, if any, action should be taken.
RECORD RETENTION
Compliance shall maintain copies of the Watch List and Restricted List for
a minimum of six years.
TENDER OFFERS
Tender offers represent a particular concern in the law of insider trading
for two reasons. First, tender offer activity often produces extraordinary
fluctuations in the price of the target company's securities. Trading during
this time period is more likely to attract regulatory attention (and produces a
disproportionate percentage of insider trading cases). Second, the SEC has
adopted a rule which expressly forbids trading and "tipping" while in possession
of material nonpublic information regarding a tender offer received from the
tender offeror, the target company or anyone acting on behalf of either. Janus
employees and others subject to this Policy should exercise particular caution
any time they become aware of nonpublic information relating to a tender offer.
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GIFT POLICY
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GIFTS MAY BE GIVEN (OR ACCEPTED) only if they are in accordance with
normally accepted business practices and do not raise any question of
impropriety. A question of impropriety may be raised if a gift influences or
gives the appearance of influencing the recipient. The following outlines
Janus's policy on giving and receiving gifts to help us maintain those standards
and is applicable to all Inside Directors and Inside Trustees, officers and
employees of Janus.
GIFT GIVING
Neither you nor members of your immediate family may give any gift, series
of gifts, or other thing of value, including cash, loans, personal services, or
special discounts ("Gifts") in excess of $100 per year to any Client or any one
person or entity that does or seeks to do business with or on behalf of Janus or
any Client (collectively referred to herein as "Business Relationships").
GIFT RECEIVING
Neither you nor members of your immediate family may receive any Gift of
material value from any single Business Relationship. A Gift will be considered
material in value if it influences or gives the appearance of influencing the
recipient.
In the event the aggregate fair market value of all Gifts received by you
from any single Business Relationship is estimated to exceed $250 in any
12-month period, you must immediately notify your manager. Managers that receive
such notification must report this information to the Compliance Manager if it
appears that such Gifts may have improperly influenced the receiver. If the Gift
is made in connection with the sale or distribution of registered investment
company or variable contract securities, the aggregate fair market value of all
such Gifts received by you from any single Business Relationship may never
exceed $100 in any 12-month period.
Occasionally, Janus employees are invited to attend or participate in
conferences, tour a company's facilities, or meet with representatives of a
company. Such invitations may involve traveling and may require overnight
lodging. Generally, Janus must pay for all travel and lodging expenses provided
in connection with such activities. However, if appropriate, and with prior
approval from your manager, you may accept travel related amenities if the costs
are considered insubstantial and are not readily ascertainable.
The solicitation of a gift is prohibited (i.e., you may not request a gift,
such as tickets to a sporting event, be given to you).
CUSTOMARY BUSINESS AMENITIES
Customary business amenities are not considered gifts so long as such
amenities are business related (e.g., if you are accepting tickets to a sporting
event, the offerer must go with you), reasonable in cost, appropriate as to time
and place, and neither so frequent nor so costly as to raise any question of
impropriety. Customary business amenities which you and, if appropriate, your
guests, may accept (or give) include an occasional meal, a ticket to a sporting
event or the theater, greens fees, an invitation to a reception or cocktail
party, or comparable entertainment.
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OUTSIDE EMPLOYMENT POLICY
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No Inside Director, Inside Trustee, officer or employee of Janus shall
accept employment or compensation as a result of any business activity (other
than a passive investment), outside the scope of his relationship with Janus
unless such person has provided prompt written notice of such employment or
compensation to the Chief Compliance Officer (or, for Registered Persons, to
JDI's Operations Manager), and, in the case of securities-related employment or
compensation, has received the prior written approval of the Ethics Committee.
Registered Persons are reminded to update and submit their Outside Business
Activity Disclosure forms as appropriate pursuant to JDI's Written Supervisory
Procedures and applicable NASD rules.
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PENALTY GUIDELINES
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OVERVIEW
Covered Persons who violate any of the requirements, restrictions, or
prohibitions of the Rules may be subject to sanctions imposed by the Ethics
Committee. The following guidelines shall be used by the Compliance Manager for
recommending remedial actions for Covered Persons who violate prohibitions or
disregard requirements of the Rules. Deviations from the Fifteen-Day Rule are
not considered to be violations under the Rules and, therefore, are not subject
to the penalty guidelines.
Upon learning of a potential deviation from, or violation of the Rules, the
Compliance Manager will provide a written recommendation of remedial action to
the Ethics Committee. The Ethics Committee has full discretion to approve such
recommendation or impose other sanctions it deems appropriate. The Ethics
Committee will take into consideration, among other things, whether the
violation was a technical violation of the Rules or inadvertent oversight (i.e.,
ill-gotten profits versus general oversight). The guidelines are designed to
promote consistency and uniformity in the imposition of sanctions and
disciplinary matters.
PENALTY GUIDELINES
Outlined below are the guidelines for the sanctions that may be imposed on
Covered Persons who fail to comply with the Rules:
o 1st violation- Compliance will send a memorandum of reprimand to the
person, copying his or her supervisor. The memorandum will generally
reinforce the person's responsibilities under the Rules, educate the
person on the severity of personal trading violations and inform the
person of the possible penalties for future violations of the Rules;
o 2nd violation- Janus's Chief Investment Officer, James Craig, will
meet with the person to discuss the violations in detail and will
reinforce the importance of complying with the Rules;
o 3rd violation- Janus's Chairman of the Board, Thomas Bailey, will meet
with the person to discuss the violations in detail and will reinforce
the importance of complying with the Rules;
o 4th violation- The Executive Committee will impose such sanctions as
it deems appropriate, including without limitation, a letter of
censure, fines, withholding of bonus payments, or suspension or
termination of employment or personal trading privileges.
In addition to the above disciplinary sanctions, such persons may be
required to disgorge any profits realized in connection with such violation. All
disgorgement proceeds collected will be donated to a charitable organization
selected by the Ethics Committee. The Ethics Committee may determine to impose
any of the sanctions set forth in item 4 above, including termination,
immediately and without notice if it determines that the severity of any
violation or violations warrants such action. All sanctions imposed will be
documented in such person's personal trading file maintained by Janus, and will
be reported to the Executive Committee.
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SUPERVISORY AND COMPLIANCE PROCEDURES
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The Chief Compliance Officer and Compliance Manager are responsible for
implementing supervisory and compliance review procedures. Supervisory
procedures can be divided into two classifications: prevention of violations and
detection of violations. Compliance review procedures include preparation of
special and annual reports, record maintenance and review, and confidentiality
preservation.
SUPERVISORY PROCEDURES
PREVENTION OF VIOLATIONS
To prevent violations of the Rules, the Compliance Manager should, in
addition to enforcing the procedures outlined in the Rules:
1. Review and update the Rules as necessary, at least once annually,
including but not limited to a review of the Code by the Chief
Compliance Officer, the Ethics Committee and/or counsel;
2. Answer questions regarding the Rules, or refer the same to the Chief
Compliance Officer;
3. Request from all persons upon commencement of services, and annually
thereafter, any applicable forms and reports as required by the Rules;
4. Identify all Access Persons and notify them of their responsibilities
and reporting requirements;
5. Write letters to the securities firms requesting duplicate
confirmations and account statements where necessary; and
6. With such assistance from the Human Resources Department as may be
appropriate, maintain a continuing education program consisting of the
following:
1) Orienting Covered Persons who are new to Janus to the Rules, and
2) Further educating Covered Persons by distributing memos or other
materials that may be issued by outside organizations such as the
Investment Company Institute discussing the issue of insider
trading and other issues raised by the Rules.
DETECTION OF VIOLATIONS
To detect violations of these Rules, the Compliance Manager should, in
addition to enforcing the procedures outlined in the Rules:
o Implement procedures to review holding and transaction reports,
confirmations, forms and statements relative to applicable
restrictions, as provided under the Code; and
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o Implement procedures to review the Restricted and Watch Lists
relative to applicable personal and Client trading activity, as
provided under the Policy.
Spot checks of certain information are permitted as noted under the Code.
COMPLIANCE PROCEDURES
REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS
Upon learning of a potential deviation from, or violation of the Rules, the
Compliance Manager shall report such violation to the Chief Compliance Officer,
together with all documents relating to the matter. The Chief Compliance Officer
shall either present the information at the next regular meeting of the Ethics
Committee, or conduct a special meeting. The Ethics Committee shall thereafter
take such action as it deems appropriate (see Penalty Guidelines).
ANNUAL REPORTS
The Compliance Manager shall prepare a written report to the Ethics
Committee and the Trustees at least annually. The written report to the Trustees
shall include any certification required by Rule 17j-1. This report shall set
forth the following information, and shall be confidential:
o Copies of the Rules, as revised, including a summary of any
changes made since the last report;
o Identification of any material issues arising under the Rules
including material violations requiring significant remedial
action since the last report;
o Identification of any material conflicts that arose since the
last report; and
o Recommendations, if any, regarding changes in existing
restrictions or procedures based upon Janus's experience under
these Rules, evolving industry practices, or developments in
applicable laws or regulations.
The Trustees must initially approve these Rules within the time frame
required by Rule 17-1. Any material changes to these Rules must be approved
within six months.
RECORDS
Compliance shall maintain the following records on behalf of each Janus
entity:
o A copy of this Code and any amendment thereof which is or at any
time within the past five years has been in effect.
o A record of any violation of this Code, or any amendment thereof,
and of any action taken as a result of such violation.
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o Files for personal securities transaction confirmations and
account statements, all reports and other forms submitted by
Covered Persons pursuant to these Rules and any other pertinent
information.
o A list of all persons who are, or have been, required to make
reports pursuant to these Rules.
o A list of persons who are, or within the last five years have
been responsible for, reviewing transaction and holdings reports.
o A copy of each report made to the Trustees pursuant to this Code.
INSPECTION
The records and reports maintained by Compliance pursuant to the Rules
shall at all times be available for inspection, without prior notice, by any
member of the Ethics Committee.
CONFIDENTIALITY
All procedures, reports and records monitored, prepared or maintained
pursuant to these Rules shall be considered confidential and proprietary to
Janus and shall be maintained and protected accordingly. Except as otherwise
required by law or this Policy, such matters shall not be disclosed to anyone
other than to members of the Ethics Committee, as requested.
FILING OF REPORTS
To the extent that any report, form acknowledgment or other document is
required to be in writing and signed, such documents may be submitted in by
e-mail or other electronic form approved by Compliance. Any report filed with
the Chief Compliance Officer or Compliance Manager of JCC shall be deemed filed
with the Janus Funds.
THE ETHICS COMMITTEE
The purpose of this Section is to describe the Ethics Committee. The Ethics
Committee is created to provide an effective mechanism for monitoring compliance
with the standards and procedures contained in the Rules and to take appropriate
action at such times as violations or potential violations are discovered.
MEMBERSHIP OF THE COMMITTEE
The Committee consists of Thomas A. Early, Vice President and General
Counsel; Steven R. Goodbarn, Vice President of Finance, Treasurer and Chief
Financial Officer; David Kowalski, Vice President and Chief Compliance Officer;
and Ernie C. Overholt, Compliance Manager. The Compliance Manager currently
serves as the Chairman of the Committee. The composition of the Committee may be
changed from time to time.
COMMITTEE MEETINGS
The Committee shall generally meet every four months or as often as
necessary to review operation of the compliance program and to consider
technical deviations from operational procedures, inadvertent oversights, or any
other potential violation of the Rules. Deviations alternatively may be
addressed by
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including them in the employee's personnel records maintained by Janus.
Committee meetings are primarily intended for consideration of the general
operation of the compliance program and substantive or serious departures from
standards and procedures in the Rules.
Such other persons may attend a Committee meeting, at the discretion of the
Committee, as the Committee shall deem appropriate. Any individual whose conduct
has given rise to the meeting also may be called upon, but shall not have the
right, to appear before the Committee.
It is not required that minutes of Committee meetings be maintained; in
lieu of minutes the Committee may issue a report describing any action taken.
The report shall be included in the confidential file maintained by the
Compliance Manager with respect to the particular employee or employees whose
conduct has been the subject of the meeting.
SPECIAL DISCRETION
The Committee shall have the authority by unanimous action to exempt any
person or class of persons or transaction or class of transactions from all or a
portion of the Rules, provided that:
o The Committee determines, on advice of counsel, that the
particular application of all or a portion of the Rules is not
legally required;
o The Committee determines that the likelihood of any abuse of the
Rules by such exempted person(s) or as a result of such exempted
transaction is remote;
o The terms or conditions upon which any such exemption is granted
is evidenced in writing; and
o The exempted person(s) agrees to execute and deliver to the
Compliance Manager, at least annually, a signed Acknowledgment
Form, which Acknowledgment shall, by operation of this provision,
include such exemptions and the terms and conditions upon which
it was granted.
The Committee shall also have the authority by unanimous action to impose
such additional requirements or restrictions as it, in its sole discretion,
determines appropriate or necessary, as outlined in the Penalty Guidelines.
Any exemption, and any additional requirement or restriction, may be
withdrawn by the Committee at any time (such withdrawal action is not required
to be unanimous).
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GENERAL INFORMATION ABOUT THE ETHICS RULES
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DESIGNEES
The Compliance Manager and the Chief Compliance Officer may appoint
designees to carry out their functions pursuant to these Rules.
ENFORCEMENT
In addition to the penalties described in the Penalty Guidelines and
elsewhere in the Rules, upon discovering a violation of the Rules, the Janus
entity with which you are associated may impose such sanctions as it deems
appropriate, including without limitation, a letter of censure or suspension or
termination of employment or personal trading privileges of the violator. All
material violations of the Rules and any sanctions imposed with respect thereto
shall be reported periodically to the Directors and Trustees and the directors
of any other Janus entity which has been directly affected by the violation.
INTERNAL USE
The Rules are intended solely for internal use by Janus and do not
constitute an admission, by or on behalf of such companies, their controlling
persons or persons they control, as to any fact, circumstance or legal
conclusion. The Rules are not intended to evidence, describe or define any
relationship of control between or among any persons. Further, the Rules are not
intended to form the basis for describing or defining any conduct by a person
that should result in such person being liable to any other person, except
insofar as the conduct of such person in violation of the Rules may constitute
sufficient cause for Janus to terminate or otherwise adversely affect such
person's relationship with Janus.
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