-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DsiM1N58VEQmJV8Kw7EmCWsIeaiJoO4L+3JNDEUaJ2RPziCTO2LfkP7FXIFAeQIN iDLlkROj/5S9b8xzq6QQww== 0000277751-96-000099.txt : 19961219 0000277751-96-000099.hdr.sgml : 19961219 ACCESSION NUMBER: 0000277751-96-000099 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 19961218 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JANUS INVESTMENT FUND CENTRAL INDEX KEY: 0000277751 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840592523 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-34393 FILM NUMBER: 96682368 BUSINESS ADDRESS: STREET 1: 100 FILLMORE ST STREET 2: STE 300 CITY: DENVER STATE: CO ZIP: 80206 BUSINESS PHONE: 3033333863 MAIL ADDRESS: STREET 1: 100 FILLMORE STREET STREET 2: SUITE 300 CITY: DENVER STATE: CO ZIP: 80203 FORMER COMPANY: FORMER CONFORMED NAME: JANUS FUND /MD/ DATE OF NAME CHANGE: 19870701 485APOS 1 JANUS INVESTMENT FUND PEA NO. 79 Registration No. 2-34393 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. /__/ Post-Effective Amendment No. 79 /X/ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 62 /X/ (Check appropriate box or boxes.) JANUS INVESTMENT FUND (Exact Name of Registrant as Specified in Charter) 100 Fillmore Street, Denver, Colorado 80206-4928 Address of Principal Executive Offices (Zip Code) Registrant's Telephone No., including Area Code: 303-333-3863 David C. Tucker - 100 Fillmore Street, Denver, Colorado 80206-4928 (Name and Address of Agent for Service) Approximate Date of Proposed Offering: February 17, 1997 It is proposed that this filing will become effective (check appropriate line): _____ immediately upon filing pursuant to paragraph (b) of Rule 485. _____ on (date) pursuant to paragraph (b) of Rule 485. _____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485. __X__ on February 17, 1997, pursuant to paragraph (a)(1) of Rule 485. _____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485. _____ on (date) pursuant to paragraph (a)(2) of Rule 485. If appropriate, check the following line: _____ this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Registrant has registered an indefinite number of shares of beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2(a) and filed a Rule 24f-2 Notice on December 13, 1996, for the fiscal year ended October 31, 1996, with respect to all of its series and classes in existence as of October 31, 1996. JANUS INVESTMENT FUND Cross Reference Sheet Between the Prospectus and Statement of Additional Information and Form N-1A Item (Cross Reference Sheet for Janus Special Situations Fund is included in a previous post-effective amendment relating to that series) FORM N-1A ITEM CAPTION IN PROSPECTUS PART A 1. Cover Page Cover Page 2. Synopsis Cover Page; Fund(s) at a Glance (in Combined Income, Combined Equity and Venture Prospectuses only); Expense Information 3. Condensed Financial Financial Highlights (not included in Information Money Market Funds - Service Shares Prospectus); Understanding the Financial Highlights (not included in Money Market Funds - Institutional Prospectus or Money Market Funds - Service Shares Prospectus); Performance Terms (in Combined Income, Combined Equity and Venture Prospectuses only); Performance (Money Market Fund - Institutional and Service Shares Prospectuses only) 4. General Description of Fund(s) at a Glance (in Combined Income, Registrant Combined Equity and Venture Prospectuses only); The Fund(s) in Detail (in Combined Income, Combined Equity and Venture Prospectuses only); Investment Objectives and Policies (Combined Income and Combined Equity Prospectuses only); Investment Objective and Types of Investments (Venture Prospectus only) and Investment Objectives, Policies and Techniques (Money Market Fund Institutional and Service Shares Prospectuses only); General Portfolio Policies (Combined Income, Combined Equity and Venture Prospectuses only); Common Investment Policies (Money Market Fund - Institutional Prospectus only); Additional Risk Factors (not included in Money Market Fund - Institutional Prospectus); Appendix A - Glossary of Investment Terms (Combined Income, Combined Equity and Venture Prospectuses only); Appendix B - Explanation of Rating Categories (Combined Income Prospectus only) 5. Management of the Fund Management of the Fund(s) (Combined Income, Combined Equity and Venture Prospectuses only); Investment Adviser and Administrator (Money Market Fund - Institutional, Service Shares and Combined Income Prospectuses only) 5A. Management's Discussion of Not Applicable Fund Performance 6. Capital Stock and Other Distributions and Taxes; Shareholder's Securities Manual; Shareholder's Guide (Money Market Funds - Institutional and Service Shares Prospectuses only) 7. Purchase of Securities Being Shareholder's Manual; Shareholder's Offered Guide (Money Market Funds - Institutional and Service Shares Prospectuses only) 8. Redemption or Repurchase Shareholder's Manual; Shareholder's Guide (Money Market Funds - Institutional and Service Shares Prospectuses only) 9. Pending Legal Proceedings Not Applicable FORM N-1A ITEM CAPTION IN STATEMENT OF ADDITIONAL INFORMATION PART B 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and Miscellaneous Information History 13. Investment Objectives and Investment Policies, Restrictions and Policies Techniques (Combined Equity and Income and Venture Statements of Additional Information only); Investment Policies and Restrictions (Money Market Funds Statements of Additional Information only); Types of Securities and Investment Techniques; Appendix A Description of Securities Ratings (Money Market Funds Statements of Additional Information only); Appendix B - Description of Municipal Securities (Money Market Funds Statements of Additional Information only); Appendix A - Explanation of Rating Categories (Combined Equity and Income and Venture Statements of Additional Information only) 14. Management of the Fund Investment Adviser (Combined and Venture Statements of Additional Information only); Investment Adviser and Administrator (Money Market Funds Statements of Additional Information only); Officers and Trustees 15. Control Persons and Principal Principal Shareholders Holders of Securities 16. Investment Advisory and Investment Adviser (Combined and Venture Other Services Statements of Additional Information only); Investment Adviser and Administrator (Money Market Funds Statements of Additional Information only); Custodian, Transfer Agent and Certain Affiliations; Portfolio Transactions and Brokerage; Officers and Trustees; Miscellaneous Information 17. Brokerage Allocation and Portfolio Transactions and Brokerage Other Practices 18. Capital Stock and Other Purchase of Shares; Redemption of Securities Shares; Miscellaneous Information 19. Purchase, Redemption and Purchase of Shares; Redemption of Pricing of Securities Being Shares; Shareholder Accounts Offered 20. Tax Status Income Dividends, Capital Gains Distributions and Tax Status (Combined Equity and Income and Venture Statements of Additional Information only); Dividends and Tax Status (Money Market Funds Statements of Additional Information only) 21. Underwriters Custodian, Transfer Agent and Certain Affiliations 22. Calculation of Performance Performance Information (Combined Equity Data and Income and Venture Statements of Additional Information only); Performance Data (Money Market Funds Statements of Additional Information only) 23. Financial Statements Financial Statements CONTENTS - -------------------------------------------------------------------------------- FUNDS AT A GLANCE Brief description of each Fund .............................................. 1 - -------------------------------------------------------------------------------- EXPENSE INFORMATION Each Fund's annual operating expenses ....................................................... 3 Financial Highlights-a summary of financial data ........................................................ 4 - -------------------------------------------------------------------------------- THE FUNDS IN DETAIL Investment Objectives and Policies .......................................... 8 General Portfolio Policies .................................................. 11 Additional Risk Factors ..................................................... 12 - -------------------------------------------------------------------------------- SHAREHOLDER'S MANUAL Types of Account Ownership .................................................. 14 How to Open Your Janus Account .............................................. 15 How to Purchase Shares ...................................................... 15 How to Exchange Shares ...................................................... 15 How to Redeem Shares ........................................................ 16 Shareholder Services and Account Policies ..................................................... 17 - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS Investment Adviser and Investment Personnel ..................................................... 19 Management Expenses ......................................................... 20 Portfolio Transactions ...................................................... 20 Other Service Providers ..................................................... 20 Other Information ........................................................... 21 - -------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES Distributions ............................................................... 22 Taxes ....................................................................... 23 - -------------------------------------------------------------------------------- PERFORMANCE TERMS An Explanation of Performance Terms ......................................... 23 - -------------------------------------------------------------------------------- APPENDIX A Glossary of Investment Terms ................................................ 24 [LOGO] JANUS INVESTMENT FUND JANUS EQUITY FUNDS 100 Fillmore Street Denver, CO 80206-4928 (800) 525-3713 http://www.JanusFunds.com February 17, 1997 A FAMILY OF NO-LOAD MUTUAL FUNDS All Janus Funds are no-load investments. This means you may purchase and sell shares in any of our mutual funds without incurring any sales charges. If you enroll in our low minimum initial investment program, you can open your account for as little as $500 and a $100 subsequent purchase per month. Otherwise, the minimum initial investment is $2,500. For complete information on how to purchase, exchange and sell shares, please see the Shareholder's Manual beginning on page 14. This Prospectus describes ten equity mutual funds that emphasize growth of capital or a combination of growth and income (the "Funds"). Janus Capital Corporation ("Janus Capital") serves as investment adviser to each Fund. Janus Capital has been in the investment advisory business for over 26 years and currently manages approximately $45 billion in assets. Each Fund is a series of Janus Investment Fund (the "Trust"). The Trust is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. This Prospectus contains information about the Funds that you should consider before investing. Please read it carefully and keep it for future reference. Additional information about the Funds is contained in a Statement of Additional Information ("SAI") filed with the SEC. The SAI dated February 17, 1997, is incorporated by reference into this Prospectus. For a copy of the SAI, write or call the Funds at the address or phone number listed above. The SEC maintains a Web site located at http://www.sec.gov that contains the SAI, material incorporated by reference, and other information regarding the Funds. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER JURISDICTION. JANUS EQUITY FUNDS COMBINED PROSPECTUS FUNDS AT A GLANCE This section is designed to provide you with a brief overview of the Funds and their investment emphasis. A more detailed discussion of the Funds' investment objectives and policies begins on page 8 and complete information on how to purchase, redeem and exchange shares begins on pages 15-17. - -------------------------------------------------------------------------------- GROWTH FUNDS Janus Fund Fund Focus: A diversified fund that seeks long-term growth of capital by investing primarily in common stocks, with an emphasis on companies with larger market capitalizations. Fund Inception: February 1970 Fund Manager: James P. Craig, III Assistant Fund Managers: David Decker Blaine Rollins Janus Enterprise Fund Fund Focus: A nondiversified fund that seeks long-term growth of capital by investing primarily in common stocks, with an emphasis on securities issued by medium-sized companies. Fund Inception: September 1992 Fund Manager: James P. Goff Janus Equity Income Fund Fund Focus: A diversified fund that seeks current income and long-term growth of capital by investing primarily in income-producing equity securities. Fund Inception: June 1996 Fund Manager: Blaine P. Rollins Janus Mercury Fund Fund Focus: A diversified fund that seeks long-term growth of capital by investing primarily in common stocks of companies of any size. Fund Inception: May 1993 Fund Manager: Warren B. Lammert Assistant Fund Manager: Tom Malley Janus Olympus Fund Fund Focus: A nondiversified fund that seeks long-term growth of capital by investing primarily in common stocks of companies of any size. Fund Inception: December 1995 Fund Manager: Scott W. Schoelzel Assistant Fund Manager: Mike Lu Janus Overseas Fund Fund Focus: A diversified fund that seeks long-term growth of capital by investing primarily in common stocks of foreign companies. Fund Inception: May 1994 Fund Manager: Helen Young Hayes Assistant Fund Manager: Laurence Chang Janus Twenty Fund Fund Focus: A nondiversified fund that seeks long-term growth of capital by normally concentrating its investments in a core position of 20-30 common stocks. Fund Inception: April 1985 Fund Manager: Thomas F. Marsico Assistant Fund Managers: Marc Pinto Claire Young Janus Worldwide Fund Fund Focus: A diversified fund that seeks long-term growth of capital by investing primarily in common stocks of foreign and domestic companies. Fund Inception: May 1991 Fund Manager: Helen Young Hayes Assistant Fund Manager: Laurence Chang - -------------------------------------------------------------------------------- COMBINATION FUNDS Janus Balanced Fund Fund Focus: A diversified fund that seeks long-term growth of capital, balanced by current income. The Fund normally invests 40-60% of its assets in securities selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. Fund Inception: September 1992 Fund Manager: Blaine P. Rollins Janus Growth and Income Fund Fund Focus: A diversified fund that seeks long-term growth of capital with a limited emphasis on income. Although the Fund normally invests at least 25% of its assets in securities that have income potential, it emphasizes equity securities selected for their growth potential. Fund Inception: May 1991 Fund Manager: Thomas F. Marsico Assistant Fund Managers: Marc Pinto Claire Young JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 1 - -------------------------------------------------------------------------------- JANUS SPECTRUM The spectrum below shows Janus Capital's assessment of the potential overall risk of the Janus Funds relative to one another and should not be used to compare the Funds to other mutual funds or other types of investments. A Fund's position in the spectrum was determined based on a number of factors such as selected historic volatility measurements, the types of securities in which the Fund intends to invest, the degree of diversification intended and/or permitted, and the sizes of the Fund. In addition, the spectrum is significantly affected by the portfolio managers' investment styles. These factors were considered as of the date of this prospectus and will be reassessed with each new prospectus. Specific risks of certain types of instruments in which some of the Funds may invest, including foreign securities, junk bonds and derivative instruments such as futures contracts and options, are described under "Additional Risk Factors" on pages 12-13. THE SPECTRUM IS NOT INDICATIVE OF THE FUTURE VOLATILITY OR PERFORMANCE OF A FUND AND RELATIVE POSITIONS OF FUNDS WITHIN THE SPECTRUM MAY CHANGE IN THE FUTURE. [SPECTRUM CHART] The spectrum illustrates the potential overall risk of the Janus funds relative to one another. The funds' risk ranges from conservative to aggressive. The Growth Funds are illustrated as follows: Janus Fund is shown as moderate; Janus Enterprise Fund is shown as aggressive; Janus Equity Income Fund is shown as moderate (but less aggressive than Janus Fund); Janus Mercury Fund is shown as moderate-aggressive; Janus Olympus Fund is shown as aggressive; Janus Overseas Fund is shown as moderate-aggressive; Janus Special Situations Fund* is shown as moderate-aggressive (but less aggressive than Janus Overseas Fund); Janus Twenty Fund is shown as aggressive; Janus Venture Fund, which is closed to new investors, is shown as moderate-aggressive; Janus Worldwide Fund is shown as moderate-aggressive (but less aggressive than Janus Special Situations Fund). The Combination Funds are illustrated as follows: Janus Balanced Fund is shown as moderate. Janus Growth and Income Fund is shown as moderate-aggressive. The Fixed-Income Funds are illustrated as follows: Janus Flexible Income Fund* is shown as conservative-moderate; Janus High-Yield Fund* is shown as moderate-aggressive; Janus Federal Tax-Exempt Fund* is shown as conservative-moderate (but more conservative than Janus Flexible Income Fund); Janus Short-Term Bond Fund* is shown as conservative (but more conservative than Janus Federal Tax-Exempt Fund). The Money Market Funds are illustrated as follows: Janus Money Market Fund* is shown as conservative (but less conservative than Janus Short-Term Bond Fund); Janus Government Money Market Fund* is shown equally as conservative as Janus Money Market Fund; and Janus Tax-Exempt Money Market Fund* is shown equally as conservative as Janus Government Money Market Fund. *These funds are offered by separate prospectuses. +This fund is closed to new investors and is offered by a separate prospectus. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 2 EXPENSE INFORMATION The tables and example below are designed to assist you in understanding the various costs and expenses that you will bear directly or indirectly as an investor in the Funds. Shareholder Transaction Expenses are fees charged directly to your individual account when you buy, sell or exchange shares. The table below shows that you pay no such fees. Annual Fund Operating Expenses are paid out of each Fund's assets and include fees for portfolio management, maintenance of shareholder accounts, shareholder servicing, accounting and other services. - -------------------------------------------------------------------------------- WHY DO EXPENSES VARY ACROSS THE FUNDS? EXPENSES VARY FOR A NUMBER OF REASONS, INCLUDING DIFFERENCES IN MANAGEMENT FEES, AVERAGE SHAREHOLDER ACCOUNT SIZE, THE FREQUENCY OF DIVIDEND PAYMENTS, AND THE EXTENT OF FOREIGN INVESTMENTS WHICH ENTAIL GREATER TRANSACTION COSTS. SHAREHOLDER TRANSACTION EXPENSES (applicable to each Fund) Maximum sales load imposed on purchases None Maximum sales load imposed on reinvested dividends None Deferred sales charges on redemptions None Redemption fee* None Exchange fee None * There is an $8 service fee for redemptions by wire. ANNUAL FUND OPERATING EXPENSES(1) (expressed as a percentage of average net assets) Management Fee Other Expenses Total Fund Operating Expenses - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund .65% .21% .86% Janus Enterprise Fund .73% .41% 1.14% Janus Equity Income Fund 1.00% .79%(2) 1.79% Janus Mercury Fund .67% .35% 1.02% Janus Olympus Fund .78% .39%(2) 1.17% Janus Overseas Fund .75% .51% 1.26% Janus Twenty Fund .66% .27% .93% Janus Worldwide Fund .67% .35% 1.02% Janus Balanced Fund .80% .43% 1.23% Janus Growth and Income Fund .71% .34% 1.05% - ------------------------------------------------------------------------------------------------------------------------------------
(1) The information in the table above is based on expenses before expense offset arrangements for the fiscal year ended October 31, 1996. (2) "Other Expenses" are based on the fees and expenses that the Fund incurred in its initial fiscal period. EXAMPLE Assume you invest $1,000, the Funds return 5% annually and each Fund's expense ratios remain as listed above. The example below shows the operating expenses that you would indirectly bear as an investor in the Funds. 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $ 9 $27 $48 $106 Janus Enterprise Fund $12 $36 $63 $139 Janus Equity Income Fund $18 $56 $97 $211 Janus Mercury Fund $10 $32 $56 $125 Janus Olympus Fund $12 $37 $64 $142 Janus Overseas Fund $13 $40 $69 $152 Janus Twenty Fund $ 9 $30 $51 $114 Janus Worldwide Fund $10 $32 $56 $125 Janus Balanced Fund $13 $39 $68 $149 Janus Growth and Income Fund $11 $33 $58 $128 - ------------------------------------------------------------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 3 FINANCIAL HIGHLIGHTS Unless otherwise noted, the information below is for fiscal periods ending on October 31 of each year. The accounting firm of Price Waterhouse LLP has audited the Funds' financial statements since October 1, 1990. Their report is included in the Funds' Annual Reports, which are incorporated by reference into the SAI. Expense and income ratios and portfolio turnover rates have been annualized for periods of less than one year. Total returns for periods of less than one year are not annualized. A DETAILED EXPLANATION OF THE FINANCIAL HIGHLIGHTS CAN BE FOUND ON PAGE 7. [TO BE FILED BY AMENDMENT] Janus Fund 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $19.62 $20.81 $18.86 $18.27 $13.25 $16.36 $12.11 $12.39 $14.77 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.16 0.17 0.26 0.23 0.25 0.25 0.22 0.60 0.19 3. Net gains or (losses) on securities (both realized and unrealized) 3.99 (0.03) 2.88 1.46 5.09 (0.67) 4.59 1.05 0.30 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 4.15 0.14 3.14 1.69 5.34 (0.42) 4.81 1.65 0.49 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (.01) (0.39)(1) (0.29) (0.19) (0.31) (0.19) (0.56) (0.32) (0.38) 6. Distributions (from capital gains) (.39) (0.94) (0.90) (0.91) (0.01) (2.50) -- (1.61) (2.49) - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (.40) (1.33) (1.19) (1.10) (0.32) (2.69) (0.56) (1.93) (2.87) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $23.37 $19.62 $20.81 $18.86 $18.27 $13.25 $16.36 $12.11 $12.39 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 21.62% 0.75% 17.41% 9.35% 40.95% (3.68%) 41.67% 15.83% 4.14% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $11,963 $9,647 $9,098 $4,989 $2,598 $1,049 $673 $391 $387 11. Average net assets for the period (in millions) $10,560 $9,339 $7,336 $3,871 $1,785 $930 $487 $382 $486 12. Ratio of gross expenses to average net assets 0.87% N/A N/A N/A N/A N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 0.86% 0.91% 0.92% 0.97% 0.98% 1.02% 0.92% 0.98% 1.01% 14. Ratio of net investment income to average net assets 1.25% 1.12% 1.55% 1.54% 1.77% 2.11% 1.68% 4.99% 1.55% 15. Portfolio turnover rate 118% 139% 127% 153% 132% 307% 205% 175% 214% 16. Average commission rate $ N/A N/A N/A N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Distribution in excess of financial statement income of $0.02. [TO BE FILED BY AMENDMENT] Janus Enterprise Fund 1996 1995 1994 1993 1992(1) - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $24.43 $21.87 $17.09 $15.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income (loss) 0.52 (0.06) 0.04 -- 3. Net gains or (losses) on securities (both realized and unrealized) 3.09 3.18 4.76 2.09 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 3.61 3.12 4.80 2.09 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.52) (0.02) (0.02) -- 6. Distributions (from capital gains) (0.38) (0.54) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (0.90) (0.56) (0.02) -- - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $27.14 $24.43 $21.87 $17.09 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 15.46% 14.56% 28.09% 13.93% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $459 $370 $239 $8 11. Average net assets for the period (in millions) $408 $270 $188 $2 12. Ratio of gross expenses to average net assets 1.26% N/A N/A N/A 13. Ratio of net expenses to average net assets 1.23% 1.25% 1.36% 2.50% 14. Ratio of net investment income to average net assets 0.02% (0.32%) 0.14% (0.81%) 15. Portfolio turnover rate 194% 193% 201% 53% 16. Average commission rate $ N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from September 1, 1992 (inception) to October 31, 1992. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 4 Janus Equity Income Fund Janus Mercury Fund 1996(1) 1996 1995 1994 1993(2) [TO BE FILED BY [TO BE FILED BY AMENDMENT] AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $14.12 $11.70 $10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income (loss) 0.16 0.02 (0.01) 3. Net gains or (losses) on securities (both realized and unrealized) 3.37 2.40 1.71 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 3.53 2.42 1.70 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.16) -- -- 6. Distributions (from capital gains) (0.11) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (0.27) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $17.38 $14.12 $11.70 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 25.53% 20.68% 17.00% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $1,521 $596 $113 11. Average net assets for the period (in millions) $ $ $1,116 $258 $67 12. Ratio of gross expenses to average net assets 1.14% N/A N/A 13. Ratio of net expenses to average net assets 1.12% 1.33% 1.75% 14. Ratio of net investment income to average net assets 0.50% 0.25% (0.40%) 15. Portfolio turnover rate 201% 283% 151% 16. Average commission rate $_____ $_____ N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from June 28, 1996 (inception) to October 31, 1996. (2) Fiscal period from May 3, 1993 (inception) to October 31, 1993. Janus Olympus Fund Janus Overseas Fund 1996(1) 1996 1995 1994(2) [TO BE FILED BY [TO BE FILED BY AMENDMENT] AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $ $ $10.36 $10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income (loss) 0.12 (0.02) 3. Net gains or (losses) on securities (both realized and unrealized) 1.10 0.38 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 1.22 0.36 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) -- -- 6. Distributions (from capital gains) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $11.58 $10.36 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 11.78% 3.60% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $111 $64 11. Average net assets for the period (in millions) $ $ $78 $37 12. Ratio of gross expenses to average net assets 1.76% N/A 13. Ratio of net expenses to average net assets 1.73% 2.16% 14. Ratio of net investment income to average net assets 0.36% (0.64%) 15. Portfolio turnover rate 188% 181% 16. Average commission rate $_____ $_____ N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from December 29, 1995 (inception) to October 31, 1996. (2) Fiscal period from May 2, 1994 (inception) to October 31, 1994. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 5 [TO BE FILED BY AMENDMENT] Janus Twenty Fund 1996 1995 1994 1993 1992(1) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $24.24 $25.85 $22.75 $22.17 $18.88 $16.01 $13.05 $9.66 $13.69 $14.27 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income .01 0.16 0.17 0.09 0.11 0.16 0.05 0.46 0.42 0.30 3. Net gains or (losses) on securities (both realized and unrealized) 5.94 (1.07) 3.31 0.49 3.62 2.90 3.35 3.73 (2.86) 0.74 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 5.95 (0.91) 3.48 0.58 3.73 3.06 3.40 4.19 (2.44) 1.04 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (.07) (0.25) (0.18) -- (0.02) (0.19) (0.02) (0.80) (0.41) (0.25) 6. Distributions (from capital gains) -- (0.45) (0.20) -- (0.42) -- (0.42) -- (1.18) (1.37) - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (.07) (0.70) (0.38) -- (0.44) (0.19) (0.44) (0.80) (1.59) (1.62) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $30.12 $24.24 $25.85 $22.75 $22.17 $18.88 $16.01 $13.05 $9.66 $13.69 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 24.67% (3.52%) 15.39% 2.62% 19.60% 19.43% 26.36% 45.89% (17.13%) 8.66% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $2,996 $2,743 $3,749 $2,434 $2,081 $556 $175 $20 $13 $19 11. Average net assets for the period (in millions) $ $2,716 $3,051 $3,546 $2,221 $1,188 $294 $64 $10 $16 $16 12. Ratio of gross expenses to average net assets 1.00% N/A N/A N/A N/A N/A N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 0.99% 1.02% 1.05% 1.12% 1.01% 1.07% 1.32% 1.88% 1.70% 1.79% 14. Ratio of net investment income to average net assets 0.62% 0.57% 0.87% 1.27% 1.08% 1.30% 1.28% 0.68% 3.35% 2.98% 15. Portfolio turnover rate 147% 102% 99% 79% 83% 163% 228% 220% 317% 202% 16. Average commission rate $ N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from June 1, 1992 to October 31, 1992. (2) Fiscal year ended on May 31st of each year. [TO BE FILED BY AMENDMENT] Janus Worldwide Fund 1996 1995 1994 1993 1992 1991(1) - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $27.00 $24.16 $18.95 $17.45 $15.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.81 0.15 0.14 0.16 -- 3. Net gains or (losses) on securities (both realized and unrealized) 1.39 3.34 5.29 1.39 2.45 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 2.20 3.49 5.43 1.55 2.45 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.54) (0.27) (0.22) -- -- 6. Distributions (from capital gains) (1.01) (0.38) -- (0.05) -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (1.55) (0.65) (0.22) (0.05) -- - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $27.65 $27.00 $24.16 $18.95 $17.45 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 8.89% 14.76% 28.79% 9.20% 16.00% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $1,804 $1,587 $755 $161 $18 11. Average net assets for the period (in millions) $ $1,622 $1,244 $379 $80 $7 12. Ratio of gross expenses to average net assets 1.24% N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 1.23% 1.12% 1.32% 1.73% 2.50% 14. Ratio of net investment income to average net assets 0.99% 0.42% 0.92% 1.74% 0.02% 15. Portfolio turnover rate 142% 158% 124% 147% 40% 16. Average commission rate $ N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from May 15, 1991 (inception) to October 31, 1991. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 6 [TO BE [TO BE FILED BY FILED BY AMENDMENT] Janus Balanced Fund AMENDMENT] Janus Growth and Income Fund 1996 1995 1994 1993 1992(1) 1996 1995 1994 1993 1992 1991(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $12.17 $12.23 $10.64 $10.00 $14.69 $15.24 $12.95 $12.13 $10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.61 0.27 0.19 -- 0.11 0.19 0.14 0.17 0.02 3. Net gains or (losses) on securities (both realized and unrealized) 1.52 (0.09) 1.56 0.64 3.43 (0.31) 2.29 0.80 2.13 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 2.13 0.18 1.75 0.64 3.54 (0.12) 2.43 0.97 2.15 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.58) (0.24) (0.16) -- (0.10) (0.10) (0.14) (0.15) (0.02) 6. Distributions (from capital gains) -- -- -- -- -- (0.33) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (0.58) (0.24) (0.16) -- (0.10) (0.43) (0.14) (0.15) (0.02) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $13.72 $12.17 $12.23 $10.64 $18.13 $14.69 $15.24 $12.95 $12.13 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 18.26% 1.51% 16.54% 6.40% 24.20% (0.76%) 18.81% 7.98% 21.50% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $125 $94 $73 $2 $583 $490 $519 $244 $56 11. Average net assets for the period (in millions) $ $107 $86 $44 $1 $ $498 $500 $404 $157 $21 12. Ratio of gross expenses to average net assets 1.35% N/A N/A N/A 1.19% N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 1.32% 1.42% 1.70% 2.50% 1.17% 1.22% 1.28% 1.52% 2.33% 14. Ratio of net investment income to average net assets 2.52% 2.28% 2.15% (0.12%) 1.11% 1.26% 1.13% 1.61% 0.76% 15. Portfolio turnover rate 185% 167% 131% 130% 195% 123% 138% 120% 14% 16. Average commission rate $ N/A N/A N/A N/A $ N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from September 1, 1992 (inception) to October 31, 1992. (2) Fiscal period from May 15, 1991 (inception) to October 31, 1991. - -------------------------------------------------------------------------------- UNDERSTANDING THE FINANCIAL HIGHLIGHTS This section is designed to help you better understand the information summarized in the Financial Highlights tables. The tables contain important historical operating information that may be useful in making your investment decision or understanding how your investment has performed. The Funds' Annual Reports contain additional information about each Fund's performance, including a comparison to an appropriate securities index. For a copy of your Fund's Annual Report, call 1-800-525-8983. Net asset value ("NAV") is the value of a single share of a Fund. It is computed by adding the value of all of a Fund's investments and other assets, subtracting any liabilities and dividing the result by the number of shares outstanding. The difference between line 1 and line 8 in the Financial Highlights tables represents the change in value of a Fund's shares over the fiscal period, but not its total return. Net investment income is the per share amount of dividends and interest income earned on securities held by a Fund, less Fund expenses. Dividends (from net investment income) is the per share amount that a Fund paid from net investment income. Net gains or (losses) on securities is the per share increase or decrease in value of the securities a Fund holds. A gain (or loss) is realized when securities are sold. A gain (or loss) is unrealized when securities increase or decrease in value but are not sold. Distributions (from capital gains) is the per share amount that a Fund paid from net realized gains. Total return is the percentage increase or decrease in the value of an investment over a stated period of time. A total return percentage includes both changes in NAV and income. For the purposes of calculating total return, it is assumed that dividends and distributions are reinvested at the NAV on the day of the distribution. A FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLES. Ratio of net expenses to average net assets is the total of a Fund's operating expenses divided by its average net assets for the stated period. Ratio of gross expenses to average net assets does not reflect reductions in expenses through the use of brokerage commissions and uninvested cash balances earning interest with a Fund's custodian. Ratio of net investment income to average net assets is a Fund's net investment income divided by its average net assets for the stated period. Portfolio turnover rate is a measure of the amount of a Fund's buying and selling activity. It is computed by dividing total purchases or sales, whichever is less, by the average monthly market value of a Fund's portfolio securities. Average commission rate is the total of a Fund's agency commissions paid on equity securities trades divided by the number of shares purchased. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 7 THE FUNDS IN DETAIL To help you decide which Fund is appropriate for you, this section takes a closer look at the Funds' investment objectives, policies and the securities in which they invest. Please carefully review the "Additional Risk Factors" section of this Prospectus for a more detailed discussion of the risks associated with certain investment techniques, as well as the risk spectrum on page 2. Appendix A contains a more detailed description of investment terms used throughout this Prospectus. You should carefully consider your own investment goals, time horizon and risk tolerance before investing in a Fund. Policies that are noted as "fundamental" cannot be changed without a shareholder vote. All other policies, including each Fund's investment objective, are not fundamental and may be changed by the Funds' Trustees without a shareholder vote. You will be notified of any such changes that are material. If there is a material change in a Fund's objective or policies, you should consider whether that Fund remains an appropriate investment for you. - -------------------------------------------------------------------------------- A SHAREHOLDER'S INVESTMENT HORIZON IS THE AMOUNT OF TIME YOU SHOULD PLAN TO HOLD YOUR INVESTMENT IN A FUND TO MAXIMIZE THE POTENTIAL FOR REALIZING THE FUND'S OBJECTIVE. - -------------------------------------------------------------------------------- THE JANUS GROWTH FUNDS ARE DESIGNED FOR LONG-TERM INVESTORS WHO SEEK GROWTH OF CAPITAL AND WHO CAN TOLERATE THE GREATER RISKS ASSOCIATED WITH COMMON STOCK INVESTMENTS. GROWTH FUNDS Investment Objective: ....................................... Growth of Capital (and Current Income for Janus Equity Income Fund) Primary Holdings: ............................................... Common Stocks Shareholder's Investment Horizon: ................................... Long-Term JANUS FUND The investment objective of this Fund is long-term growth of capital in a manner consistent with the preservation of capital. It is a diversified fund that pursues its objective by investing in common stocks of companies of any size. Janus Fund was first offered to the public in 1970 and has the largest asset base of the Funds. This Fund generally invests in larger, more established issuers. JANUS ENTERPRISE FUND The investment objective of this Fund is long-term growth of capital. It is a non-diversified fund that pursues its investment objective by normally investing at least 50% of its equity assets in securities issued by medium-sized companies. Medium-sized companies are those whose market capitalizations fall within the range of companies in the S&P MidCap 400 Index (the "MidCap Index"). Companies whose capitalization falls outside this range after the Fund's initial purchase continue to be considered medium-sized companies for the purpose of this policy. As of ________1996, the MidCap Index included companies with capitalizations between approximately ___ million to ___ billion. The range of the MidCap Index is expected to change on a regular basis. Subject to the above policy, the Fund may also invest in smaller or larger issuers. JANUS EQUITY INCOME FUND The investment objective of this Fund is current income and long-term growth of capital. It is a diversified fund that pursues its objective by normally investing at least 65% of invested assets in income-producing equity securities. Equity securities include common stocks, preferred stocks, warrants and securities convertible into common or preferred stocks. Growth potential is a significant investment consideration and the Fund may hold securities selected solely for their growth potential. The Fund seeks to provide a lower level of volatility than the stock market at large, as measured by the S&P 500. The lower volatility sought by the Fund is expected to result primarily from investments in dividend-paying common stocks and other equity securities that are characterized by relatively greater price stability. The greater price stability sought by the Fund may be characteristic of companies that generate above average positive cash flows. A company may use positive cash flows for a number of purposes including commencing or increasing dividend payments, repurchasing its own stock or retiring outstanding debt. JANUS MERCURY FUND The investment objective of this Fund is long-term growth of capital. It is a diversified fund that pursues its objective by investing in common stocks of issuers of any size, which may include larger well-established issuers and/or smaller emerging growth companies. JANUS OLYMPUS FUND The investment objective of this Fund is long-term growth of capital. It is a nondiversified fund that pursues its objective by investing primarily in common stocks of issuers of any size, which may include larger well-established issuers and/or smaller emerging growth companies. JANUS OVERSEAS FUND The investment objective of this Fund is long-term growth of capital. It is a diversified fund that pursues its objective primarily through investments in common stocks of issuers located outside the United States. The Fund has the flexibility to invest on a worldwide basis in companies and other organizations of any size, regardless of country of organization or place of principal business activity. The Fund normally invests at least 65% of its total assets in securities of issuers from at least five different countries, excluding the United States. Although the Fund intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country. JANUS TWENTY FUND The investment objective of this Fund is long-term growth of capital. It is a non-diversified fund that pursues its objective by normally concentrating its investments in a core position of 20-30 common stocks. JANUS WORLDWIDE FUND The investment objective of this Fund is long-term growth of capital in a manner consistent with the preservation of capital. It is a diversified fund that pursues its objective primarily through investments in common stocks of foreign and domestic issuers. The Fund has the flexibility to invest on a worldwide basis in companies and organizations of any size, regardless of country of organization or place of principal business activity. Janus Worldwide Fund normally invests in issuers from at least five different countries, including the United States. The Fund may at times invest in fewer than five countries or even a single country. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 8 ALL GROWTH FUNDS Each of the Growth Funds invests primarily in common stocks of foreign and domestic companies. However, the percentage of each Fund's assets invested in common stocks will vary and each Fund may at times hold substantial positions in cash equivalents or interest bearing securities. See "General Portfolio Policies" on page 11. Each Fund may invest to a lesser degree in other types of securities including preferred stock, warrants, convertible securities and debt securities when its portfolio manager perceives an opportunity for capital growth from such securities or to receive a return on idle cash. The Funds may purchase securities on a when-issued, delayed delivery or forward commitment basis. The Funds may invest up to 25% of their assets in mortgage- and asset-backed securities, up to 10% of their assets in zero coupon, pay-in-kind and step coupon securities, and without limit in indexed/structured securities. No Fund will invest 35% or more of its assets in high-yield/high-risk securities. Although Janus Worldwide Fund and Janus Overseas Fund are committed to foreign investing, all of the Growth Funds may invest without limit in foreign equity and debt securities. The Funds may invest directly in foreign securities denominated in a foreign currency and not publicly traded in the United States. Other ways of investing in foreign securities include depositary receipts or shares, and passive foreign investment companies. Each of the Growth Funds may use futures, options and other derivatives for hedging purposes or for non-hedging purposes such as seeking to enhance return. See "Additional Risk Factors" on pages 12-13 for a discussion of the risks associated with foreign investing and derivatives. THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT IN THE JANUS GROWTH FUNDS. HOW ARE COMMON STOCKS SELECTED? Each of the Growth Funds invests substantially all of its assets in common stocks to the extent its portfolio manager believes that the relevant market environment favors profitable investing in those securities. Portfolio managers generally take a "bottom up" approach to building their portfolios. In other words, they seek to identify individual companies with earnings growth potential that may not be recognized by the market at large. Although themes may emerge in any Fund, securities are generally selected without regard to any defined industry sector or other similarly defined selection procedure. Realization of income is not a significant investment consideration for the Growth Funds (except Janus Equity Income Fund). Any income realized on these Growth Funds' investments will be incidental to their objectives. - -------------------------------------------------------------------------------- ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES? Generally, yes. Portfolio managers seek companies that meet their selection criteria regardless of country of organization or place of principal business activity. Foreign securities are generally selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic regions. However, certain factors such as expected levels of inflation, government policies influencing business conditions, the outlook for currency relationships, and prospects for economic growth among countries, regions or geographic areas may warrant greater consideration in selecting foreign securities. See "Additional Risk Factors" on pages 12-13. WHAT IS THE MAIN RISK OF INVESTING IN A COMMON STOCK FUND? The fundamental risk associated with any common stock fund is the risk that the value of the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. Historically, common stocks have provided greater long-term returns and have entailed greater short-term risks than other investment choices. Smaller or newer issuers are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers. Investments in such companies can be both more volatile and more speculative. See "Additional Risk Factors" on pages 12-13. - -------------------------------------------------------------------------------- WHAT IS MEANT BY "MARKET CAPITALIZATION"? Market capitalization is the most commonly used measure of the size and value of a company. It is computed by multiplying the current market price of a share of the company's stock by the total number of its shares outstanding. As noted previously, market capitalization is an important investment criteria for Janus Enterprise Fund. Although the other Growth Funds offered by this Prospectus do not emphasize companies of any particular size, Funds with a larger asset base (e.g., Janus Fund) are more likely to invest in larger, more established issuers. - -------------------------------------------------------------------------------- HOW DOES A DIVERSIFIED FUND DIFFER FROM A NONDIVERSIFIED FUND? Diversification is a means of reducing risk by investing a Fund's assets in a broad range of stocks or other securities. A "nondiversified" fund has the ability to take larger positions in a smaller number JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 9 of issuers. Because the appreciation or depreciation of a single stock may have a greater impact on the NAV of a nondiversified fund, its share price can be expected to fluctuate more than a comparable diversified fund. Janus Enterprise Fund, Janus Olympus Fund, and Janus Twenty Fund are nondiversified funds. See the risk spectrum on page 2 and "General Portfolio Policies" on page 11. HOW DO THE GROWTH FUNDS TRY TO REDUCE RISK? Diversification of a Fund's assets reduces the effect of any single holding on its overall portfolio value. A Fund may also use futures, options and other derivative instruments to protect its portfolio from movements in securities prices and interest rates. The Funds may use a variety of currency hedging techniques, including forward currency contracts, to manage exchange rate risk. See "Additional Risk Factors" on pages 12-13. In addition, to the extent that a Fund holds a larger cash position, it might not participate in market declines to the same extent as if the Fund remained more fully invested in common stocks. THE JANUS COMBINATION FUNDS ARE DESIGNED FOR INVESTORS WHO PRIMARILY SEEK GROWTH OF CAPITAL WITH A DEGREE OF EMPHASIS ON INCOME. THESE FUNDS ARE NOT DESIGNED FOR INVESTORS WHO DESIRE A CONSISTENT LEVEL OF INCOME. COMBINATION FUNDS Investment Objective: .............. Growth of Capital; Some Emphasis on Income Primary Holdings: ............... Common Stocks and Income-Producing Securities Shareholder's Investment Horizon: ................................... Long-Term JANUS BALANCED FUND The investment objective of this Fund is long-term capital growth, consistent with preservation of capital and balanced by current income. It is a diversified fund that, under normal circumstances, pursues its objective by investing 40-60% of its assets in securities selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. This Fund normally invests at least 25% of its assets in fixed-income senior securities, which include debt securities and preferred stocks. JANUS GROWTH AND INCOME FUND The investment objective of this Fund is long-term capital growth and current income. It is a diversified fund that, under normal circumstances, pursues its objective by investing up to 75% of its assets in equity securities selected primarily for their growth potential and at least 25% of its assets in securities that have income potential. The Fund normally emphasizes the growth component. However, in unusual circumstances, this Fund may reduce the growth component of its portfolio to 25% of its assets. ALL COMBINATION FUNDS The Combination Funds may invest in the types of investments previously described under "Growth Funds" on page 9. THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT IN THE JANUS COMBINATION FUNDS. HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME COMPONENT OF A COMBINATION FUND'S PORTFOLIO? The Combination Funds may invest in a combination of common stocks, preferred stocks, convertible securities, debt securities and other fixed-income securities. A Combination Fund may shift assets between the growth and income components of its portfolio based on its portfolio manager's analysis of relevant market, financial and economic conditions. If a portfolio manager believes that growth securities will provide better returns than the yields then available or expected on income-producing securities, then that Fund will place a greater emphasis on the growth component. - -------------------------------------------------------------------------------- WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF THE COMBINATION FUNDS? The growth component of the Combination Funds is expected to consist primarily of common stocks. The selection criteria for common stocks are described on page 9. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 10 Because income is a part of the investment objective of the Combination Funds, a portfolio manager may consider dividend-paying characteristics to a greater degree in selecting equity securities for these Funds. The Combination Funds may also find opportunities for capital growth from debt securities because of anticipated changes in interest rates, credit standing, currency relationships or other factors. - -------------------------------------------------------------------------------- WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT OF THE COMBINATION FUNDS? The income component of each Combination Fund will consist of securities that the portfolio manager believes have income potential. Such securities may include equity securities, convertible securities and all types of debt securities. Equity securities may be included in the income component of the Combination Funds if they currently pay dividends or a portfolio manager believes they have the potential for either increasing their dividends or commencing dividends, if none are currently paid. Investors in the Combination Funds should keep in mind that the Combination Funds are not designed to produce a consistent level of income. - -------------------------------------------------------------------------------- HOW DO THE COMBINATION FUNDS DIFFER FROM EACH OTHER? Janus Growth and Income Fund places a greater emphasis on the growth objective. Because it generally invests more heavily in growth stocks than Janus Balanced Fund, its share price can be expected to fluctuate more. Janus Growth and Income Fund has historically derived a greater portion of its income from dividend-paying common stocks, while Janus Balanced Fund invests to a greater degree in debt securities and preferred stock. GENERAL PORTFOLIO POLICIES Unless otherwise stated, each of the following policies applies to all of the Funds. The percentage limitations included in these policies and elsewhere in this Prospectus apply at the time of purchase of the security. For example, if a Fund exceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose of any securities. CASH POSITION When a Fund's portfolio manager believes that market conditions are not favorable for profitable investing or when the portfolio manager is otherwise unable to locate favorable investment opportunities, a Fund's investments may be hedged to a greater degree and/or its cash or similar investments may increase. In other words, the Funds do not always stay fully invested in stocks and bonds. Cash or similar investments are a residual - they represent the assets that remain after a portfolio manager has committed available assets to desirable investment opportunities. Partly because the portfolio managers act independently of each other, the cash positions of the Funds may vary significantly. Larger hedged positions and/or larger cash positions may serve as a means of preserving capital in unfavorable market conditions. Securities that the Funds may invest in as means of receiving a return on idle cash include high-grade commercial paper, certificates of deposit, repurchase agreements or other short-term debt obligations. The Funds may also invest in money market funds (including funds managed by Janus Capital). When a Fund's investments in cash or similar investments increase, a Fund may not participate in stock or bond market advances or declines to the same extent that it would if the Fund remained more fully invested in stocks or bonds. DIVERSIFICATION The Investment Company Act of 1940 (the "1940 Act") classifies investment companies as either diversified or nondiversified. All of the Funds (except Janus Enterprise Fund, Janus Olympus Fund and Janus Twenty Fund) qualify as diversified funds under the 1940 Act. The Funds are subject to the following diversification requirements: o As a fundamental policy, no Fund may own more than 10% of the outstanding voting shares of any issuer. o As a fundamental policy, with respect to 50% of the total assets of Janus Enterprise Fund, Janus Olympus Fund and Janus Twenty Fund and 75% of the total assets of the other Funds, no Fund will purchase a security of any issuer (other than cash items and U.S. government securities, as defined in the 1940 Act) if such purchase would cause a Fund's holdings of that issuer to amount to more than 5% of that Fund's total assets. o No Fund will invest more than 25% of its total assets in a single issuer (other than U.S. government securities). o Janus Enterprise Fund, Janus Olympus Fund and Janus Twenty Fund reserve the right to become diversified funds by limiting the investments in which more than 5% of their total assets are invested. INDUSTRY CONCENTRATION As a fundamental policy, no Fund will invest 25% or more of its total assets in any particular industry (excluding U.S. government securities). PORTFOLIO TURNOVER Each Fund generally intends to purchase securities for long-term investment rather than short-term gains. However, short-term transactions may result from liquidity needs, securities having reached a price or yield objective, changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not foreseen at the time of the initial investment decision. Changes are made in a Fund's portfolio whenever its portfolio manager believes such changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 11 To a limited extent, a Fund may purchase securities in anticipation of relatively short-term price gains. A Fund may also sell one security and simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or securities prices. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs and may also result in taxable capital gains. Certain tax rules may restrict the Funds' ability to engage in short-term trading if a security has been held for less than three months. ILLIQUID INVESTMENTS Each Fund may invest up to 15% of its net assets in illiquid investments, including restricted securities or private placements that are not deemed to be liquid by Janus Capital. An illiquid investment is a security or other position that cannot be disposed of quickly in the normal course of business. Some securities cannot be sold to the U.S. public because of their terms or because of SEC regulations. Janus Capital will follow guidelines established by the Funds' Trustees in making liquidity determinations for Rule 144A securities and certain other securities, including privately placed commercial paper and municipal lease obligations. BORROWING AND LENDING Each Fund may borrow money and lend securities or other assets, as follows: o Each Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. o Each Fund may mortgage or pledge securities as security for borrowings in amounts up to 15% of its net assets. o As a fundamental policy, each Fund may lend securities or other assets if, as a result, no more than 25% of its total assets would be lent to other parties. Each Fund intends to seek permission from the SEC to borrow money from or lend money to each other and other funds that permit such transactions and for which Janus Capital serves as investment adviser. All such borrowing and lending will be subject to the above percentage limits. There is no assurance that such permission will be granted. ADDITIONAL RISK FACTORS FOREIGN SECURITIES INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS, INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES. Securities of some foreign companies and governments may be traded in the United States, but many foreign securities are traded primarily in foreign markets. The risks of foreign investing include: o Currency Risk. A Fund may buy the local currency when it buys a foreign currency denominated security and sell the local currency when it sells the security. As long as a Fund holds a foreign security, its value will be affected by the value of the local currency relative to the U.S. dollar. When a Fund sells a foreign security, its value may be worth less in U.S. dollars even though the security increases in value in its home country. U.S. dollar denominated securities of foreign issuers may also be affected by currency risk. o Political and Economic Risk. Foreign investments may be subject to heightened political and economic risks, particularly in underdeveloped or developing countries which may have relatively unstable governments and economies based on only a few industries. In some countries, there is the risk that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of a Fund's assets from that country. The Funds may invest in emerging market countries. Emerging market countries involve greater risks such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. o Regulatory Risk. There may be less government supervision of foreign markets. Foreign issuers may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic issuers. There may be less publicly available information about foreign issuers than domestic issuers. o Market Risk. Foreign securities markets, particularly those of underdeveloped or developing countries, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions. There may be limited legal recourse against an issuer in the event of a default on a debt instrument. o Transaction Costs. Transaction costs of buying and selling foreign securities, including brokerage, tax and custody costs, are generally higher than those involved in domestic transactions. Foreign securities purchased indirectly (e.g., depositary receipts) are subject to many of the above risks, including currency risk, because their values depend on the performance of a foreign security denominated in its home currency. INVESTMENTS IN SMALLER COMPANIES SMALLER OR NEWER COMPANIES MAY SUFFER MORE SIGNIFICANT LOSSES AS WELL AS REALIZE MORE SUBSTANTIAL GROWTH THAN LARGER OR MORE ESTABLISHED ISSUERS. Smaller or newer companies may lack depth of management, they may be unable to generate funds necessary for growth or potential development, or they may be developing or marketing new products or services for which markets are not yet established and may never become established. In addition, such companies may be insignificant factors in their industries and JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 12 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 wider price fluctuations. Investments in such companies tend to be more volatile and somewhat more speculative. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS Each Fund may enter into futures contracts on securities, financial indices and foreign currencies and options on such contracts ("futures contracts") and may invest in options on securities, financial indices and foreign currencies ("options"), forward contracts and interest rate swaps and swap-related products (collectively "derivative instruments"). The Funds intend to use most derivative instruments primarily to hedge the value of their portfolios against potential adverse movements in securities prices, foreign currency markets or interest rates. To a limited extent, the Funds may also use derivative instruments for non-hedging purposes such as seeking to increase a Fund's income or otherwise seeking to enhance return. Please refer to Appendix A to this Prospectus and the SAI for a more detailed discussion of these instruments. The use of derivative instruments exposes the Funds to additional investment risks and transaction costs. Risks inherent in the use of derivative instruments include: o the risk that interest rates, securities prices and currency markets will not move in the direction that a portfolio manager anticipates; o imperfect correlation between the price of derivative instruments and movements in the prices of the securities, interest rates or currencies being hedged; o the fact that skills needed to use these strategies are different from those needed to select portfolio securities; o inability to close out certain hedged positions to avoid adverse tax consequences; o the possible absence of a liquid secondary market for any particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; o leverage risk, that is, the risk that adverse price movements in an instrument can result in a loss substantially greater than a Fund's initial investment in that instrument (in some cases, the potential loss is unlimited); and o particularly in the case of privately-negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave a Fund worse off than if it had not entered into the position. Although the Funds believe the use of derivative instruments will benefit the Funds, a Fund's performance could be worse than if the Fund had not used such instruments if a portfolio manager's judgement proves incorrect. When a Fund invests in a derivative instrument, it may be required to segregate cash and other liquid assets or certain portfolio securities with its custodian to "cover" the Fund's position. Assets segregated or set aside generally may not be disposed of so long as the Fund maintains the positions requiring segregation or cover. Segregating assets could diminish the Fund's return due to the opportunity losses of foregoing other potential investments with the segregated assets. HIGH-YIELD/HIGH-RISK SECURITIES High-yield/high-risk securities (or "junk" bonds) are debt securities rated below investment grade by the primary rating agencies (such as, Standard & Poor's Ratings Services and Moody's Investors Service, Inc.). The value of lower quality securities generally is more dependent on the ability of the issuer to meet interest and principal payments (i.e., credit risk) than is the case for higher quality securities. Conversely, the value of higher quality securities may be more sensitive to interest rate movements than lower quality securities. Issuers of high-yield securities may not be as strong financially as those issuing bonds with higher credit ratings. Investments in such companies are considered to be more speculative than higher quality investments. Issuers of high-yield securities are more vulnerable to real or perceived economic changes (for instance, an economic downturn or prolonged period of rising interest rates), political changes or adverse developments specific to the issuer. The market for lower quality securities is generally less liquid than the market for higher quality bonds. Adverse publicity and investor perceptions as well as new or proposed laws may also have a greater negative impact on the market for lower quality securities. Please refer to the SAI for a description of bond rating categories. SHORT SALES Each Fund may engage in "short sales against the box," which involves selling a security that a Fund owns (or has the right to obtain securities equivalent in kind and amount to the securities sold short) for delivery at a specified date in the future, to hedge against anticipated declines in the market price of portfolio securities or to defer an unrealized gain. If the value of the securities sold short increases prior to the scheduled delivery date, a Fund loses the opportunity to participate in the gain. SPECIAL SITUATIONS Each Fund may invest in "special situations" from time to time. A special situation arises when, in the opinion of a Fund's portfolio manager, the securities of a particular issuer will be recognized and appreciate in value due to a specific development with respect to that issuer. Developments creating a special situation might include, among others, a new product or process, a technological breakthrough, a management change or other extraordinary corporate event, or differences in market supply of and demand for the security. Investment in special situations may carry an additional risk of loss in the event that the anticipated development does not occur or does not attract the expected attention. See Appendix A for risks associated with certain other investments. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 13 SHAREHOLDER'S MANUAL This section will help you become familiar with the different types of accounts you can establish with Janus. This section also explains in detail the wide array of services and features you can establish on your account. These services and features may be modified or discontinued without shareholder approval or prior notice. HOW TO GET IN TOUCH WITH JANUS If you have any questions while reading this Prospectus, please call one of our Investor Service Representatives at 1-800-525-3713 Monday-Friday: 8:00 a.m.-10:00 p.m., and Saturday: 10:00 a.m.-7:00 p.m., New York time. - -------------------------------------------------------------------------------- MINIMUM INVESTMENTS* To open a new account ............................. $2,500 To open a new retirement or UGMA/UTMA account ............................... $500 To open a new account with an Automatic Investment Program ................. $500** To add to any type of an account .................. $100 *The Funds reserve the right to change the amount of these minimums from time to time or to waive them in whole or in part for certain types of accounts. **There is a $100 minimum for each subsequent investment. - -------------------------------------------------------------------------------- TYPES OF ACCOUNT OWNERSHIP If you are investing in the Funds for the first time, you will need to establish an account. You can establish the following types of accounts by completing the New Account Application. To request an application, call 1-800-525-3713. o Individual or Joint Ownership. Individual accounts are owned by one person. Joint accounts have two or more owners. o A Gift or Transfer to Minor (UGMA or UTMA). An UGMA/UTMA account is a custodial account managed for the benefit of a minor. To open an UGMA or UTMA account, you must include the minor's Social Security number on the application. o Trust. An established trust can open an account. The names of each trustee, the name of the trust and the date of the trust agreement must be included on the application. o Business Accounts. Corporations and partnerships may also open an account. The application must be signed by an authorized officer of the corporation or a general partner of the partnership. RETIREMENT ACCOUNTS If you are eligible, you may set up your account under a tax-sheltered retirement plan. A retirement plan allows you to shelter your investment income and capital gains from current income taxes. A contribution to these plans may also be tax deductible. Distributions from a retirement plan are generally subject to income tax and may be subject to an additional tax if withdrawn prior to age 59 1/2. Investors Fiduciary Trust Company serves as custodian for the retirement plans offered by the Funds. There is an annual $12 fee per account to maintain your retirement account. The maximum annual fee is $24 per taxpayer identification number. You may pay the fee by check or have it automatically deducted from your account (usually in December). The following plans require a special application. For an application and more details about our Retirement Plans, call 1-800-525-3713. o Individual Retirement Account: An IRA allows individuals under age 70 1/2 with earned income to contribute up to the lesser of $2,000 or 100% of compensation annually. Please refer to the Janus Funds IRA booklet for complete information regarding IRAs. o Simplified Employee Pension Plan ("SEP"): This plan allows small business owners (including sole proprietors) to make tax-deductible contributions for themselves and any eligible employee(s). A SEP requires an IRA (a SEP-IRA) to be set up for each SEP participant. o Profit Sharing or Money Purchase Pension Plan: These plans are open to corporations, partnerships and sole proprietors to benefit their employees and themselves. o Section 403(b)(7) Plan: Employees of educational organizations or other qualifying, tax-exempt organizations may be eligible to participate in a Section 403(b)(7) Plan. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 14 HOW TO OPEN YOUR JANUS ACCOUNT Complete and sign the appropriate application. Please be sure to provide your Social Security or taxpayer identification number on the application. Make your check payable to Janus Funds. Send all items to one of the following addresses: Janus Funds P.O. Box 173375 Denver, CO 80217-3375 For Overnight Carrier Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 INVESTOR SERVICE CENTERS Janus Funds offers two Investor Service Centers for those individuals who would like to conduct their investing in person. Our representatives will be happy to assist you at either of the following locations: 100 Fillmore Street, Suite 100 Denver, CO 80206 3773 Cherry Creek North Drive, Suite 101 Denver, CO 80209 HOW TO PURCHASE SHARES PAYING FOR SHARES When you purchase shares, your request will be processed at the next NAV calculated after your order is received and accepted. Please note the following: o Cash, credit cards, third party checks and credit card checks will not be accepted. o All purchases must be made in U.S. dollars. o Checks must be drawn on U.S. banks and made payable to Janus Funds. o If a check does not clear your bank, the Funds reserve the right to cancel the purchase. o If the Funds are unable to debit your predesignated bank account on the day of purchase, they may make additional attempts or cancel the purchase. o The Funds reserve the right to reject any specific purchase request. If your purchase is cancelled, you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of any decline in the value of the cancelled purchase. The Funds (or their agents) have the authority to redeem shares in your account(s) to cover any losses due to fluctuations in share price. Any profit on such cancellation will accrue to the Fund. ONCE YOU HAVE OPENED YOUR JANUS ACCOUNT, THE MINIMUM AMOUNT FOR AN ADDITIONAL INVESTMENT IS $100. You may add to your account at any time through any of the following options: BY MAIL Complete the remittance slip attached at the bottom of your confirmation statement. If you are making a purchase into a retirement account, please indicate whether the purchase is a rollover or a current or prior year contribution. Send your check and remittance slip or written instructions to one of the addresses listed previously. You may also request a booklet of remittance slips for non-retirement accounts. BY TELEPHONE This service allows you to purchase additional shares quickly and conveniently through an electronic transfer of money. When you make an additional purchase by telephone, Janus will automatically debit your predesignated bank account for the desired amount. To establish the telephone purchase option on your new account, complete the "Telephone Purchase of Shares Option" section on the application and attach a "voided" check or deposit slip from your bank account. If your account is already established, call 1-800-525-3713 to request the appropriate form. This option will become effective ten business days after the form is received. BY WIRE Purchases may also be made by wiring money from your bank account to your Janus account. Call 1-800-525-3713 to receive wiring instructions. AUTOMATIC INVESTMENT PROGRAMS Janus offers several automatic investment plans to help you achieve your financial goals as simply and conveniently as possible. You may open a new account with a $500 initial purchase and $100 automatic subsequent investments. o Automatic Monthly Investment Program You select the day each month that your money ($100 minimum) will be electronically transferred from your bank account to your Fund account. To establish this option, complete the "Automatic Monthly Investment Program" section on the application and attach a "voided" check or deposit slip from your bank account. If your Fund account is already established, call 1-800-525-3713 to request the appropriate form. o Payroll Deduction If your employer can initiate an automatic payroll deduction, you may have all or a portion of your paycheck ($100 minimum) invested directly into your Fund account. To obtain information on establishing this option, call 1-800-525-3713. o Systematic Exchange With a Systematic Exchange you determine the amount of money ($100 minimum) you would like automatically exchanged from one Janus account to another on any day of the month. For more information on how to establish this option, call 1-800-525-3713. HOW TO EXCHANGE SHARES On any business day, you may exchange all or a portion of your shares into any other available Janus fund. IN WRITING To request an exchange in writing, please follow the instructions for written requests on page 17. BY TELEPHONE All accounts are automatically eligible for the telephone exchange option. To exchange shares by telephone, call an Investor Service Representative at 1-800-525-3713 JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 15 during normal business hours or call the Janus Electronic Telephone Service (JETS(R)) line at 1-800-525-6125. BY SYSTEMATIC EXCHANGE As noted above, you may establish a Systematic Exchange for as little as a $100 subsequent purchase per month on established accounts. You may establish a new account with a $500 initial purchase and subsequent $100 systematic exchanges. If the balance in the account you are exchanging from falls below the systematic exchange amount, all remaining shares will be exchanged and the program will be discontinued. EXCHANGE POLICIES o Except for Systematic Exchanges, new accounts established by exchange must meet the $2,500 minimum, or be for the total account value if less than $2,500. o Exchanges between existing accounts must meet the $100 subsequent investment requirement. o You may make four exchanges out of each Fund during a calendar year (exclusive of Systematic Exchanges) free of charge. o Exchanges between accounts will be accepted only if the registrations are identical. o If the shares you are exchanging are held in certificate form, you must return the certificate to your Fund prior to making any exchanges. o Be sure that you read the prospectus for the Fund into which you are exchanging. o The Funds reserve the right to reject any exchange request and to modify or terminate the exchange privilege at any time. For example, the Funds may reject exchanges from accounts engaged in excessive trading (including market timing transactions) that are believed to be detrimental to the Funds. o An exchange represents the sale of shares from one Fund and the purchase of shares of another Fund, which may produce a taxable gain or loss in a non-tax deferred account. QUICK ADDRESS AND TELEPHONE REFERENCE MAILING ADDRESS Janus Funds P.O. Box 173375 Denver, CO 80217-3375 FOR OVERNIGHT CARRIER Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 JANUS INTERNET ADDRESS http://www.JanusFunds.com JANUS INVESTOR SERVICES 1-800-525-3713 To speak to a service representative JETS(R) 1-800-525-6125 For 24-hour access to account and Fund information. TDD 1-800-525-0056 A telecommunications device for our hearing- and speech-impaired shareholders. JANUS QUOTELINE(R) For automated daily quotes on Fund share prices, yields and total returns. JANUS LITERATURE LINE 1-800-525-8983 To request a prospectus, shareholder reports or marketing materials. HOW TO REDEEM SHARES On any business day, you may redeem all or a portion of your shares. If the shares are held in certificate form, the certificate must be returned with or before your redemption request. Your transaction will be processed at the next NAV calculated after your order is received and accepted. IN WRITING To request a redemption in writing, please follow the instructions for written requests on page 17. BY TELEPHONE Most accounts have the telephone redemption option, unless this option was specifically declined on the application or in writing. This option enables you to redeem up to $100,000 daily from your account by simply calling 1-800-525-3713 by 4:00 p.m. New York time. SYSTEMATIC REDEMPTION OPTION Systematic Redemption Options allow you to redeem a specific dollar amount from your account on a regular basis. For more information or to request the appropriate form, please call 1-800-525-3713. PAYMENT OF REDEMPTION PROCEEDS o By Check Redemption proceeds will be sent to the shareholder(s) of record at the address of record within seven days after receipt of a valid redemption request. o Electronic Transfer If you have established this option, your redemption proceeds can be electronically transferred to your predesignated bank account on the second business day after receipt of your redemption request. To establish this option, call 1-800-525-3713. There is no fee for this option. o By Wire If you are authorized for the wire redemption service, your redemption proceeds will be wired directly into your designated bank account on the next business day after receipt of your redemption request. There is no limitation on redemptions by wire; however, there is an $8 fee for each wire and your bank may charge an additional fee to receive the wire. If you would like to establish this option on an existing account, please call 1-800-525-3713 to request the appropriate form. Wire redemptions are not available for retirement accounts. IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUNDS MAY DELAY THE PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE TO ALLOW THE PURCHASE TO CLEAR. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 16 Unless you provide alternate instructions, your proceeds will be invested in Janus Money Market Fund - Investor Shares during the 15 day hold period. WRITTEN INSTRUCTIONS To redeem or exchange all or part of your shares in writing, your request should be sent to one of the addresses listed on page 15 and must include the following information: o the name of the Fund(s) o the account number(s) o the amount of money or number of shares being redeemed o the name(s) on the account o the signature(s) of all registered account owners o your daytime telephone number SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE o Individual, Joint Tenants, Tenants in Common: Written instructions must be signed by each shareholder, exactly as the names appear in the account registration. o UGMA or UTMA: Written instructions must be signed by the custodian in his/ her capacity as it appears in the account registration. o Sole Proprietor, General Partner: Written instructions must be signed by an authorized individual in his/her capacity as it appears in the account registration. o Corporation, Association: Written instructions must be signed by the person(s) authorized to act on the account. In addition, a certified copy of the corporate resolution authorizing the signer to act must accompany the request. o Trust: Written instructions must be signed by the trustee(s). If the name of the current trustee(s) does not appear in the account registration, a certificate of incumbency dated within 60 days must also be submitted. o IRA: Written instructions must be signed by the account owner. If you do not want federal income tax withheld from your redemption, you must state that you elect not to have such withholding apply. In addition, your instructions must state whether the distribution is normal (after age 59 1/2) or premature (before age 59 1/2) and, if premature, whether any exceptions such as death or disability apply with regard to the 10% additional tax on early distributions. PRICING OF FUND SHARES All purchases, redemptions and exchanges will be processed at the NAV next calculated after your request is received and approved. A Fund's NAV is calculated at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4:00 p.m. New York time) each day that the NYSE is open. In order to receive a day's price, your order must be received by the close of the regular trading session of the NYSE. Securities are valued at market value or, if a market quotation is not readily available, at their fair value determined in good faith under procedures established by and under the supervision of the Trustees. Short-term instruments maturing within 60 days are valued at amortized cost, which approximates market value. See the SAI for more detailed information. SHAREHOLDER SERVICES AND ACCOUNT POLICIES JANUS ELECTRONIC TELEPHONE SERVICE (JETS(R)) JETS, our electronic telephone service line, offers you 24-hour access by TouchTone(TM) telephone to obtain your account balance, to confirm your last transaction or dividend posted to your account, to order duplicate account or tax statements, to reorder money market fund checks, to exchange your shares or to purchase shares. JETS can be accessed by calling 1-800-525-6125. Calls on JETS are limited to seven minutes. JANUS WEB SITE Janus maintains a Web site located at http://www.JanusFunds.com. You can access information such as your account balance and the Funds' NAVs through the Web site. In addition, you may request and/or download a Janus funds prospectus. SIGNATURE GUARANTEE In addition to the signature requirements, a signature guarantee is also required if any of the following is applicable: o The redemption exceeds $100,000. o You would like the check made payable to anyone other than the shareholder(s) of record. o You would like the check mailed to an address which has been changed within 10 days of the redemption request. o You would like the check mailed to an address other than the address of record. THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713. HOW TO OBTAIN A SIGNATURE GUARANTEE A signature guarantee assures that a signature is genuine. The signature guarantee protects shareholders from unauthorized account transfers. The following financial institutions may guarantee signatures: banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange. Call your financial institution to see if they have the ability to guarantee a signature. A SIGNATURE GUARANTEE MAY NOT BE PROVIDED BY A NOTARY PUBLIC. If you live outside the United States, a foreign bank properly authorized to do business in your country of residence or a U.S. consulate may be able to authenticate your signature. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 17 ACCOUNT MINIMUMS Minimum account sizes are noted on page 14. An account established on or before February 18, 1996 is required to meet the minimum balances in effect when the account was established ($1,000 for regular accounts and $250 for retirement and UGMA/UTMA accounts). An active Automatic Monthly Investment (AMI) on any such account exempted it from any minimum initial investment requirement and continues to do so. In addition, an active AMI on these accounts may continue at $50 per month, provided there is no interruption in the AMI program. All other subsequent investments must meet the $100 required minimum. Due to the proportionately higher costs of maintaining small accounts, Janus reserves the right to deduct a $10 minimum balance fee (or the value of the account if less than $10) from accounts with values below the minimums described on page 14 or to close such accounts. This policy will apply to accounts participating in the Automatic Monthly Investment Program only if your account balance does not reach the required minimum initial investment or falls below such minimum and you have discontinued monthly investments. This policy does not apply to accounts that fall below the minimums solely as a result of market value fluctuations. It is expected that accounts will be valued in September. The $10 fee will be assessed on the second Friday of September of each year. You will receive notice before we charge the $10 fee or close your account so that you may increase your account balance to the required minimum. TRANSACTIONS THROUGH PROCESSING ORGANIZATIONS You may purchase or sell Fund shares through a broker-dealer, bank or other financial institution, or an organization that provides recordkeeping and consulting services to 401(k) plans or other employee benefit plans (a "Processing Organization"). Processing Organizations may charge you a fee for this service and may require different minimum initial and subsequent investments than the Funds. The Processing Organization may also impose other charges or restrictions different from those applicable to shareholders who invest in the Funds directly. The Processing Organization, rather than its customers, may be the shareholder of record of your shares. The Funds are not responsible for the failure of any Processing Organization to carry out its obligations to its customers. Certain Processing Organizations may receive compensation from Janus Capital or its affiliates and certain Processing Organizations may receive compensation from the Funds for shareholder recordkeeping and similar services. TAXPAYER IDENTIFICATION NUMBER On the application or other appropriate form, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to backup withholding for failing to report income to the IRS. If you are subject to the 31% backup withholding or you did not certify your taxpayer identification, the IRS requires the Funds to withhold 31% of any dividends paid and redemption or exchange proceeds. In addition to the 31% backup withholding, you may be subject to a $50 fee to reimburse the Funds for any penalty that the IRS may impose. SHARE CERTIFICATES Most shareholders choose not to hold their shares in certificate form because account transactions such as exchanges and redemptions cannot be completed until the certificate has been returned to the Funds. The Funds will issue share certificates upon written request only. Share certificates will not be issued until the shares have been held for at least 15 days and will not be issued for accounts that do not meet the minimum investment requirements. Share certificates cannot be issued for retirement accounts. In addition, if the certificate is lost, there may be a replacement charge. INVOLUNTARY REDEMPTIONS The Funds reserve the right to close an account if the shareholder is deemed to engage in activities which are illegal or otherwise believed to be detrimental to the Funds. TELEPHONE TRANSACTIONS You may initiate many transactions by telephone. The Funds and their agents will not be responsible for any losses resulting from unauthorized transactions when procedures designed to verify the identity of the caller are followed. It may be difficult to reach the Funds by telephone during periods of unusual market activity. If you are unable to reach a representative by telephone, please consider sending written instructions, stopping by a Service Center or, in the case of purchases and exchanges, calling the JETS line. TEMPORARY SUSPENSION OF SERVICES The Funds or their agents may, in case of emergency, temporarily suspend telephone transactions and other shareholder services. ADDRESS CHANGES To change the address on your account, call 1-800-525-3713 or send a written request signed by all account owners. Include the name of your Fund(s), the account number(s), the name(s) on the account and both the old and new addresses. Certain options may be suspended for 10 days following an address change unless a signature guarantee is provided. REGISTRATION CHANGES To change the name on an account, the shares are generally transferred to a new account. In some cases, legal documentation may be required. For more information, call 1-800-525-3713. STATEMENTS AND REPORTS Investors participating in an automatic investment program will receive quarterly confirmations of all transactions. (Dividend information will be distributed annually.) The Funds will send you a confirmation statement after every non-systematic transaction. Tax information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. Account tax information will also be sent to the IRS. Financial reports for the Funds, which include a list of the Funds' portfolio holdings, will be mailed semiannually to all shareholders. To reduce expenses, only one copy of most financial reports will be mailed to accounts with the same record address. Upon request, such reports will be mailed to all accounts in the same household. Please call 1-800-525-3713 if you would like to receive additional reports. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 18 MANAGEMENT OF THE FUNDS TRUSTEES The Trustees oversee the business affairs of the Trust and are responsible for major decisions relating to each Fund's investment objectives and policies. The Trustees delegate the day-to-day management of the Funds to the officers of the Trust and meet at least quarterly to review the Funds' investment policies, performance, expenses and other business affairs. INVESTMENT ADVISER Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, is the investment adviser to each of the Funds and is responsible for the day-to-day management of the investment portfolios and other business affairs of the Funds. Janus Capital began serving as investment adviser to Janus Fund at its inception in 1970 and currently serves as investment adviser to all of the Janus funds, as well as adviser or subadviser to other mutual funds and individual, corporate, charitable and retirement accounts. Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock of Janus Capital, most of which it acquired in 1984. KCSI is a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services. Thomas H. Bailey, President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. Janus Capital furnishes continuous advice and recommendations concerning each Fund's investments. Janus Capital also furnishes certain administrative, compliance and accounting services for the Funds, and may be reimbursed by the Funds for its costs in providing those services. In addition, Janus Capital employees serve as officers of the Trust and Janus Capital provides office space for the Funds and pays the salaries, fees and expenses of all Fund officers and those Trustees who are affiliated with Janus Capital. INVESTMENT PERSONNEL James P. Craig, III is Chief Investment Officer of Janus Capital. He is also Executive Vice President and portfolio manager of Janus Fund, which he has managed since 1986. Mr. Craig previously managed Janus Venture Fund from its inception to December 1993 and Janus Balanced Fund from December 1993 through December 1995. He holds a Bachelor of Arts in Business from the University of Alabama and a Master of Arts in Finance from the Wharton School of the University of Pennsylvania. - -------------------------------------------------------------------------------- James P. Goff is Executive Vice President and portfolio manager of Janus Enterprise Fund. Mr. Goff joined Janus Capital in 1988 and has managed this Fund since its inception. Mr. Goff co-managed Janus Venture Fund from December 1993 to December 1996. Effective January 1, 1997, he became sole portfolio manager of Janus Venture Fund. He holds a Bachelor of Arts in Economics from Yale University and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Helen Young Hayes is Executive Vice President and portfolio manager of Janus Worldwide Fund and Janus Overseas Fund. Ms. Hayes joined Janus Capital in 1987 and has managed or co-managed Janus Worldwide Fund and Janus Overseas Fund since their inceptions. She holds a Bachelor of Arts in Economics from Yale University and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Warren B. Lammert is Executive Vice President and portfolio manager of Janus Mercury Fund. Mr. Lammert joined Janus Capital in 1987 and has managed Janus Mercury Fund since its inception and Janus Balanced Fund from its inception to December 1993. He also co-managed Janus Venture Fund from December 1993 to December 1996. He holds a Bachelor of Arts in Economics from Yale University and a Master of Science in Economic History from the London School of Economics and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Thomas F. Marsico is Executive Vice President and portfolio manager of Janus Growth and Income Fund and Janus Twenty Fund. Mr. Marsico has managed Janus Growth and Income Fund since its inception and Janus Twenty Fund since March 1988. He holds a Bachelor of Arts in Biology from the University of Colorado and Master of Business Administration in Finance from the University of Denver. - -------------------------------------------------------------------------------- Blaine P. Rollins is Executive Vice President and portfolio manager of Janus Balanced Fund, which he has managed since January 1996 and Janus Equity Income Fund which he has managed since inception. He has been an assistant portfolio manager of Janus Fund since January 1995. Mr. Rollins joined Janus Capital in 1990 and gained experience as a fixed-income trader and equity research analyst prior to assuming management responsibility for Janus Balanced Fund. He holds a Bachelor of Science in Finance from the University of Colorado and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Scott W. Schoelzel is Executive Vice President and portfolio manager of Janus Olympus Fund, which he has managed since inception. Mr. Schoelzel joined Janus Capital in January 1994. From 1991 to 1993, Mr. Schoelzel was a portfolio manager with Founders Asset Management, Denver, Colorado. Prior to 1991, he was a general partner of Ivy Lane Investments, Denver, Colorado (a real estate investment partnership). He holds a Bachelor of Arts in Business from Colorado College. ASSISTANT PORTFOLIO MANAGERS Laurence Chang is assistant portfolio manager of Janus Overseas Fund and Janus Worldwide Fund. He received an undergraduate degree with honors in religion and philosophy from Dartmouth College and a Master's Degree in Political Science from Stanford University. He is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- David Decker is an assistant portfolio manager of Janus Fund. He is Executive Vice President and portfolio manager of Janus Special Situations Fund, which he has managed since inception. Mr. Decker received a Masters of Business Administration in Finance from the Fuqua School of Business at Duke University and a Bachelor's Degree in Economics and Political Science from Tufts University. He is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Mike Lu is assistant portfolio manager of Janus Olympus Fund. He received an undergraduate degree in Economics and History from Yale University. He is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Tom Malley is assistant portfolio manager of Janus Mercury Fund. He received an undergraduate degree in Molecular Biology from Stanford University. He is a Chartered Financial Analyst. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 19 Marc Pinto is an assistant portfolio manager of Janus Growth and Income Fund and Janus Twenty Fund. He received an undergraduate degree in History from Yale University and a Masters of Business Administration from Harvard. He is a Chartered Financial Analyst. Claire Young is an assistant portfolio manager of Janus Growth and Income Fund and Janus Twenty Fund. She received an undergraduate degree in Electrical Engineering from Yale University. She is a Chartered Financial Analyst. PERSONAL INVESTING Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts, except under the limited exceptions contained in Janus Capital's policy governing personal investing. Janus Capital's policy requires investment and other personnel to conduct their personal investment activities in a manner that Janus Capital believes is not detrimental to the Funds or Janus Capital's other advisory clients. See the SAI for more detailed information. BREAKDOWN OF MANAGEMENT EXPENSES Each Fund pays Janus Capital a management fee which is accrued daily and paid monthly. The advisory agreement with each Fund spells out the management fee and other expenses that the Funds must pay. Each of the Funds is subject to the following management fee schedule (expressed as an annual rate): Average Daily Net Annual Rate Fee Schedule Assets of Fund Percentage (%) - ------------------------------------------------------------------------------------------------------------------------------------ Growth Funds and Combination Funds First $ 30 Million 1.00 Next $270 Million .75 Next $200 Million .70 Over $500 Million .65 - ------------------------------------------------------------------------------------------------------------------------------------
Differences in the actual management fees incurred by the Funds are due primarily to variances in the asset size of the Funds. As asset size increases, the annual rate of the management fee declines in accordance with the above schedules. In addition, each Fund incurs expenses not assumed by Janus Capital, including transfer agent and custodian fees and expenses, legal and auditing fees, printing and mailing costs of sending reports and other information to existing shareholders, and independent Trustees' fees and expenses. The Annual Fund Operating Expenses table on page 3 lists the management fees and total operating expenses of each Fund for the most recent fiscal year. PORTFOLIO TRANSACTIONS Purchases and sales of securities on behalf of each Fund are executed by broker-dealers selected by Janus Capital. Broker-dealers are selected on the basis of their ability to obtain best price and execution for a Fund's transactions and recognizing brokerage, research and other services provided to the Fund and to Janus Capital. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. Janus Capital may also consider sales of shares of a Fund as a factor in the selection of broker-dealers. The Funds' Trustees have authorized Janus Capital to place portfolio transactions on an agency basis with a broker-dealer affiliated with Janus Capital. When transactions for a Fund are effected with that broker-dealer, the commissions payable by the Fund are credited against certain Fund operating expenses. The SAI further explains the selection of broker-dealers. OTHER SERVICE PROVIDERS The following parties provide the Funds with administrative and other services. CUSTODIAN State Street Bank and Trust Company P.O. Box 0351 Boston, Massachusetts 02117-0351 TRANSFER AGENT Janus Service Corporation P.O. Box 173375 Denver, Colorado 80217-3375 DISTRIBUTOR Janus Distributors, Inc. 100 Fillmore Street Denver, Colorado 80206-4928 Janus Service Corporation and Janus Distributors, Inc. are wholly-owned subsidiaries of Janus Capital. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 20 OTHER INFORMATION ORGANIZATION The Trust is a "mutual fund" that was organized as a Massachusetts business trust on February 11, 1986. A mutual fund is an investment vehicle that pools money from numerous investors and invests the money to achieve a specified objective. As of the date of this Prospectus, the Trust offers 19 separate series, three of which currently offer three classes of shares. This Prospectus describes ten series of the Trust; the other series are offered by separate prospectuses. SHAREHOLDER MEETINGS The Trust does not intend to hold annual shareholder meetings. However, special meetings may be called for a specific Fund or for the Trust as a whole for purposes such as electing or removing Trustees, terminating or reorganizing the Trust, changing fundamental policies, or for any other purpose requiring a shareholder vote under the 1940 Act. Separate votes are taken by each Fund only if a matter affects or requires the vote of only that Fund or that Fund's interest in the matter differs from the interest of other portfolios of the Trust. As a shareholder, you are entitled to one vote for each share that you own. SIZE OF FUNDS The Funds have no present plans to limit their size. However, any Fund may discontinue sales of its shares if management believes that continued sales may adversely affect the Fund's ability to achieve its investment objective. If sales of a Fund are discontinued, it is expected that existing shareholders of that Fund would be permitted to continue to purchase shares and to reinvest any dividends or capital gains distributions, absent highly unusual circumstances. MASTER/FEEDER OPTION The Trust may in the future seek to achieve any Fund's investment objective by investing all of that Fund's assets in another investment company having the same investment objective and substantially the same investment policies and restrictions as those applicable to that Fund. It is expected that any such investment company would be managed by Janus Capital in substantially the same manner as the existing Fund. The Trust's shareholders of record on April 30, 1992, and the initial shareholder(s) of all Funds created after April 30, 1992, have voted to vest authority to use this investment structure in the sole discretion of the Trustees. No further approval of the shareholders of the Funds is required. You will receive at least 30 days' prior notice of any such investment. Such investment would be made only if the Trustees determine it to be in the best interests of a Fund and its shareholders. In making that determination, the Trustees will consider, among other things, the benefits to shareholders and/ or the opportunity to reduce costs and achieve operational efficiencies. Although management of the Funds believe the Trustees will not approve an arrangement that is likely to result in higher costs, no assurance is given that costs will be materially reduced if this option is implemented. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 21 DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- DISTRIBUTIONS To avoid taxation, the Internal Revenue Code requires each Fund to distribute net income and any net gains realized by its investments annually. A Fund's income from dividends and interest and any net realized short-term capital gains are paid to shareholders as ordinary income dividends. Net realized long-term gains are paid to shareholders as capital gains distributions. - -------------------------------------------------------------------------------- DISTRIBUTION SCHEDULE Dividends Capital Gains - ------------------------------------------------------------------------------------------------------------------------------------ Growth Funds Declared and paid in December Declared and paid in December (except Janus Equity Income Fund) - ------------------------------------------------------------------------------------------------------------------------------------ Combination Funds Declared and paid in March, June, Declared and paid in December and Janus Equity Income Fund September and December - ------------------------------------------------------------------------------------------------------------------------------------
HOW DISTRIBUTIONS AFFECT A FUND'S NAV Distributions are paid to shareholders as of the record date of a distribution of a Fund, regardless of how long the shares have been held. Dividends and capital gains awaiting distribution are included in each Fund's daily NAV. The share price of a Fund drops by the amount of the distribution, net of any subsequent market fluctuations. As an example, assume that on December 31, Janus Fund declared a dividend in the amount of $0.25 per share. If Janus Fund's share price was $10.00 on December 30, the Fund's share price on December 31 would be $9.75, barring market fluctuations. Shareholders should be aware that distributions from a taxable mutual fund are a taxable event and not a value-enhancing event. "BUYING A DIVIDEND" If you purchase shares of a Fund just before the distribution, you will pay the full price for the shares and receive a portion of the purchase price back as a taxable distribution. This is referred to as "buying a dividend." In the above example, if you bought shares on December 30, you would have paid $10.00 per share. On December 31, the Fund would pay you $0.25 per share as a dividend and your shares would now be worth $9.75 per share. Unless your account is set up as a tax-deferred account, dividends paid to you would be included in your gross income for tax purposes even though you may not have participated in the increase in NAV of the Fund, whether or not you reinvested the dividends. DISTRIBUTION OPTIONS When you open an account, you must specify on your application how you want to receive your distributions. You may change your distribution option at any time by writing or calling 1-800-525-3713. The Funds offer the following options: 1. Reinvestment Option. You may reinvest your income dividends and capital gains distributions in additional shares. This option is assigned automatically if no other choice is made. 2. Cash Option. You may receive your income dividends and capital gains distributions in cash. 3. Reinvest And Cash Option. You may receive either your income dividends or capital gains distributions in cash and reinvest the other in additional shares. 4. Redirect Option. You may direct your dividends or capital gains to purchase shares of another Janus fund. The Funds reserve the right to reinvest into your account undeliverable and uncashed dividend and distribution checks that remain outstanding for six months in shares of the applicable Fund at the NAV next computed after the check is cancelled. Subsequent distributions may also be reinvested. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 22 - -------------------------------------------------------------------------------- TAXES As with any investment, you should consider the tax consequences of investing in the Funds. The following discussion does not apply to tax-deferred retirement accounts, nor is it a complete analysis of the federal tax implications of investing in the Funds. You may wish to consult your own tax adviser. Additionally, state or local taxes may apply to your investment, depending upon the laws of your state of residence. TAXES ON DISTRIBUTIONS Dividends and distributions of the Funds are subject to federal income tax, regardless of whether the distribution is made in cash or reinvested in additional shares of a Fund. In certain states, a portion of the dividends and distributions (depending on the sources of a Fund's income) may be exempt from state and local taxes. Information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. TAXATION OF THE FUNDS Dividends, interest and some capital gains received by a Fund on foreign securities may be subject to tax withholding or other foreign taxes. Any foreign taxes paid by a Fund will be treated as an expense to the particular Fund or passed through to shareholders as a foreign tax credit, depending on particular facts and circumstances. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The Funds do not expect to pay any federal income or excise taxes because they intend to meet certain requirements of the Internal Revenue Code. It is important that the Funds meet these requirements so that any earnings on your investment will not be taxed twice. - -------------------------------------------------------------------------------- PERFORMANCE TERMS This section will help you understand various terms that are commonly used to describe a Fund's performance. You may see references to these terms in our newsletters, advertisements and in media articles. Our newsletters and advertisements may include comparisons of the Fund's performance to the performance of other mutual funds, mutual fund averages or recognized stock market indices. The Growth and Combination Funds generally measure performance in terms of total return. Cumulative total return represents the actual rate of return on an investment for a specified period. The Financial Highlights tables beginning on page 4 show total return for a single fiscal period. Cumulative total return is generally quoted for more than one year (e.g., the life of the Fund). A cumulative total return does not show interim fluctuations in the value of an investment. Average annual total return represents the average annual percentage change of an investment over a specified period. It is calculated by taking the cumulative total return for the stated period and determining what constant annual return would have produced the same cumulative return. Average annual returns for more than one year tend to smooth out variations in a Fund's return and are not the same as actual annual results. THE FUNDS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 23 Appendix A GLOSSARY OF INVESTMENT TERMS This glossary provides a more detailed description of some of the types of securities and other instruments in which the Funds may invest. The Funds may invest in these instruments to the extent permitted by their investment objectives and policies. The Funds are not limited by this discussion and may invest in any other types of instruments not precluded by the policies discussed elsewhere in this Prospectus. Please refer to the SAI for a more detailed discussion of certain instruments. I. EQUITY AND DEBT SECURITIES Bonds are debt securities issued by a company, municipality, government or government agency. The issuer of a bond is required to pay the holder the amount of the loan (or par value) 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. For example, the Funds may purchase commercial paper issued under Section 4(2) of the Securities Act of 1933. Common stock represents a share of ownership in a company and usually carries voting rights and earns dividends. Unlike preferred stock, dividends on common stock are not fixed but are declared at the discretion of the issuer's board of directors. Convertible securities are preferred stocks or bonds that pay a fixed dividend or interest payment and are convertible into common stock at a specified price or conversion ratio. Depositary receipts are receipts for shares of a foreign-based corporation that entitle the holder to dividends and capital gains on the underlying security. Receipts include those issued by domestic banks (American Depositary Receipts), foreign banks (Global or European Depositary Receipts) and broker-dealers (depositary shares). Fixed-income securities are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate and municipal obligations that pay a specified rate of interest or coupons for a specified period of time and preferred stock, which pays fixed dividends. Coupon and dividend rates may be fixed for the life of the issue or, in the case of adjustable and floating rate securities, for a shorter period. High-yield/High-risk securities are securities that are rated below investment grade by the primary rating agencies (e.g., BB or lower by Standard &Poor's and Ba or lower by Moody's). Other terms commonly used to describe such securities include "lower rated bonds," "noninvestment grade bonds" and "junk bonds." Mortgage- and asset-backed securities are shares in a pool of mortgages or other debt. These securities are generally pass-through securities, which means that principal and interest payments on the underlying securities (less servicing fees) are passed through to shareholders on a pro rata basis. These securities involve prepayment risk, which is the risk that the underlying mortgages or other debt may be refinanced or paid off prior to their maturities during periods of declining interest rates. In that case, a portfolio manager may have to reinvest the proceeds from the securities at a lower rate. Potential market gains on a security subject to prepayment risk may be more limited than potential market gains on a comparable security that is not subject to prepayment risk. Passive foreign investment companies (PFICs) are any foreign corporations which generate certain amounts of passive income or hold certain amounts of assets for the production of passive income. Passive income includes dividends, interest, royalties, rents and annuities. Income tax regulations may require the Funds to recognize income associated with a PFIC prior to the actual receipt of any such income. 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 stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and liquidation. Preferred stock generally does not carry voting rights. Repurchase agreements involve the purchase of a security by a Fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Fund at a specified date or upon demand. This technique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, a Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. Reverse repurchase agreements involve the sale of a security by a Fund to another party (generally a bank or dealer) in return for cash and an agreement by the Fund to buy the security back at a specified price and time. This technique may be used to provide cash to satisfy unusually high redemption requests, to earn additional income on portfolio securities, such as Treasury bills or notes, or for other temporary or emergency purposes. Rule 144A securities are securities that are not registered for sale to the general public under the Securities Act of 1933, but that may be resold to certain institutional investors. Standby commitments are obligations purchased by a Fund from a dealer that give the Fund the option to sell a security to the dealer at a specified price. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 24 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. U.S. government securities include direct obligations of the U.S. government that are supported by its full faith and credit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to ten years and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S. government securities also include indirect obligations of the U.S. government that are issued by federal agencies and government sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith and credit of the U.S. government. Some agency securities are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. government to purchase the agency's obligations and others are supported only by the credit of the sponsoring agency. Variable and floating rate securities have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. The floating rate tends to decrease the security's price sensitivity to changes in interest rates. Warrants are securities, typically issued with preferred stock or bonds, that give the holder the right to buy a proportionate amount of common stock at a specified price, usually at a price that is higher than the market price at the time of issuance of the warrant. The right may last for a period of years or indefinitely. When-issued, delayed delivery and forward transactions generally involve the purchase of a security with payment and delivery at some time in the future - i.e., beyond normal settlement. The Funds do not earn interest on such securities until settlement and bear the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements and U.S. government securities may be sold in this manner. Zero coupon bonds are debt securities that do not pay regular interest at regular intervals, but are issued at a discount from face value. The discount approximates the total amount of interest the security will accrue from the date of issuance to maturity. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity. II. FUTURES, OPTIONS AND OTHER DERIVATIVES Forward contracts are contracts to purchase or sell a specified amount of property for an agreed upon price at a specified time. Forward contracts are not currently exchange traded and are typically negotiated on an individual basis. The Funds may enter into forward currency contracts to hedge against declines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar or to reduce the impact of currency appreciation on purchases of such securities. They may also enter into forward contracts to purchase or sell securities or other financial indices. Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. The Funds may buy and sell futures contracts on foreign currencies, securities and financial indices including interest rates or an index of U.S. government, foreign government, equity or fixed-income securities. The Funds may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts and options on futures are standardized and traded on designated exchanges. Indexed/structured securities are typically short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed (i.e. their value may increase or decrease if the reference index or instrument appreciates). Indexed/ structured securities may have return characteristics similar to direct investments in the underlying instruments and may be more volatile than the underlying instruments. A Fund bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer. 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). Options are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on or before a fixed date at a predetermined price. The Funds may purchase and write put and call options on securities, securities indices and foreign currencies. JANUS EQUITY FUNDS COMBINED PROSPECTUS February 17, 1997 25 CONTENTS - -------------------------------------------------------------------------------- FUNDS AT A GLANCE Brief description of the Funds ............................................. 1 - -------------------------------------------------------------------------------- EXPENSE INFORMATION Each Fund's annual operating expenses ...................................................... 3 Financial Highlights-a summary of financial data ....................................................... 4 - -------------------------------------------------------------------------------- THE FIXED-INCOME FUNDS IN DETAIL Investment Objectives and Policies ......................................... 7 General Portfolio Policies ................................................. 10 Additional Risk Factors .................................................... 11 - -------------------------------------------------------------------------------- THE MONEY MARKET FUNDS IN DETAIL Investment Objectives, Policies and Techniques ................................................. 13 - -------------------------------------------------------------------------------- SHAREHOLDER'S MANUAL Types of Account Ownership ................................................. 17 How to Open Your Janus Account ............................................. 18 How to Purchase Shares ..................................................... 18 How to Exchange Shares ..................................................... 18 How to Redeem Shares ....................................................... 19 Shareholder Services and Account Policies .................................................... 21 - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS Investment Adviser, Administrator and Investment Personnel ................................................ 23 Management Expenses ........................................................ 24 Portfolio Transactions ..................................................... 24 Other Service Providers .................................................... 25 Other Information .......................................................... 25 - -------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES Distributions .............................................................. 26 Taxes ...................................................................... 27 - -------------------------------------------------------------------------------- PERFORMANCE TERMS An Explanation of Performance Terms ........................................ 27 - -------------------------------------------------------------------------------- APPENDIX A Glossary of Investment Terms ............................................... 28 - -------------------------------------------------------------------------------- APPENDIX B Explanation of Rating Categories ........................................... 31 [LOGO] JANUS INVESTMENT FUND JANUS INCOME FUNDS 100 Fillmore Street Denver, CO 80206-4928 (800) 525-3713 http://www.JanusFunds.com February 17, 1997 A FAMILY OF NO-LOAD MUTUAL FUNDS All Janus Funds are no-load investments. This means you may purchase and sell shares in any of our mutual funds without incurring any sales charges. If you enroll in our low minimum initial investment program, you can open your account for as little as $500 and a $100 subsequent purchase per month. Otherwise, the minimum initial investment is $2,500. For complete information on how to purchase, exchange and sell shares, please see the Shareholder's Manual beginning on page 17. This Prospectus describes seven mutual funds that emphasize income-producing securities (the "Funds"). Included in this Prospectus is a separate class of shares, Investor Shares, of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund (collectively, the "Shares"). Janus Capital Corporation ("Janus Capital") serves as investment adviser to each Fund. Janus Capital has been in the investment advisory business for over 26 years and currently manages approximately $45 billion in assets. JANUS HIGH-YIELD FUND MAY INVEST ALL OF ITS ASSETS IN HIGH-YIELD CORPORATE DEBT SECURITIES, COMMONLY KNOWN AS "JUNK BONDS." SEE "ADDITIONAL RISK FACTORS" ON PAGE 11 FOR THE RISKS ASSOCIATED WITH INVESTING IN THESE SECURITIES. AN INVESTMENT IN JANUS MONEY MARKET FUND, JANUS GOVERNMENT MONEY MARKET FUND OR JANUS TAX-EXEMPT MONEY MARKET FUND (COLLECTIVELY, THE "MONEY MARKET FUNDS"), IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. Each Fund is a series of Janus Investment Fund (the "Trust"). The Trust is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. This Prospectus contains information about the Funds that you should consider before investing. Please read it carefully and keep it for future reference. Additional information about the Funds is contained in a Statement of Additional Information ("SAI") filed with the SEC. The SAI dated February 17, 1997, is incorporated by reference into this Prospectus. For a copy of the SAI, write or call the Funds at the address or phone number listed above. The SEC maintains a Web site located at http://www.sec.gov that contains the SAI, material incorporated by reference, and other information regarding the Funds. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER JURISDICTION. JANUS INCOME FUNDS COMBINED PROSPECTUS FUNDS AT A GLANCE This section is designed to provide you with a brief overview of the Funds and their investment emphasis. A more detailed discussion of the Funds' investment objectives and policies begins on page 7 and complete information on how to purchase, redeem and exchange shares begins on pages 18-19. - -------------------------------------------------------------------------------- MONEY MARKET FUNDS JANUS MONEY MARKET FUND Fund Focus: A money market mutual fund that seeks maximum current income to the extent consistent with stability of capital. The Fund seeks to achieve this objective by investing primarily in high quality commercial paper and obligations of financial institutions. Fund Inception: February 1995 Fund Manager: Sharon S. Pichler JANUS GOVERNMENT MONEY MARKET FUND Fund Focus: A money market mutual fund that seeks maximum current income to the extent consistent with stability of capital. The Fund seeks to achieve this objective by investing exclusively in obligations issued and/or guaranteed as to principal and interest by the United States government or its agencies and instrumentalities and repurchase agreements secured by such obligations. Fund Inception: February 1995 Fund Manager: Sharon S. Pichler JANUS TAX-EXEMPT MONEY MARKET FUND Fund Focus: A money market mutual fund that seeks maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. The Fund seeks to achieve this objective by investing primarily in municipal securities whose interest is exempt from federal income taxes including the federal alternative minimum tax. Fund Inception: February 1995 Fund Manager: Sharon S. Pichler FIXED-INCOME FUNDS JANUS FLEXIBLE INCOME FUND Fund Focus: A diversified fund that seeks to maximize total return from a combination of income and capital appreciation by investing in income-producing securities. This Fund may have substantial holdings of lower rated debt securities or "junk" bonds. Fund Inception: July 1987 Fund Managers: Ronald V. Speaker Sandy R. Rufenacht JANUS FEDERAL TAX-EXEMPT FUND Fund Focus: A diversified fund that seeks a high level of current income exempt from federal income tax by normally investing at least 80% of its assets in municipal obligations whose interest is exempt from federal income taxes, including the federal alternative minimum tax. Fund Inception: May 1993 Fund Manager: Darrell W. Watters JANUS HIGH-YIELD FUND Fund Focus: A diversified fund that seeks high current income as its primary objective. Capital appreciation is a secondary objective when consistent with the primary objective. The Fund seeks to achieve these objectives by investing primarily in high-yield/high-risk fixed-income securities. Fund Inception: December 1995 Fund Managers: Ronald V. Speaker Sandy R. Rufenacht JANUS SHORT-TERM BOND FUND Fund Focus: A diversified fund that seeks a high level of current income while minimizing interest rate risk by investing in shorter term fixed-income securities. Its average-weighted effective maturity is normally less than three years. Fund Inception: September 1992 Fund Manager: Sandy R. Rufenacht JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 1 - -------------------------------------------------------------------------------- JANUS SPECTRUM The spectrum below shows Janus Capital's assessment of the potential overall risk of the Janus Funds relative to one another and should not be used to compare the Funds to other mutual funds or other types of investments. A Fund's position in the spectrum was determined based on a number of factors such as selected historic volatility measurements, the types of securities in which the Fund intends to invest, the degree of diversification intended and/or permitted, and the sizes of the Fund. In addition, the spectrum is significantly affected by the portfolio managers' investment styles. These factors were considered as of the date of this prospectus and will be reassessed with each new prospectus. Specific risks of certain types of instruments in which some of the Funds may invest, including foreign securities, junk bonds and derivative instruments such as futures contracts and options, are described under "Additional Risk Factors" on pages 11-12. THE SPECTRUM IS NOT INDICATIVE OF THE FUTURE VOLATILITY OR PERFORMANCE OF A FUND AND RELATIVE POSITIONS OF FUNDS WITHIN THE SPECTRUM MAY CHANGE IN THE FUTURE. [SPECTRUM CHART] The spectrum illustrates the potential overall risk of the Janus funds relative to one another. The funds' risk ranges from conservative to aggressive. The Growth Funds are illustrated as follows: Janus Fund* is shown as moderate; Janus Enterprise Fund* is shown as aggressive; Janus Equity Income Fund* is shown as moderate (but less aggressive than Janus Fund); Janus Mercury Fund* is shown as moderate-aggressive; Janus Olympus Fund* is shown as aggressive; Janus Overseas Fund* is shown as moderate-aggressive; Janus Special Situations Fund* is shown as moderate-aggressive (but less aggressive than Janus Overseas Fund); Janus Twenty Fund* is shown as aggressive; Janus Venture Fund, which is closed to new investors, is shown as moderate-aggressive; Janus Worldwide Fund* is shown as moderate-aggressive (but less aggressive than Janus Special Situations Fund). The Combination Funds are illustrated as follows: Janus Balanced Fund* is shown as moderate. Janus Growth and Income Fund* is shown as moderate-aggressive. The Fixed-Income Funds are illustrated as follows: Janus Flexible Income Fund is shown as conservative-moderate; Janus High-Yield Fund is shown as moderate-aggressive; Janus Federal Tax-Exempt Fund is shown as conservative-moderate (but more conservative than Janus Flexible Income Fund); Janus Short-Term Bond Fund is shown as conservative (but more conservative than Janus Federal Tax-Exempt Fund). The Money Market Funds are illustrated as follows: Janus Money Market Fund is shown as conservative (but less conservative than Janus Short-Term Bond Fund); Janus Government Money Market Fund is shown equally as conservative as Janus Money Market Fund; and Janus Tax-Exempt Money Market Fund is shown equally as conservative as Janus Government Money Market Fund. *These funds are offered by separate prospectuses. + This fund is closed to new investors and is offered by a separate prospectus. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 2 EXPENSE INFORMATION The tables and example below are designed to assist you in understanding the various costs and expenses that you will bear directly or indirectly as an investor in the Funds. Shareholder Transaction Expenses are fees charged directly to your individual account when you buy, sell or exchange shares. The table below shows that you pay no such fees. Annual Operating Expenses are paid out of each Fund's assets and include fees for portfolio management, maintenance of shareholder accounts, shareholder servicing, accounting and other services. - -------------------------------------------------------------------------------- WHY DO EXPENSES VARY ACROSS THE FUNDS? EXPENSES VARY FOR A NUMBER OF REASONS, INCLUDING DIFFERENCES IN MANAGEMENT FEES, AVERAGE SHAREHOLDER ACCOUNT SIZE, AND THE EXTENT OF FOREIGN INVESTMENTS WHICH ENTAIL GREATER TRANSACTION COSTS. SHAREHOLDER TRANSACTION EXPENSES (applicable to each Fund) Maximum sales load imposed on purchases None Maximum sales load imposed on reinvested dividends None Deferred sales charges on redemptions None Redemption fee* None Exchange fee None * There is an $8 service fee for redemptions by wire. ANNUAL OPERATING EXPENSES(1) (expressed as a percentage of average net assets) Management Fee Other Expenses Total Operating Expenses - ------------------------------------------------------------------------------------------------------------------------------------ Janus Flexible Income Fund .60% .28% .88% Janus High-Yield Fund(2) .58% .43% 1.01% Janus Federal Tax-Exempt Fund(2) .14% .54% .68% Janus Short-Term Bond Fund(2) .09% .58% .67% Janus Money Market Fund-Investor Shares(2) .10% .50% .60% Janus Government Money Market Fund-Investor Shares(2) .10% .50% .60% Janus Tax-Exempt Money Market Fund-Investor Shares(2) .10% .50% .60% - ------------------------------------------------------------------------------------------------------------------------------------
(1) The information in the table above is based on expenses before expense offset arrangements for the fiscal year ended October 31, 1996. When applicable, all expenses are stated net of waivers by Janus Capital. Waivers for the Fixed-Income Funds are first applied against the management fee and then against other expenses. (2) Net of waivers. Without such waivers, the Management Fee, Other Expenses and Total Operating Expenses would have been.75%, .43% and 1.18%, respectively, for Janus High-Yield Fund; .60%, .54% and 1.14%, respectively, for Janus Federal Tax-Exempt Fund; .65%, .58% and 1.23%, respectively, for Janus Short-Term Bond Fund; and .20%, .50% and .70% for each of the Money Market Funds - Investor Shares. Janus Capital may modify or terminate the waivers at any time upon 90 days' notice to the Trustees. EXAMPLE Assume you invest $1,000, the Funds return 5% annually and each Fund's expense ratios remain as listed above. The example below shows the operating expenses that you would indirectly bear as an investor in the Funds. 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------------ Janus Flexible Income Fund $ 9 $28 $49 $108 Janus High-Yield Fund $10 $32 $56 $124 Janus Federal Tax-Exempt Fund $ 7 $22 $38 $ 85 Janus Short-Term Bond Fund $ 7 $21 $37 $ 83 Janus Money Market Fund - Investor Shares $ 6 $19 $33 $ 75 Janus Government Money Market Fund - Investor Shares $ 6 $19 $33 $ 75 Janus Tax-Exempt Money Market Fund - Investor Shares $ 6 $19 $33 $ 75 - ------------------------------------------------------------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 3 FINANCIAL HIGHLIGHTS Unless otherwise noted, the information below is for fiscal periods ending on October 31 of each year. The accounting firm of Price Waterhouse LLP has audited the Funds' financial statements since October 1, 1990. Their report is included in the Funds' Annual Reports, which are incorporated by reference into the SAI. Expense and income ratios and portfolio turnover rates have been annualized for periods of less than one year. Total returns for periods of less than one year are not annualized. A detailed explanation of the Financial Highlights can be found on page 6. Janus Flexible Income Fund 1996 1995 1994 1993 1992(1) 1991(2) 1990(2) 1989(2) 1988(2) 1987(3) [TO BE FILED BY AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92 $10.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.72 0.74 0.77 0.68 0.68 0.95 0.97 0.92 0.40 3. Net gains or (losses) on securities (both realized and unrealized) 0.59 (0.86) 0.79 0.15 1.29 (1.38) (0.56) 0.09 (0.07) - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 1.31 (0.12) 1.56 0.83 1.97 (0.43) 0.41 1.01 0.33 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.72) (0.72) (0.77) (0.66) (0.72) (0.91) (0.97) (0.92) (.40) 6. Distributions (from capital gains) -- (0.23) (0.02) -- (0.17) -- (0.08) (0.02) (.01) - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (0.72) (0.95) (0.79) (0.66) (0.89) (0.91) (1.05) (0.94) (0.41) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $9.55 $8.96 $10.03 $9.26 $9.09 $8.01 $9.35 $9.99 $9.92 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 15.35% (1.26%) 17.48% 9.43% 25.98% (4.62%) 4.12% 10.70% 3.40% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $580 $377 $473 $205 $72 $14 $18 $10 $4 11. Average net assets for the period (in millions) $450 $429 $338 $143 $33 $15 $15 $7 $2 12. Ratio of gross expenses to average net assets 0.96% N/A N/A N/A N/A N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 0.96% 0.93% 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 1.00%(4) 14. Ratio of net investment income to average net assets 7.91% 7.75% 7.96% 8.98% 9.38% 11.24% 10.00% 9.32% 8.52% 15. Portfolio turnover rate 250% 137% 201% 210% 88% 96% 75% 76% 130% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from January 1, 1992 to October 31, 1992. (2) Fiscal year ended on December 31st of each year. (3) Fiscal period from July 2, 1987 (inception) to December 31, 1987. (4) The ratio of net expenses to average net assets was 1.01% in 1993, 1.21% in 1992 and 1.74% in 1991 before waiver of certain Fund expenses. The ratio was 2% in prior years. Janus High-Yield Fund 1996 (1) [TO BE FILED BY AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 3. Net gains or (losses) on securities (both realized and unrealized) - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) 6. Distributions (from capital gains) - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 10. Net assets, end of period (in millions) 11. Average net assets for the period (in millions) $ 12. Ratio of gross expenses to average net assets 13. Ratio of net expenses to average net assets ___%(2) 14. Ratio of net investment income to average net assets 15. Portfolio turnover rate - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from December 29, 1995 (inception) to October 31, 1996. (2) The ratio was ___% before waiver of certain Fund expenses. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 4 Janus Janus Federal Tax-Exempt Fund Short-Term Bond Fund 1996 1995 1994 1993(1) 1996 1995 1994 1993 1992(2) [TO BE FILED BY [TO BE FILED BY AMENDMENT] AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $6.45 $7.30 $7.00 $2.87 $3.02 $2.98 $3.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.36 0.36 0.14 0.18 0.18 0.14 0.01 3. Net gains or (losses) on securities (both realized and unrealized) 0.43 (0.83) 0.30 (0.03) (0.15) 0.04 (0.02) - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 0.79 (0.47) 0.44 0.15 0.03 0.18 (0.01) - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.36) (0.36) (0.14) (0.18) (0.17) (0.14) (0.01) 6. Distributions (from capital gains) -- (0.02) -- -- (0.01) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (0.36) (0.38) (0.14) (0.18) (0.18) (0.14) (0.01) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $6.88 $6.45 $7.30 $2.84 $2.87 $3.02 $2.98 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 12.60% (6.62%) 6.33% 5.55% 1.26% 6.17% (0.19%) - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $33 $26 $27 $48 $54 $76 $3 11. Average net assets for the period (in millions) $29 $28 $16 $47 $60 $37 $1 12. Ratio of gross expenses to average net assets 0.70% N/A N/A 0.66% N/A N/A N/A 13. Ratio of net expenses to average net assets 0.65%(3) 0.65%(3) 0.75%(3,4) 0.65%(5) 0.65%(5) 0.83%(4,5) 1.00%(4)(5) 14. Ratio of net investment income to average net assets 5.43% 5.20% 4.58% 6.67% 6.08% 4.86% 3.22% 15. Portfolio turnover rate 164% 160% 124% 337% 346% 372% 7% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from May 3, 1993 (inception) to October 31, 1993. (2) Fiscal period from September 1, 1992 (inception) to October 31, 1992. (3) The ratio of net expenses to average net assets was 1.31% in 1995, 1.41% in 1994 and 1.60% in 1993 before waiver of certain Fund expenses. 4) The ratio of net expenses to average net assets reflects the Fund's previous expense limit of 1.00%. This limit was reduced to .65% as of August 1, 1993. (5) The ratio of net expenses to average net assets was 1.23% in 1995, 1.15% in 1994, 1.40% in 1993 and 2.50% in 1992 before waiver of certain Fund expenses. Janus Janus Janus Money Market Government Money Market Tax-Exempt Money Market Fund Fund Fund 1996 1995(1) 1996 1995(1) 1996 1995(1) [TO BE FILED [TO BE FILED [TO BE FILED Investor Shares BY AMENDMENT] BY AMENDMENT] BY AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income .04 .04 .02 3. Net gains or (losses) on securities (both realized and unrealized) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations .04 .04 .02 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (.04) (.04) (.02) 6. Distributions (from capital gains) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (.04) (.04) (.02) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 3.95% 3.90% 2.40% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Average net assets for the period (in millions) $ $461 $ $87 $ $57 11. Net assets, end of period (in thousands) $643,219 $119,307 $67,479 12. Ratio of expenses to average net assets 0.60%(2) 0.60%(2) 0.60%(2) 13. Ratio of net investment income to average net assets 5.56% 5.40% 3.38% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from February 15, 1995 (inception) to October 31, 1995. (2) The ratio of expenses to average net assets was 0.70% before voluntary reduction of fees. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 5 UNDERSTANDING THE FINANCIAL HIGHLIGHTS This section is designed to help you better understand the information summarized in the Financial Highlights tables. The tables contain important historical operating information that may be useful in making your investment decision or understanding how your investment has performed. The Funds' Annual Reports contain additional information about each Fund's performance, including a comparison to an appropriate securities index. For a copy of your Fund's Annual Report, call 1-800-525-8983. Net asset value ("NAV") is the value of a single share of a Fund. It is computed by adding the value of all of a Fund's investments and other assets, subtracting any liabilities and dividing the result by the number of shares outstanding. The difference between line 1 and line 8 in the Financial Highlights tables represents the change in value of a Fund's shares over the fiscal period, but not its total return. The Money Market Funds' NAV is expected to be $1.00. Net investment income is the per share amount of dividends and interest income earned on securities held by a Fund, less Fund expenses. Dividends (from net investment income) is the per share amount that a Fund paid from net investment income. Net gains or (losses) on securities is the per share increase or decrease in value of the securities a Fund holds. A gain (or loss) is realized when securities are sold. A gain (or loss) is unrealized when securities increase or decrease in value but are not sold. Distributions (from capital gains) is the per share amount that a Fund paid from net realized gains. Total return is the percentage increase or decrease in the value of an investment over a stated period of time. A total return percentage includes both changes in NAV and income. For the purposes of calculating total return, it is assumed that dividends and distributions are reinvested at the NAV on the day of the distribution. A FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLES. Ratio of net expenses to average net assets is the total of a Fund's operating expenses divided by its average net assets for the stated period. Ratio of gross expenses to average net assets does not reflect reductions in expenses through the use of brokerage commissions and uninvested cash balances earning interest with a Fund's custodian. Ratio of net investment income to average net assets is a Fund's net investment income divided by its average net assets for the stated period. Portfolio turnover rate is a measure of the amount of a fund's buying and selling activity. It is computed by dividing total purchases or sales, whichever is less, by the average monthly market value of a fund's portfolio securities. The Money Market Funds do not calculate portfolio turnover. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 6 THE FIXED-INCOME FUNDS IN DETAIL To help you decide which Fixed-Income Fund is appropriate for you, this section takes a closer look at the Fixed-Income Funds' investment objectives, policies and the securities in which they invest. Please carefully review the "Additional Risk Factors" section of this Prospectus for a more detailed discussion of the risks associated with certain investment techniques, as well as the risk spectrum on page 2. Appendix A contains a more detailed description of investment terms used throughout this Prospectus. You should carefully consider your own investment goals, time horizon and risk tolerance before investing in a Fixed-Income Fund. Policies that are noted as "fundamental" cannot be changed without a shareholder vote. All other policies, including each Fixed-Income Fund's investment objective, are not fundamental and may be changed by the Funds' Trustees without a shareholder vote. You will be notified of any such changes that are material. If there is a material change in a Fixed-Income Fund's objective or policies, you should consider whether that Fixed-Income Fund remains an appropriate investment for you. - -------------------------------------------------------------------------------- A SHAREHOLDER'S INVESTMENT HORIZON IS THE AMOUNT OF TIME YOU SHOULD PLAN TO HOLD YOUR INVESTMENT IN A FUND TO MAXIMIZE THE POTENTIAL FOR REALIZING THE FUND'S OBJECTIVE. - -------------------------------------------------------------------------------- THE JANUS FIXED-INCOME FUNDS ARE DESIGNED FOR THOSE INVESTORS WHO PRIMARILY SEEK CURRENT INCOME. FIXED-INCOME FUNDS Investment Objective: Janus Flexible Income Fund ..................................... Total Return Others ............................................................... Income Primary Holdings: ................................. Income-Producing Securities Shareholder's Investment Horizon: Janus Short-Term Bond Fund ...................... Short- to Intermediate-Term Others ........................................... Intermediate- to Long-Term JANUS FLEXIBLE INCOME FUND The investment objective of this Fund is to obtain maximum total return, consistent with preservation of capital. This Fund pursues its objective primarily through investments in income-producing securities. Total return is expected to result from a combination of current income and capital appreciation, although income will normally be the dominant component of total return. As a fundamental policy, this Fund will invest at least 80% of its assets in income-producing securities. Janus Flexible Income Fund may invest in a wide variety of income-producing securities including corporate bonds and notes, government securities, indexed/structured securities, preferred stock, income-producing common stocks, debt securities that are convertible or exchangeable into equity securities, and debt securities that carry with them the right to acquire equity securities as evidenced by warrants attached to or acquired with the securities. The Fund may invest to a lesser degree in common stocks, other equity securities or debt securities that are not currently paying dividends or interest. The Fund may purchase securities of any maturity and quality and the average maturity and quality of its portfolio may vary substantially. Janus Flexible Income Fund may invest without limit in foreign securities, including those of corporate and government issuers. The Fund may invest without limit in high-yield/high-risk securities and may have substantial holdings of such securities. The Fund may invest without limit in mortgage- and asset-backed securities and up to 10% in zero coupon, pay-in-kind and step coupon securities. The risks of foreign securities and high-yield securities are described under "Additional Risk Factors" on pages 11-12. The Fund may purchase defaulted debt securities if, in the opinion of Janus Capital, it appears likely that the issuer may resume interest payments or other advantageous developments appear likely in the near term. Defaulted debt securities may be illiquid and subject to the Fund's limit on illiquid investments. JANUS HIGH-YIELD FUND The primary investment objective of this Fund is to obtain high current income. Capital appreciation is a secondary objective when consistent with its primary objective. Capital appreciation may result, for example, from an improvement in the credit standing of an issuer whose securities are held by this Fund or from a general lowering of interest rates, or both. This Fund pursues its objectives by investing primarily in high-yield/high-risk fixed-income securities. This Fund will normally invest at least 65% of its total assets in those securities. In addition, the Fund may invest in all of the types of securities previously described under Janus Flexible Income Fund (except this Fund may invest without limit in zero coupon, pay-in-kind and step coupon securities). The high yields sought by this Fund are expected to result primarily from investments in longer-term, lower quality corporate bonds, commonly referred to as "junk" bonds. This Fund considers lower quality securities to be securities rated below investment grade by established rating agencies or unrated securities of comparable quality. Securities rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower by Moody's Investors Service, Inc. ("Moody's") are below investment grade. Lower quality securities are often considered to be more speculative and involve greater risk of default or price changes due to changes in interest rates, economic conditions and the issuer's credit-worthiness. As JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 7 a result, their market prices tend to fluctuate more than higher quality securities of comparable maturity. Additional risks of lower quality securities are described under "Additional Risk Factors" on page 11. JANUS FEDERAL TAX-EXEMPT FUND The investment objective of this Fund is to seek as high a level of current income exempt from federal income tax as is consistent with preservation of capital. This Fund pursues its objective by investing primarily in municipal obligations of any maturity whose interest is exempt from federal income tax. Because of this emphasis, capital appreciation is not a significant investment consideration. However, to the extent that capital gains are realized, they are subject to federal income tax. As a fundamental policy, this Fund will normally invest at least 80% of its net assets in securities whose interest is exempt from federal income tax, including the federal alternative minimum tax. The Fund is designed for investors who seek a higher after-tax yield than comparable investing in taxable securities. Municipal securities in which the Fund may invest include general obligation bonds, revenue bonds, industrial development bonds, municipal lease obligations, certificates of participation (not to exceed 10% of assets), inverse floaters (not to exceed 5% of assets), instruments with demand features, tender option bonds and standby commitments. At times, this Fund may invest more than 25% of its assets in tax-exempt securities that are related in such a way that an economic, business, or political development or change affecting one security could similarly affect the other securities; for example, securities whose issuers are located in the same state, or securities whose interest is derived from revenues of similar type projects. The Fund may invest more than 25% of its assets in industrial development bonds. Subject to the policies above, the Fund may invest up to 25% of its assets in mortgage- and asset-backed securities and up to 10% of its assets in zero coupon, pay-in-kind and step coupon securities. The Fund will invest less than 35% of its net assets in high-yield/high-risk securities. JANUS SHORT-TERM BOND FUND The investment objective of this Fund is to seek as high a level of current income as is consistent with preservation of capital. This Fund pursues its objective by investing primarily in short- and intermediate-term fixed-income securities. Under normal circumstances, it is expected that this Fund's dollar-weighted average portfolio effective maturity will not exceed three years. Effective maturity is the weighted average period over which a security's principal is expected to be paid. It differs from stated maturity in that it estimates the effect of expected principal prepayments and call provisions. Targeting effective maturity provides additional flexibility in portfolio management but, all else being equal, could result in higher volatility than a fund targeting a stated maturity or maturity range. See the question and answer section below for a more detailed discussion of the Fund's maturity policy. Janus Short-Term Bond Fund will normally invest at least 65% of its assets in debt securities. Subject to this policy and subject to its maturity limits, the Fund may invest in the types of securities previously described under Janus Flexible Income Fund except that the Fund will invest less than 35% of its net assets in high-yield/ high-risk securities and its investments in mortgage- and asset-backed securities will not exceed 25% of assets. ALL FIXED-INCOME FUNDS Each Fund may purchase securities on a when-issued, delayed delivery or forward commitment basis. In addition, each Fund may use futures, options, swaps and other derivatives for hedging purposes or for non-hedging purposes such as seeking to enhance return. See "Additional Risk Factors" on pages 11-12. When its portfolio manager is unable to locate investment opportunities with favorable risk/reward characteristics, the cash position of any Fund may increase and the Fund may have substantial holdings of cash or cash equivalent short-term obligations. See "General Portfolio Policies" on page 10. THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT IN THE JANUS FIXED-INCOME FUNDS. HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT? A fundamental risk associated with any fund that invests in fixed-income securities (e.g., a bond fund) is the risk that the value of the securities it holds will rise or fall as interest rates change. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. A bond fund's average-weighted effective maturity and its duration are measures of how the fund may react to interest rate changes. High-yield bond prices are generally less directly responsive to interest rate changes than investment grade issues and may not always follow this pattern. - -------------------------------------------------------------------------------- WHAT IS MEANT BY A FUND'S "AVERAGE-WEIGHTED EFFECTIVE MATURITY"? The stated maturity of a bond is the date when the issuer must repay the bond's entire principal value to an investor, such as a Fund. Some types of bonds, such as mortgage-backed securities and securities with call provisions, may also have an "effective maturity" that is shorter than the stated date. With respect to GNMA securities and other mortgage-backed securities, effective maturity is likely to be substantially less than the stated maturities of the mortgages in the underlying pools. With respect to obligations with call provisions, effective maturity is typically the next JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 8 call date on which the obligation reasonably may be expected to be called. Securities without prepayment or call provisions generally have an effective maturity equal to their stated maturity. Dollar-weighted effective maturity is calculated by averaging the effective maturity of bonds held by a Fund with each effective maturity "weighted" according to the percentage of net assets that it represents. - -------------------------------------------------------------------------------- WHAT IS MEANT BY A FUND'S "DURATION"? A bond's duration indicates the time it will take an investor to recoup his investment. Unlike average maturity, duration reflects both principal and interest payments. Generally, the higher the coupon rate on a bond, the lower its duration will be. The duration of a bond fund is calculated by averaging the duration of bonds held by a fund with each duration "weighted" according to the percentage of net assets that it represents. Because duration accounts for interest payments, a Fund's duration is usually shorter than its average maturity. - -------------------------------------------------------------------------------- HOW DO THE FIXED-INCOME FUNDS MANAGE INTEREST RATE RISK? Each Fixed-Income Fund may vary the average-weighted maturity of its portfolio to reflect its portfolio manager's analysis of interest rate trends and other factors. A Fund's average-weighted maturity will tend to be shorter when its portfolio manager expects interest rates to rise and longer when its portfolio manager expects interest rates to fall. The Funds may also use futures, options and other derivatives to manage interest rate risk. See "Additional Risk Factors" on pages 11-12. - -------------------------------------------------------------------------------- WHAT IS MEANT BY "CREDIT QUALITY"? Credit quality measures the likelihood that the issuer will meet its obligations on a bond. One of the fundamental risks associated with all fixed-income funds is credit risk, which is the risk that an issuer will be unable to make principal and interest payments when due. U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, present the highest credit risk. - -------------------------------------------------------------------------------- HOW IS CREDIT QUALITY MEASURED? Ratings published by nationally recognized statistical rating agencies such as Standard & Poor's and Moody's are widely accepted measures of credit risk. The lower a bond issue is rated by an agency, the more credit risk it is considered to represent. Lower rated bonds generally pay higher yields to compensate investors for the associated risk. Please refer to Appendix B for a description of rating categories. - -------------------------------------------------------------------------------- WHAT IS A HIGH-YIELD/ HIGH-RISK SECURITY? A high-yield security (also called a "junk" bond) is a debt security rated below investment grade by major rating agencies (i.e., BB or lower by Standard & Poor's or Ba or lower by Moody's) or an unrated bond of similar quality. It presents greater risk of default (the failure to make timely interest and principal payments) than higher quality bonds. - -------------------------------------------------------------------------------- WHAT RISKS DO HIGH-YIELD/HIGH-RISK SECURITIES PRESENT? High-yield securities are often considered to be more speculative and involve greater risk of default or price changes due to changes in economic and industry conditions and the issuer's creditworthiness. Their market prices tend to fluctuate more than higher quality securities as a result of changes in these factors. The default rate of lower quality debt securities is likely to be higher when issuers have difficulty meeting projected goals or obtaining additional financing. This could occur during economic recessions or periods of high interest rates. In addition, there may be a smaller market for lower quality securities than for higher quality securities, making lower quality securities more difficult to sell promptly at an acceptable price. The junk bond market can experience sudden and sharp price swings and thus, investors should be willing to tolerate significant and sudden changes in the Fund's NAV. - -------------------------------------------------------------------------------- WHAT ARE THE TAX ADVANTAGES OF INVESTING IN JANUS FEDERAL TAX-EXEMPT FUND? Most regular income dividends you receive from Janus Federal Tax-Exempt Fund generally will not be subject to federal income tax. Additionally, your state may not tax the portion of this Fund's income derived from obligations issued by your state (if any). Capital gains distributed by this Fund are taxable to you. See "Distributions" and "Taxes" on pages 26-27. The higher your income tax level is, the more you will benefit from tax-exempt investing. - -------------------------------------------------------------------------------- HOW DO THE FIXED-INCOME FUNDS DIFFER FROM EACH OTHER? The chart below shows that the Fixed-Income Funds differ substantially in terms of the type, credit quality and interest rate risk of the securities in which they invest. Primary Interest Rate Investment Type Credit Risk Risk - ------------------------------------------------------------------------------------------------------------------------------------ Janus Flexible Income Fund Corporate Bonds High High - ------------------------------------------------------------------------------------------------------------------------------------ Janus High-Yield Fund Corporate Bonds Highest Moderate - ------------------------------------------------------------------------------------------------------------------------------------ Janus Federal Municipal Tax-Exempt Fund Securities Moderate High - ------------------------------------------------------------------------------------------------------------------------------------ Janus Short-Term Bond Fund Corporate Bonds Moderate Low - ------------------------------------------------------------------------------------------------------------------------------------
JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 9 GENERAL PORTFOLIO POLICIES Unless otherwise stated, each of the following policies applies to all of the Fixed-Income Funds. The percentage limitations included in these policies and elsewhere in this Prospectus apply at the time of purchase of the security. For example, if a Fund exceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose of any securities. CASH POSITION When a Fixed-Income Fund's portfolio manager believes that market conditions are not favorable for profitable investing or when the portfolio manager is otherwise unable to locate favorable investment opportunities, the Fund's investments may be hedged to a greater degree and/or its cash or similar investments may increase. In other words, the Fixed-Income Funds do not always stay fully invested in stocks and bonds. Cash or similar investments are a residual - they represent the assets that remain after a portfolio manager has committed available assets to desirable investment opportunities. Partly because the portfolio managers act independently of each other, the cash positions of the Fixed-Income Funds may vary significantly. Larger hedged positions and/or larger cash positions may serve as a means of preserving capital in unfavorable market conditions. Securities that the Fixed-Income Funds may invest in as means of receiving a return on idle cash include high-grade commercial paper, certificates of deposit, repurchase agreements or other short-term debt obligations. The Fixed-Income Funds may also invest in money market funds (including funds managed by Janus Capital). Janus Federal Tax-Exempt Fund may invest in such securities even though they may be federally taxable. When a Fixed-Income Fund's investments in cash or similar investments increase, a Fund may not participate in stock or bond market advances or declines to the same extent that it would if the Fund remained more fully invested in stocks or bonds. DIVERSIFICATION The Investment Company Act of 1940 (the "1940 Act") classifies investment companies as either diversified or nondiversified. All of the Fixed-Income Funds qualify as diversified funds under the 1940 Act. The Fixed-Income Funds are subject to the following diversification requirements: o As a fundamental policy, no Fixed-Income Fund may own more than 10% of the outstanding voting shares of any issuer. o As a fundamental policy, with respect to 75% of the total assets of each Fixed-Income Fund, no Fund will purchase a security of any issuer (other than cash items and U.S. government securities, as defined in the 1940 Act) if such purchase would cause the Fund's holdings of that issuer to amount to more than 5% of that Fund's total assets. o No Fund will invest more than 25% of its total assets in a single issuer (other than U.S. government securities). INDUSTRY CONCENTRATION As a fundamental policy, no Fixed-Income Fund will invest 25% or more of its total assets in any particular industry (excluding U.S. government securities and municipal obligations issued by governments or their subdivisions because the issuers of those securities are not considered a part of any industry). PORTFOLIO TURNOVER Each Fixed-Income Fund generally intends to purchase securities for long-term investment rather than short-term gains. However, short-term transactions may result from liquidity needs, securities having reached a price or yield objective, changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not foreseen at the time of the initial investment decision. Changes are made in a Fixed-Income Fund's portfolio whenever its portfolio manager believes such changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions. To a limited extent, a Fixed-Income Fund may purchase securities in anticipation of relatively short-term price gains. A Fixed-Income Fund may also sell one security and simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or securities prices. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs and may also result in taxable capital gains. Certain tax rules may restrict the Fixed-Income Funds' ability to engage in short-term trading if a security has been held for less than three months. ILLIQUID INVESTMENTS Each Fixed-Income Fund may invest up to 15% of its net assets in illiquid investments, including restricted securities or private placements that are not deemed to be liquid by Janus Capital. An illiquid investment is a security or other position that cannot be disposed of quickly in the normal course of business. Some securities cannot be sold to the U.S. public because of their terms or because of SEC regulations. Janus Capital will follow guidelines established by the Funds' Trustees in making liquidity determinations for Rule 144A securities and certain other securities, including privately placed commercial paper and municipal lease obligations. BORROWING AND LENDING Each Fixed-Income Fund may borrow money and lend securities or other assets, as follows: o Each Fixed-Income Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. o Each Fixed-Income Fund may mortgage or pledge securities as security for borrowings in amounts up to 15% of its net assets. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 10 o As a fundamental policy, each Fixed-Income Fund may lend securities or other assets if, as a result, no more than 25% of its total assets would be lent to other parties. Each Fixed-Income Fund intends to seek permission from the SEC to borrow money from or lend money to each other and other funds that permit such transactions and for which Janus Capital serves as investment adviser. All such borrowing and lending will be subject to the above percentage limits. There is no assurance that such permission will be granted. ADDITIONAL RISK FACTORS FOREIGN SECURITIES INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS, INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES. Securities of some foreign companies and governments may be traded in the United States, but many foreign securities are traded primarily in foreign markets. The risks of foreign investing include: o Currency Risk. A Fixed-Income Fund may buy the local currency when it buys a foreign currency denominated security and sell the local currency when it sells the security. As long as a Fund holds a foreign security, its value will be affected by the value of the local currency relative to the U.S. dollar. When a Fund sells a foreign security, its value may be worth less in U.S. dollars even though the security increases in value in its home country. U.S. dollar denominated securities of foreign issuers may also be affected by currency risk. o Political and Economic Risk. Foreign investments may be subject to heightened political and economic risks, particularly in underdeveloped or developing countries which may have relatively unstable governments and economies based on only a few industries. In some countries, there is the risk that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of a Fixed-Income Fund's assets from that country. The Fixed-Income Funds may invest in emerging market countries. Emerging market countries involve greater risks such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. o Regulatory Risk. There may be less government supervision of foreign markets. Foreign issuers may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic issuers. There may be less publicly available information about foreign issuers than domestic issuers. o Market Risk. Foreign securities markets, particularly those of underdeveloped or developing countries, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions. There may be limited legal recourse against an issuer in the event of a default on a debt instrument. o Transaction Costs. Transaction costs of buying and selling foreign securities, including brokerage, tax and custody costs, are generally higher than those involved in domestic transactions. Foreign securities purchased indirectly (e.g., depositary receipts) are subject to many of the above risks, including currency risk, because their values depend on the performance of a foreign security denominated in its home currency. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS Each Fixed-Income Fund may enter into futures contracts on securities, financial indices and foreign currencies and options on such contracts ("futures contracts") and may invest in options on securities, financial indices and foreign currencies ("options"), forward contracts and interest rate swaps and swap-related products (collectively "derivative instruments"). The Fixed-Income Funds intend to use most derivative instruments primarily to hedge the value of their portfolios against potential adverse movements in securities prices, foreign currency markets or interest rates. To a limited extent, the Fixed-Income Funds may also use derivative instruments for non-hedging purposes such as seeking to increase income or otherwise seeking to enhance return. Please refer to Appendix A to this Prospectus and the SAI for a more detailed discussion of these instruments. The use of derivative instruments exposes the Fixed-Income Funds to additional investment risks and transaction costs. Risks inherent in the use of derivative instruments include: o the risk that interest rates, securities prices and currency markets will not move in the direction that a portfolio manager anticipates; o imperfect correlation between the price of derivative instruments and movements in the prices of the securities, interest rates or currencies being hedged; o the fact that skills needed to use these strategies are different from those needed to select portfolio securities; o inability to close out certain hedged positions to avoid adverse tax consequences; JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 11 o the possible absence of a liquid secondary market for any particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; o leverage risk, that is, the risk that adverse price movements in an instrument can result in a loss substantially greater than a Fixed-Income Fund's initial investment in that instrument (in some cases, the potential loss is unlimited); and o particularly in the case of privately-negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave a Fixed-Income Fund worse off than if it had not entered into the position. Although the Fixed-Income Funds believe the use of derivative instruments will benefit the Funds, a Fund's performance could be worse than if the Fund had not used such instruments if a portfolio manager's judgement proves incorrect. When a Fixed-Income Fund invests in a derivative instrument, it may be required to segregate cash and other liquid assets or certain portfolio securities with its custodian to "cover" the Fund's position. Assets segregated or set aside generally may not be disposed of so long as the Fund maintains the positions requiring segregation or cover. Segregating assets could diminish the Fund's return due to the opportunity losses of foregoing other potential investments with the segregated assets. HIGH-YIELD/HIGH-RISK SECURITIES High-yield/high-risk securities (or "junk" bonds) are debt securities rated below investment grade by the primary rating agencies (Standard & Poor's and Moody's). Please refer to Appendix B for a description of rating categories. The value of lower quality securities generally is more dependent on the ability of the issuer to meet interest and principal payments (i.e., credit risk) than is the case for higher quality securities. Conversely, the value of higher quality securities may be more sensitive to interest rate movements than lower quality securities. Issuers of high-yield securities may not be as strong financially as those issuing bonds with higher credit ratings. Investments in such companies are considered to be more speculative than higher quality investments. Issuers of high-yield securities are more vulnerable to real or perceived economic changes (for instance, an economic downturn or prolonged period of rising interest rates), political changes or adverse developments specific to the issuer. Adverse economic, political or other developments may impair the issuer's ability to service principal and interest obligations, to meet projected business goals and to obtain additional financing, particularly if the issuer is highly leveraged. In the event of a default, a Fixed-Income Fund would experience a reduction of its income and could expect a decline in the market value of the defaulted securities. The market for lower quality securities is generally less liquid than the market for higher quality securities. Adverse publicity and investor perceptions as well as new or proposed laws may also have a greater negative impact on the market for lower quality securities. Unrated debt, while not necessarily of lower quality than rated securities, may not have as broad a market as rated securities. Sovereign debt of foreign governments is generally rated by country. Because these ratings do not take into account individual factors relevant to each issue and may not be updated regularly, Janus Capital may treat such securities as unrated debt. The market prices of high-yield securities structured as zero coupon or pay-in-kind securities are generally affected to a greater extent by interest rate changes and tend to be more volatile than securities which pay interest periodically. In addition, zero coupon, pay-in-kind and delayed interest bonds often do not pay interest until maturity. However, the Fixed-Income Funds must recognize a computed amount of interest income and pay dividends to shareholders even though they have received no cash. In some instances, the Fixed-Income Funds may have to sell securities to have sufficient cash to pay the dividends. SHORT SALES Each Fixed-Income Fund may engage in "short sales against the box," which involves selling a security that a Fund owns (or has the right to obtain securities equivalent in kind and amount to the securities sold short) for delivery at a specified date in the future, to hedge against anticipated declines in the market price of portfolio securities or to defer an unrealized gain. If the value of the securities sold short increases prior to the scheduled delivery date, a Fund loses the opportunity to participate in the gain. SPECIAL SITUATIONS Each Fixed-Income Fund may invest in "special situations" from time to time. A special situation arises when, in the opinion of a Fund's portfolio manager, the securities of a particular issuer will be recognized and appreciate in value due to a specific development with respect to that issuer. Developments creating a special situation might include, among others, a new product or process, a technological breakthrough, a management change or other extraordinary corporate event, or differences in market supply of and demand for the security. Investment in special situations may carry an additional risk of loss in the event that the anticipated development does not occur or does not attract the expected attention. See Appendix A for risks associated with certain other investments. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 12 THE MONEY MARKET FUNDS IN DETAIL INVESTMENT OBJECTIVES The investment objective of each of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or that the Shares will be able to maintain a stable net asset value of $1.00 per share. COMMON INVESTMENT POLICIES The Money Market Funds will invest only in eligible high quality, short-term money market instruments that present minimal credit risks, as determined by Janus Capital, pursuant to procedures adopted by the Trustees. Each Money Market Fund may invest only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7 under the 1940 Act) and will maintain a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities (as defined below), each Money Market Fund will not invest more than 5% of its total assets in the securities of any one issuer. A guarantor is not considered an issuer for the purpose of this limit provided that the value of all securities held by a Money Market Fund that are issued or guaranteed by that institution does not exceed 10% of the Money Market Fund's total assets. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's total assets may be invested without regard to the foregoing limitations. A Money Market Fund may not invest more than 25% of its total assets in any one industry, except that this limit does not apply to U.S. Government Securities, bank obligations or municipal securities. To ensure adequate liquidity, no Money Market Fund may invest more than 10% of its net assets in illiquid investments, including repurchase agreements maturing in more than seven days (unless subject to a demand feature) and certain time deposits that are subject to early withdrawal penalties and mature in more than seven days. Because the Money Market Funds are typically used as a cash management vehicle, they intend to maintain a high degree of liquidity. Janus Capital determines and monitors the liquidity of portfolio securities under the supervision of the Trustees. RATINGS High quality money market instruments include those that (i) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in one of the two highest rating categories for short-term debt by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise unrated and determined by Janus Capital to be of comparable quality. Each Money Market Fund, except Janus Tax-Exempt Money Market Fund, will invest at least 95% of its total assets in securities in the highest rating category (as determined pursuant to Rule 2a-7). Descriptions of the rating categories of Standard & Poor's, Moody's, and certain other NRSROs are contained in Appendix B. A further description of the Money Market Funds' investment policies is included in the Money Market Funds' SAI. Although each Money Market Fund only invests in high quality money market instruments, an investment in a Money Market Fund is subject to risk even if all securities in a Money Market Fund's portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities, can change in value as a result of changes in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. TYPES OF INVESTMENTS JANUS MONEY MARKET FUND Janus Money Market Fund pursues its objective by investing primarily in high quality debt obligations and obligations of financial institutions. The Fund may also invest in U.S. Government Securities (as defined below) and municipal securities, although the Fund expects to invest in such securities to a lesser degree. DEBT OBLIGATIONS The Fund may invest in debt obligations of domestic issuers, including commercial paper (short-term promissory notes issued by companies to finance their, or their affiliates' current obligations), notes and bonds, and variable amount master demand notes. The payment obligations on these instruments may be backed by securities, swap agreements or other assets, by a guarantee of a third party or solely by the unsecured promise of the issuer to make payments when due. The Fund may invest in privately issued commercial paper or other securities that are restricted as to disposition under the federal securities laws. In general, sales of these securities may not be made absent registration under the Securities Act of 1933 (the "1933 Act") or the availability of an appropriate exemption. 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 Fund may invest in obligations of financial institutions. Examples of obligations in which the Fund may invest include negotiable certificates of deposit, bankers' acceptances and time deposits of U.S. banks (including savings and loan associations) having total assets in excess of one billion dollars and U.S. branches of foreign banks having total assets in excess of ten billion JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 13 dollars. The Fund may also invest in Eurodollar and Yankee bank obligations as discussed below. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Fixed time deposits, which are payable at a stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Fund but may be subject to early withdrawal penalties that could reduce the Fund's yield. Unless there is a readily available market for them, time deposits that are subject to early withdrawal penalties and that mature in more than seven days will be treated as illiquid securities. EURODOLLAR OR YANKEE OBLIGATIONS The Fund may invest in Eurodollar and Yankee bank obligations. Eurodollar bank obligations are dollar-denominated certificates of deposit or time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks. Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks. One such risk is the possibility that a foreign government might prevent dollar-denominated funds from flowing across its borders. Other risks include: adverse political and economic developments in a foreign country; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes; and expropriation or nationalization of foreign issuers. U.S. GOVERNMENT SECURITIES The Fund may invest without limit in U.S. Government Securities as described below under "Janus Government Money Market Fund." MUNICIPAL SECURITIES The Fund may invest in obligations of states, territories or possessions of the United States and their subdivisions, authorities and corporations as described below under "Janus Tax-Exempt Money Market Fund." These obligations may pay interest that is exempt from federal income taxation. JANUS GOVERNMENT MONEY MARKET FUND Janus Government Money Market Fund pursues its objective by investing exclusively in obligations issued and/or guaranteed as to principal and interest by the United States government or by its agencies and instrumentalities and repurchase agreements secured by such obligations. U.S. GOVERNMENT SECURITIES U.S. Government Securities shall have the meaning set forth in the 1940 Act. The 1940 Act defines U.S. Government Securities to include securities issued or guaranteed by the U.S. government, its agencies and instrumentalities. U.S. Government Securities may also include repurchase agreements collateralized by and municipal securities escrowed with or refunded with U.S. government securities. U.S. Government Securities in which the Fund may invest include U.S. Treasury securities and obligations issued or guaranteed by U.S. government agencies and instrumentalities that are backed by the full faith and credit of the U.S. government, such as those guaranteed by the Small Business Administration or issued by the Government National Mortgage Association. In addition, U.S. Government Securities in which the Fund may invest include securities supported primarily or solely by the credit-worthiness 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. JANUS TAX-EXEMPT MONEY MARKET FUND Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily in municipal securities whose interest is exempt from federal income taxes, including the federal alternative minimum tax. Although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income taxes, the Fund reserves the right to invest up to 20% of the value of its net assets in securities whose interest is federally taxable. Additionally, when its portfolio manager is unable to locate investment opportunities with desirable risk/reward characteristics, the Fund may invest without limit in cash and cash equivalents, including obligations that may be federally taxable (See "Taxable Investments"). MUNICIPAL SECURITIES The municipal securities in which the Fund may invest include municipal notes and short-term municipal bonds. Municipal notes are generally used to provide for the issuer's short-term capital needs and generally have maturities of 397 days or less. Examples include tax anticipation and revenue anticipation notes, which generally are issued in anticipation of various seasonal revenues, bond anticipation notes, construction loan notes and tax-exempt commercial paper. Short-term municipal bonds may include "general obligation bonds," which are secured by the issuer's pledge of its faith, credit and taxing power for payment of principal and interest; "revenue bonds," which are generally paid from the revenues of a particular facility or a specific excise tax or other source; and "industrial development bonds," which are issued by or on behalf of public authorities to provide funding for various privately operated industrial and commercial facilities. The Fund may also invest in high quality participation interests in municipal securities. A more detailed description of various types of municipal securities is contained in Appendix B in the Money Market Funds' SAI. When the assets and revenues of an agency, authority, instrumentality or other political subdivision are separate from those of the government creating the JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 14 issuing entity and a security is backed only by the assets and revenues of the issuing entity, that entity will be deemed to be the sole issuer of the security. Similarly, in the case of an industrial development bond backed only by the assets and revenues of the non-governmental issuer, the non-governmental issuer will be deemed to be the sole issuer of the bond. At times, the Fund may invest more than 25% of the value of its total assets in tax-exempt securities that are related in such a way that an economic, business, or political development or change affecting one such security could similarly affect the other securities; for example, securities whose issuers are located in the same state, or securities whose interest is derived from revenues of similar type projects. The Fund may also invest more than 25% of its assets in industrial development bonds or participation interests therein. Yields on municipal securities are dependent on a variety of factors, including the general conditions of the money market and of the municipal bond and municipal note markets, the size of a particular offering, the maturity of the obligation and the rating of the issue. The achievement of the Fund's investment objective is dependent in part on the continuing ability of the issuers of municipal securities in which the Fund invests to meet their obligations for the payment of principal and interest when due. Obligations of issuers of municipal securities are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978, as amended. Therefore, the possibility exists, that as a result of litigation or other conditions, the ability of any issuer to pay, when due, the principal of and interest on its municipal securities may be materially affected. MUNICIPAL LEASES The Fund may invest in municipal leases or participation interests therein. 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. Lease obligations may not be backed by the issuing municipality's credit and may involve risks not normally associated with general obligation bonds and other revenue bonds. For example, their interest may become taxable if the lease is assigned and the holders may incur losses if the issuer does not appropriate funds for the lease payment on an annual basis, which may result in termination of the lease and possible default. Janus Capital may determine that a liquid market exists for municipal lease obligations pursuant to guidelines established by the Trustees. TAXABLE INVESTMENTS As discussed above, although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income tax, the Fund may under certain circumstances invest in certain securities whose interest is subject to such taxation. These securities include: (i) short-term obligations of the U.S. government, its agencies or instrumentalities, (ii) certificates of deposit, bankers' acceptances and interest-bearing savings deposits of banks having total assets of more than one billion dollars and whose deposits are insured by the Federal Deposit Insurance Corporation, (iii) commercial paper and (iv) repurchase agreements as described below covering any of the securities described in items (i)-(iii) above or any other obligations of the U.S. government, its agencies or instrumentalities. COMMON INVESTMENT TECHNIQUES PARTICIPATION INTERESTS The Money Market Funds may invest in participation interests in any type of security in which the Money Market Funds may invest. A participation interest gives a Money Market Fund an undivided interest in the underlying securities in the proportion that the Money Market Fund's participation interest bears to the total principal amount of the underlying securities. Participation interests usually carry a demand feature, as described below, backed by a letter of credit or guarantee of the institution that issued the interests permitting the holder to tender them back to the institution. DEMAND FEATURES The Money Market Funds may invest in securities that are subject to puts and stand-by commitments ("demand features"). Demand features give the Money Market Funds the right to resell securities at specified periods prior to their maturity dates to the seller or to some third party at an agreed-upon price or yield. Securities with demand features may involve certain expenses and risks, including the inability of the issuer of the instrument to pay for the securities at the time the instrument is exercised, non-marketability of the instrument and differences between the maturity of the underlying security and the maturity of the instrument. Securities may cost more with demand features than without them. Demand features can serve three purposes: to shorten the maturity of a variable or floating rate security, to enhance the instrument's credit quality and to provide a source of liquidity. Demand features are often issued by third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Money Market Funds' investments may be dependent in part on the credit quality of the banks supporting the Money Market Funds' investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. Brokerage firms and insurance companies also provide certain liquidity and credit support. A substantial portion of the Janus Tax-Exempt Money Market Fund's portfolio in particular may consist of securities backed by banks and other financial institutions, and thus adverse changes in the credit quality of these institutions could cause losses to the Fund and affect its share price. VARIABLE AND FLOATING RATE SECURITIES The securities in which the Money Market Funds invest may have variable or floating rates of interest. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. Securities with ultimate maturities of greater than 397 days may be purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term instruments that have demand features JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 15 which comply with certain requirements and certain variable rate U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's or guarantor's creditworthiness. The rate of interest on securities purchased by a Money Market Fund may be tied to short-term Treasury or other government securities or indices on securities that are permissible investments of the Money Market Funds, as well as other money market rates of interest. The Money Market Funds will not purchase securities whose values are tied to interest rates or indicies that are not appropriate for the duration and volatility standards of a money market fund. MORTGAGE- AND ASSET-BACKED SECURITIES Janus Money Market Fund and Janus Government Money Market Fund may purchase fixed or adjustable 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 entities. In addition, Janus Money Market Fund may purchase other asset-backed securities, including securities backed by automobile loans, equipment leases or credit card receivables. These securities directly or indirectly represent a participation in, or are secured by and payable from, fixed or adjustable rate mortgage or other loans which may be secured by real estate or other assets. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayments of the principal of underlying loans may shorten the effective maturities of these securities and may result in a Fund having to reinvest proceeds at a lower interest rate. REPURCHASE AGREEMENTS Each Money Market Fund may seek additional income by entering into collateralized repurchase agreements. Repurchase agreements are transactions in which a Money Market Fund purchases securities and simultaneously commits to resell those securities to the seller at an agreed-upon price on an agreed-upon future date. The resale price reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased securities. If the seller of the securities underlying a repurchase agreement fails to pay the agreed resale price on the agreed delivery date, a Money Market Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. REVERSE REPURCHASE AGREEMENTS Each Money Market Fund may enter into reverse repurchase agreements. Reverse repurchase agreements are transactions in which a Money Market Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. This technique will be used only for temporary or emergency purposes, such as meeting redemption requests, or to earn additional income on portfolio securities. DELAYED DELIVERY SECURITIES Each Money Market Fund may purchase securities on a when-issued or delayed delivery basis. Securities so purchased are subject to market price fluctuation from the time of purchase but no interest on the securities accrues to a Money Market Fund until delivery and payment for the securities take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Forward commitments will be entered into only when a Money Market Fund has the intention of taking possession of the securities, but a Money Market Fund may sell the securities before the settlement date if deemed advisable. BORROWING AND LENDING Each Money Market Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. A Money Market Fund may not mortgage or pledge securities except to secure permitted borrowings. As a fundamental policy, a Money Market Fund will not lend securities or other assets if, as a result, more than 25% of its total assets would be lent to other parties; however, the Money Market Funds do not currently intend to engage in securities lending. Each Money Market Fund intends to seek permission from the SEC to borrow money from or lend money to other funds that permit such transactions and are advised by Janus Capital. There is no assurance that such permission will be granted. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 16 SHAREHOLDER'S MANUAL This section will help you become familiar with the different types of accounts you can establish with Janus. This section also explains in detail the wide array of services and features you can establish on your account. These services and features may be modified or discontinued without shareholder approval or prior notice. HOW TO GET IN TOUCH WITH JANUS If you have any questions while reading this Prospectus, please call one of our Investor Service Representatives at 1-800-525-3713 Monday-Friday: 8:00 a.m.-10:00 p.m., and Saturday: 10:00 a.m.-7:00 p.m., New York time. - -------------------------------------------------------------------------------- MINIMUM INVESTMENTS* To open a new account ............................. $2,500 To open a new retirement or UGMA/UTMA account ................................. $500 To open a new account with an Automatic Investment Program ................... $500** To add to any type of an account .................... $100 **The Funds reserve the right to change the amount of these minimums from time to time or to waive them in whole or in part for certain types of accounts. **There is a $100 minimum for each subsequent investment. - -------------------------------------------------------------------------------- TYPES OF ACCOUNT OWNERSHIP If you are investing in the Funds for the first time, you will need to establish an account. You can establish the following types of accounts by completing the New Account Application. To request an application, call 1-800-525-3713. o Individual or Joint Ownership. Individual accounts are owned by one person. Joint accounts have two or more owners. o A Gift or Transfer to Minor (UGMA or UTMA). An UGMA/UTMA account is a custodial account managed for the benefit of a minor. To open an UGMA or UTMA account, you must include the minor's Social Security number on the application. o Trust. An established trust can open an account. The names of each trustee, the name of the trust and the date of the trust agreement must be included on the application. o Business Accounts. Corporations and partnerships may also open an account. The application must be signed by an authorized officer of the corporation or a general partner of the partnership. RETIREMENT ACCOUNTS If you are eligible, you may set up your account under a tax-sheltered retirement plan. A retirement plan allows you to shelter your investment income and capital gains from current income taxes. A contribution to these plans may also be tax deductible. Distributions from a retirement plan are generally subject to income tax and may be subject to an additional tax if withdrawn prior to age 59 1/2. Investors Fiduciary Trust Company serves as custodian for the retirement plans offered by the Funds. There is an annual $12 fee per account to maintain your retirement account. The maximum annual fee is $24 per taxpayer identification number. You may pay the fee by check or have it automatically deducted from your account (usually in December). The following plans require a special application. For an application and more details about our Retirement Plans, call 1-800-525-3713. o Individual Retirement Account: An IRA allows individuals under age 70 1/2 with earned income to contribute up to the lesser of $2,000 or 100% of compensation annually. Please refer to the Janus Funds IRA booklet for complete information regarding IRAs. o Simplified Employee Pension Plan ("SEP"): This plan allows small business owners (including sole proprietors) to make tax-deductible contributions for themselves and any eligible employee(s). A SEP requires an IRA (a SEP-IRA) to be set up for each SEP. o Profit Sharing or Money Purchase Pension Plan: These plans are open to corporations, partnerships and sole proprietors to benefit their employees and themselves. o Section 403(b)(7) Plan: Employees of educational organizations or other qualifying, tax-exempt organizations may be eligible to participate in a Section 403(b)(7) Plan. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 17 HOW TO OPEN YOUR JANUS ACCOUNT Complete and sign the appropriate application. Please be sure to provide your Social Security or taxpayer identification number on the application. Make your check payable to Janus Funds. Send all items to one of the following addresses: Janus Funds P.O. Box 173375 Denver, CO 80217-3375 For Overnight Carrier Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 INVESTOR SERVICE CENTERS Janus Funds offers two Investor Service Centers for those individuals who would like to conduct their investing in person. Our representatives will be happy to assist you at either of the following locations: 100 Fillmore Street, Suite 100 Denver, CO 80206 3773 Cherry Creek North Drive, Suite 101 Denver, CO 80209 HOW TO PURCHASE SHARES PAYING FOR SHARES When you purchase shares, your request will be processed at the next NAV calculated after your order is received and accepted. Please note the following: o Cash, credit cards, third party checks and credit card checks will not be accepted. o All purchases must be made in U.S. dollars. o Checks must be drawn on U.S. banks and made payable to Janus Funds. o If a check does not clear your bank, the Funds reserve the right to cancel the purchase. o If the Funds are unable to debit your predesignated bank account on the day of purchase, they may make additional attempts or cancel the purchase. o The Funds reserve the right to reject any specific purchase request. If your purchase is cancelled, you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of any decline in the value of the cancelled purchase. The Funds (or their agents) have the authority to redeem shares in your account(s) to cover any losses due to fluctuations in share price. Any profit on such cancellation will accrue to the Fund. Once you have opened your Janus account, the minimum amount for an additional investment is $100. You may add to your account at any time through any of the following options: BY MAIL Complete the remittance slip attached at the bottom of your confirmation statement. If you are making a purchase into a retirement account, please indicate whether the purchase is a rollover or a current or prior year contribution. Send your check and remittance slip or written instructions to one of the addresses listed previously. You may also request a booklet of remittance slips for non-retirement accounts. BY TELEPHONE This service allows you to purchase additional shares quickly and conveniently through an electronic transfer of money. When you make an additional purchase by telephone, Janus will automatically debit your predesignated bank account for the desired amount. To establish the telephone purchase option on your new account, complete the "Telephone Purchase of Shares Option" section on the application and attach a "voided" check or deposit slip from your bank account. If your account is already established, call 1-800-525-3713 to request the appropriate form. This option will become effective ten business days after the form is received. BY WIRE Purchases may also be made by wiring money from your bank account to your Janus account. Call 1-800-525-3713 to receive wiring instructions. AUTOMATIC INVESTMENT PROGRAMS Janus offers several automatic investment plans to help you achieve your financial goals as simply and conveniently as possible. You may open a new account with a $500 initial purchase and $100 automatic subsequent investments. o AUTOMATIC MONTHLY INVESTMENT PROGRAM You select the day each month that your money ($100 minimum) will be electronically transferred from your bank account to your Fund account. To establish this option, complete the "Automatic Monthly Investment Program" section on the application and attach a "voided" check or deposit slip from your bank account. If your Fund account is already established, call 1-800-525-3713 to request the appropriate form. o PAYROLL DEDUCTION If your employer can initiate an automatic payroll deduction, you may have all or a portion of your paycheck ($100 minimum) invested directly into your Fund account. To obtain information on establishing this option, call 1-800-525-3713. o SYSTEMATIC EXCHANGE With a Systematic Exchange you determine the amount of money ($100 minimum) you would like automatically exchanged from one Janus account to another on any day of the month. For more information on how to establish this option, call 1-800-525-3713. HOW TO EXCHANGE SHARES On any business day, you may exchange all or a portion of your shares into any other available Janus fund. IN WRITING To request an exchange in writing, please follow the instructions for written requests on page 20. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 18 BY TELEPHONE All accounts are automatically eligible for the telephone exchange option. To exchange shares by telephone, call an Investor Service Representative at 1-800-525-3713 during normal business hours or call the Janus Electronic Telephone Service (JETS(R)) line at 1-800-525-6125. BY SYSTEMATIC EXCHANGE As noted above, you may establish a Systematic Exchange for as little as a $100 subsequent purchase per month on established accounts. You may establish a new account with a $500 initial purchase and subsequent $100 systematic exchanges. If the balance in the account you are exchanging from falls below the systematic exchange amount, all remaining shares will be exchanged and the program will be discontinued. EXCHANGE POLICIES o Except for Systematic Exchanges, new accounts established by exchange must meet the $2,500 minimum, or be for the total account value if less than $2,500. o Exchanges between existing accounts must meet the $100 subsequent investment requirement. o You may make four exchanges out of each non-Money Market Fund during a calendar year (exclusive of Systematic Exchanges) free of charge. There is currently no limit on exchanges out of the Money Market Funds. o Exchanges between accounts will be accepted only if the registrations are identical. o If the shares you are exchanging are held in certificate form, you must return the certificate to your Fund prior to making any exchanges. o Be sure that you read the prospectus for the Fund into which you are exchanging. o The Funds reserve the right to reject any exchange request and to modify or terminate the exchange privilege at any time. For example, the Funds may reject exchanges from accounts engaged in excessive trading (including market timing transactions) that are believed to be detrimental to the Funds. o An exchange represents the sale of shares from one Fund and the purchase of shares of another Fund, which may produce a taxable gain or loss in a non-tax deferred account. Because the Money Market Funds seek to maintain a stable net asset value per share, it is not anticipated that a sale of Shares of the Money Market Funds will produce a taxable gain or loss. QUICK ADDRESS AND TELEPHONE REFERENCE MAILING ADDRESS Janus Funds P.O. Box 173375 Denver, CO 80217-3375 FOR OVERNIGHT CARRIER Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 JANUS INTERNET ADDRESS http://www.JanusFunds.com JANUS INVESTOR SERVICES 1-800-525-3713 To speak to a service representative JETS(R) 1-800-525-6125 For 24-hour access to account and Fund information. TDD 1-800-525-0056 A telecommunications device for our hearing- and speech-impaired shareholders. JANUS QUOTELINE(R) 1-800-525-0024 For automated daily quotes on Fund share prices, yields and total returns. JANUS LITERATURE LINE 1-800-525-8983 To request a prospectus, shareholder reports or marketing materials. HOW TO REDEEM SHARES On any business day, you may redeem all or a portion of your shares. If the shares are held in certificate form, the certificate must be returned with or before your redemption request. Your transaction will be processed at the next NAV calculated after your order is received and accepted. IN WRITING To request a redemption in writing, please follow the instructions for written requests on page 20. BY TELEPHONE Most accounts have the telephone redemption option, unless this option was specifically declined on the application or in writing. This option enables you to redeem up to $100,000 daily from your account by simply calling 1-800-525-3713 by 4:00 p.m. New York time. SYSTEMATIC REDEMPTION OPTION Systematic Redemption Options allow you to redeem a specific dollar amount from your account on a regular basis. For more information or to request the appropriate form, please call 1-800-525-3713. PAYMENT OF REDEMPTION PROCEEDS o By Check Redemption proceeds will be sent to the shareholder(s) of record at the address of record within seven days after receipt of a valid redemption request. o ELECTRONIC TRANSFER If you have established this option, your redemption proceeds can be electronically transferred to your predesignated bank account on the second bank business day after receipt of your redemption request. To establish this option, call 1-800-525-3713. There is no fee for this option. o BY WIRE If you are authorized for the wire redemption service, your redemption proceeds will be wired directly into your designated bank account on the next bank business day after receipt of your redemption request. There is no limitation on redemptions by wire; however, there is an $8 fee for each wire and your bank may charge an additional fee to receive the wire. If you would like to establish this option on an existing account, please call 1-800-525-3713 to request the appropriate form. Wire redemptions are not available for retirement accounts. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 19 IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FIXED-INCOME FUNDS MAY DELAY THE PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE TO ALLOW THE PURCHASE TO CLEAR. Unless you provide alternate instructions, your proceeds will be invested in Janus Money Market Fund - Investor Shares during the 15 day hold period. WRITTEN INSTRUCTIONS To redeem or exchange all or part of your shares in writing, your request should be sent to one of the addresses listed on page 18 and must include the following information: o the name of the Fund(s) o the account number(s) o the amount of money or number of shares being redeemed o the name(s) on the account o the signature(s) of all registered account owners o your daytime telephone number SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE o Individual, Joint Tenants, Tenants in Common: Written instructions must be signed by each shareholder, exactly as the names appear in the account registration. o UGMA or UTMA: Written instructions must be signed by the custodian in his/ her capacity as it appears in the account registration. o Sole Proprietor, General Partner: Written instructions must be signed by an authorized individual in his/her capacity as it appears in the account registration. o Corporation, Association: Written instructions must be signed by the person(s) authorized to act on the account. In addition, a certified copy of the corporate resolution authorizing the signer to act must accompany the request. o Trust: Written instructions must be signed by the trustee(s). If the name of the current trustee(s) does not appear in the account registration, a certificate of incumbency dated within 60 days must also be submitted. o IRA: Written instructions must be signed by the account owner. If you do not want federal income tax withheld from your redemption, you must state that you elect not to have such withholding apply. In addition, your instructions must state whether the distribution is normal (after age 59 1/2) or premature (before age 59 1/2) and, if premature, whether any exceptions such as death or disability apply with regard to the 10% additional tax on early distributions. PRICING OF FUND SHARES All purchases, redemptions and exchanges will be processed at the NAV next calculated after your request is received and approved. A Fund's NAV is calculated at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4:00 p.m. New York time) each day that the NYSE is open. In order to receive a day's price, your order must be received by the close of the regular trading session of the NYSE. The Money Market Funds reserve the right to require purchase, redemption and exchange requests and payments prior to this time on days when the bond market closes before the NYSE. For the Fixed-Income Funds, securities are valued at market value or, if a market quotation is not readily available, at their fair value determined in good faith under procedures established by and under the supervision of the Trustees. Short-term instruments maturing within 60 days are valued at amortized cost, which approximates market value. For the Money Market Funds, portfolio securities are valued at their amortized cost. Amortized cost valuation involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity (or such other date as permitted by Rule 2a-7) of any discount or premium. If fluctuating interest rates cause the market value of a Fund's portfolio to deviate more than 1/2 of 1% from the value determined on the basis of amortized cost, the Trustees will consider whether any action, such as adjusting the Share's NAV to reflect current market conditions, should be initiated to prevent any material dilutive effect on shareholders. See your Fund's SAI for more detailed information. SIGNATURE GUARANTEE In addition to the signature requirements, a signature guarantee is also required if any of the following is applicable: o The redemption exceeds $100,000. o You would like the check made payable to anyone other than the shareholder(s) of record. o You would like the check mailed to an address which has been changed within 10 days of the redemption request. o You would like the check mailed to an address other than the address of record. THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713. HOW TO OBTAIN A SIGNATURE GUARANTEE A signature guarantee assures that a signature is genuine. The signature guarantee protects shareholders from unauthorized account transfers. The following financial institutions may guarantee signatures: banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange. Call your financial institution to see if they have the ability to guarantee a signature. A SIGNATURE GUARANTEE MAY NOT BE PROVIDED BY A NOTARY PUBLIC. If you live outside the United States, a foreign bank properly authorized to do business in your country of residence or a U.S. consulate may be able to authenticate your signature. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 20 SHAREHOLDER SERVICES AND ACCOUNT POLICIES JANUS ELECTRONIC TELEPHONE SERVICE (JETS(R)) JETS, our electronic telephone service line, offers you 24-hour access by TouchTone(TM) telephone to obtain your account balance, to confirm your last transaction or dividend posted to your account, to order duplicate account or tax statements, to reorder Money Market Fund checks, to exchange your shares or to purchase shares. JETS can be accessed by calling 1-800-525-6125. Calls on JETS are limited to seven minutes. JANUS WEB SITE Janus maintains a Web site located at http://www.JanusFunds.com. You can access information such as your account balance and the Funds' NAVs through the Web site. In addition, you may request and/ or download a Janus funds prospectus. CHECK WRITING PRIVILEGE Check writing privileges are available for all three Money Market Funds. Checkbooks will be issued to shareholders who have completed a Signature Draft Card, which is sent in the new account welcome package or by calling 1-800-525-3713. (There is no checkwriting privilege for retirement accounts.) Your checkbook will be mailed approximately 10 days after the check writing privilege is requested. Checks may be written for any amount over but not less than $250 per check. Purchases made by check or the Automatic Monthly Investment Program may not be redeemed by a redemption check until the 15-day hold period has passed. All checks written on the account must be signed by all account holders unless otherwise specified on the original application or the subsequent Signature Draft Card. The Funds reserve the right to terminate or modify the check writing privilege at any time. ACCOUNT MINIMUMS Minimum account sizes are noted on page 17. An account established on or before February 18, 1996 is required to meet the minimum balances in effect when the account was established ($1,000 for regular accounts and $250 for retirement and UGMA/UTMA accounts). An active Automatic Monthly Investment (AMI) on any such account exempted it from any minimum initial investment requirement and continues to do so. In addition, an active AMI on these accounts may continue at $50 per month, provided there is no interruption in the AMI program. All other subsequent investments must meet the $100 required minimum. Due to the proportionately higher costs of maintaining small accounts, Janus reserves the right to deduct a $10 minimum balance fee (or the value of the account if less than $10) from accounts with values below the minimums described on page 17 or to close such accounts. This policy will apply to accounts participating in the Automatic Monthly Investment Program only if your account balance does not reach the required minimum initial investment or falls below such minimum and you have discontinued monthly investments. This policy does not apply to accounts that fall below the minimums solely as a result of market value fluctuations. It is expected that accounts will be valued in September. The $10 fee will be assessed on the second Friday of September of each year. You will receive notice before we charge the $10 fee or close your account so that you may increase your account balance to the required minimum. TRANSACTIONS THROUGH PROCESSING ORGANIZATIONS You may purchase or sell Fund shares through a broker-dealer, bank or other financial institution, or an organization that provides recordkeeping and consulting services to 401(k) plans or other employee benefit plans (a "Processing Organization"). Processing Organizations may charge you a fee for this service and may require different minimum initial and subsequent investments than the Funds. The Processing Organization may also impose other charges or restrictions different from those applicable to shareholders who invest in the Funds directly. The Processing Organization, rather than its customers, may be the shareholder of record of your shares. The Funds are not responsible for the failure of any Processing Organization to carry out its obligations to its customers. Certain Processing Organizations may receive compensation from Janus Capital or its affiliates and certain Processing Organizations may receive compensation from the Funds for shareholder recordkeeping and similar services. TAXPAYER IDENTIFICATION NUMBER On the application or other appropriate form, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to backup withholding for failing to report income to the IRS. If you are subject to the 31% backup withholding or you did not certify your taxpayer identification, the IRS requires the Funds to withhold 31% of any dividends paid and redemption or exchange proceeds. In addition to the 31% backup withholding, you may be subject to a $50 fee to reimburse the Funds for any penalty that the IRS may impose. SHARE CERTIFICATES (FIXED-INCOME FUNDS ONLY) Most shareholders choose not to hold their shares in certificate form because account transactions such as exchanges and redemptions cannot be completed until the certificate has been returned to the Funds. The Fixed-Income Funds will issue share certificates upon written request only. Share certificates will not be issued until the shares have been held for at least 15 days and will not be issued for accounts that do not meet the minimum investment JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 21 requirements. Share certificates cannot be issued for retirement accounts. In addition, if the certificate is lost, there may be a replacement charge. Share certificates are not available for the Money Market Funds in order to maintain the general liquidity that is representative of a money market fund and to help facilitate transactions in shareholder accounts. INVOLUNTARY REDEMPTIONS The Funds reserve the right to close an account if the shareholder is deemed to engage in activities which are illegal or otherwise believed to be detrimental to the Funds. TELEPHONE TRANSACTIONS You may initiate many transactions by telephone. The Funds and their agents will not be responsible for any losses resulting from unauthorized transactions when procedures designed to verify the identity of the caller are followed. It may be difficult to reach the Funds by telephone during periods of unusual market activity. If you are unable to reach a representative by telephone, please consider sending written instructions, stopping by a Service Center or, in the case of purchases and exchanges, calling the JETS line. TEMPORARY SUSPENSION OF SERVICES The Funds or their agents may, in case of emergency, temporarily suspend telephone transactions and other shareholder services. ADDRESS CHANGES To change the address on your account, call 1-800-525-3713 or send a written request signed by all account owners. Include the name of your Fund(s), the account number(s), the name(s) on the account and both the old and new addresses. Certain options may be suspended for 10 days following an address change unless a signature guarantee is provided. REGISTRATION CHANGES To change the name on an account, the shares are generally transferred to a new account. In some cases, legal documentation may be required. For more information, call 1-800-525-3713. STATEMENTS AND REPORTS Investors participating in an automatic investment program will receive quarterly confirmations of all transactions and dividends. The Funds will send you a confirmation statement after every non-systematic transaction. Tax information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. Account tax information will also be sent to the IRS. Financial reports for the Funds, which include a list of the Funds' portfolio holdings, will be mailed semiannually to all shareholders. To reduce expenses, only one copy of most financial reports will be mailed to accounts with the same record address. Upon request, such reports will be mailed to all accounts in the same household. Please call 1-800-525-3713 if you would like to receive additional reports. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 22 MANAGEMENT OF THE FUNDS TRUSTEES The Trustees oversee the business affairs of the Trust and are responsible for major decisions relating to each Fund's investment objectives and policies. The Trustees delegate the day-to-day management of the Funds to the officers of the Trust and meet at least quarterly to review the Funds' investment policies, performance, expenses and other business affairs. INVESTMENT ADVISER Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, is the investment adviser to each of the Funds and is responsible for the day-to-day management of the investment portfolios and other business affairs of the Funds. Janus Capital began serving as investment adviser to certain series of the Trust in 1970 and currently serves as investment adviser to all of the Janus funds, as well as adviser or subadviser to other mutual funds and individual, corporate, charitable and retirement accounts. Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock of Janus Capital, most of which it acquired in 1984. KCSI is a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services. Thomas H. Bailey, President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. Janus Capital furnishes continuous advice and recommendations concerning each Fund's investments. Janus Capital also furnishes certain administrative, compliance and accounting services for the Funds, and may be reimbursed by the Fixed-Income Funds for its costs in providing those services. In addition, Janus Capital employees serve as officers of the Trust and Janus Capital provides office space for the Funds and pays the salaries, fees and expenses of all Fund officers and those Trustees who are affiliated with Janus Capital. The Funds pay all of their expenses not assumed by Janus Capital, including auditing fees and independent Trustees' fees and expenses. (Janus Capital provides these services to the Money Market Funds pursuant to an Administration Agreement as described below.) ADMINISTRATOR Each of the Money Market Funds has entered into an Administration Agreement with Janus Capital, pursuant to which Janus Capital furnishes certain administrative, compliance and accounting services for the Money Market Funds, pays the costs of printing reports and prospectuses for existing shareholders, provides office space for the Money Market Funds and pays the salaries, fees and expenses of Fund officers and of those Trustees who are affiliated with Janus Capital. Administrative services provided by Janus Capital under the Agreements include custody and transfer agency services. INVESTMENT PERSONNEL Sharon S. Pichler is Executive Vice President and portfolio manager of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund, each of which she has managed since inception. She holds a Bachelor of Arts in Economics from Michigan State University and a Master of Business Administration from the University of Texas at San Antonio. Ms. Pichler is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Sandy R. Rufenacht is Executive Vice President and portfolio manager of Janus Short-Term Bond Fund, which he has managed since January 1996. Since June 1996 he has served as Executive Vice President and co-manager of Janus High-Yield Fund and Janus Flexible Income Fund. Mr. Rufenacht joined Janus Capital in 1990 and gained experience as a trader and research analyst before assuming management of these funds. He holds a Bachelor of Arts in Business from the University of Northern Colorado. - -------------------------------------------------------------------------------- Ronald V. Speaker is Executive Vice President and co-manager of Janus Flexible Income Fund, which he has managed since December 1991 and Janus High-Yield Fund which he has managed since inception. He previously managed Janus Short-Term Bond Fund and Janus Federal Tax-Exempt Fund from their inceptions through December 1995. He holds a Bachelor of Arts in Finance from the University of Colorado and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- Darrell W. Watters is Executive Vice President and portfolio manager of Janus Federal Tax-Exempt Fund, which he has managed since January 1996. Mr. Watters joined Janus Capital in 1993 as a municipal bond trader. He holds a Bachelor of Arts in Economics from Colorado State University. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 23 BREAKDOWN OF MANAGEMENT EXPENSES AND EXPENSE LIMITS FIXED-INCOME FUNDS Each Fund pays Janus Capital a management fee which is accrued daily and paid monthly. The advisory agreement with each Fund spells out the management fee and other expenses that the Funds must pay. Each of the Funds is subject to the following management fee schedule (expressed as an annual rate): Average Daily Net Annual Rate Expense Limit Fee Schedule Assets of Fund Percentage (%) Percentage (%) - ------------------------------------------------------------------------------------------------------------------------------------ Janus Flexible Income Fund First $300 Million .65 1.00* Over $300 Million .55 - ------------------------------------------------------------------------------------------------------------------------------------ Janus High-Yield Fund First $300 Million .75 1.00* Over $300 Million .65 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Federal Tax-Exempt Fund First $300 Million .60 .65* Over $300 Million .55 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Short-Term Bond Fund First $300 Million .65 .65* Over $300 Million .55 - ------------------------------------------------------------------------------------------------------------------------------------
*Janus Capital will waive certain fees and expenses to the extent that total expenses exceed the stated limits. Janus Capital may modify or terminate such waivers at any time upon 90 days' notice to the Trustees. You will be notified of any changes in these limits. Each Fixed-Income Fund incurs expenses not assumed by Janus Capital, including transfer agent and custodian fees and expenses, legal and auditing fees, printing and mailing costs of sending reports and other information to existing shareholders, and independent Trustees' fees and expenses. The Annual Operating Expenses table on page 3 lists the management fees and total operating expenses of each Fund for the most recent fiscal year. MONEY MARKET FUNDS Each of the Money Market Funds has agreed to compensate Janus Capital for its advisory services by the monthly payment of a fee at the annual rate of 0.20% of the value of the average daily net assets of each Money Market Fund. However, Janus Capital has agreed to waive a portion of its fee and accordingly, the advisory fee of each Money Market Fund will be calculated at the annual rate of 0.10% of the value of each Money Market Fund's average daily net assets. Janus Capital may modify or terminate such waiver at any time upon 90 days' notice to the Trustees. You will be notified of any change in this limit. Janus Capital is paid a fee, calculated daily and paid monthly, at the annual rate of 0.50% of the value of the average daily net assets of each Money Market Fund attributable to Shares for services rendered pursuant to the Administration Agreements. PERSONAL INVESTING Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts, except under the limited exceptions contained in Janus Capital's policy governing personal investing. Janus Capital's policy requires investment and other personnel to conduct their personal investment activities in a manner that Janus Capital believes is not detrimental to the Funds or Janus Capital's other advisory clients. See the SAI for more detailed information. PORTFOLIO TRANSACTIONS Purchases and sales of securities on behalf of each Fund are executed by broker-dealers selected by Janus Capital. Broker-dealers are selected on the basis of their ability to obtain best price and execution for a Fund's transactions and recognizing brokerage, research and other services provided to the Fund and to Janus Capital. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. Janus Capital may also consider sales of shares of a Fund as a factor in the selection of broker-dealers. The Funds' Trustees have authorized Janus Capital to place portfolio transactions on an agency basis with a broker-dealer affiliated with Janus Capital. When transactions for a Fund are effected with that broker-dealer, the commissions payable by the Fund are credited against certain Fund operating expenses serving to reduce those expenses. The SAI further explains the selection of broker-dealers. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 24 OTHER SERVICE PROVIDERS The following parties provide the Funds with other services. CUSTODIAN FOR THE FIXED-INCOME FUNDS State Street Bank and Trust Company P.O. Box 0351 Boston, Massachusetts 02117-0351 CUSTODIAN FOR THE MONEY MARKET FUNDS United Missouri Bank, N.A. P.O. Box 419226 Kansas City, Missouri 64141-6226 TRANSFER AGENT Janus Service Corporation P.O. Box 173375 Denver, Colorado 80217-3375 DISTRIBUTOR Janus Distributors, Inc. 100 Fillmore Street Denver, Colorado 80206-4928 Janus Service Corporation and Janus Distributors, Inc. are wholly-owned subsidiaries of Janus Capital. OTHER INFORMATION ORGANIZATION The Trust is a "mutual fund" that was organized as a Massachusetts business trust on February 11, 1986. A mutual fund is an investment vehicle that pools money from numerous investors and invests the money to achieve a specified objective. As of the date of this Prospectus, the Trust offers 19 separate series. Each of the Money Market Funds currently offer three classes of shares. This prospectus only describes the Investor Shares of the Money Market Funds. Institutional Shares of the Money Market Funds are available only to investors meeting the minimum investment requirement of $250,000. Service Shares of the Money Market Funds are available only to banks and other financial institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs. Because the expenses of each class may differ, the performance of each class is expected to differ. If you would like additional information, please call 1-800-525-3713. This Prospectus describes seven series of the Trust; the other series are offered by separate prospectuses. SHAREHOLDER MEETINGS The Trust does not intend to hold annual shareholder meetings. However, special meetings may be called for a specific Fund or for the Trust as a whole for purposes such as electing or removing Trustees, terminating or reorganizing the Trust, changing fundamental policies, or for any other purpose requiring a shareholder vote under the 1940 Act. Separate votes are taken by each Fund only if a matter affects or requires the vote of only that Fund or that Fund's interest in the matter differs from the interest of other portfolios of the Trust. As a shareholder, you are entitled to one vote for each share that you own. SIZE OF FUNDS The Funds have no present plans to limit their size. However, any Fund may discontinue sales of its shares if management believes that continued sales may adversely affect the Fund's ability to achieve its investment objective. If sales of a Fund are discontinued, it is expected that existing shareholders of that Fund would be permitted to continue to purchase shares and to reinvest any dividends or capital gains distributions, absent highly unusual circumstances. MASTER/FEEDER OPTION The Trust may in the future seek to achieve any Fund's investment objective by investing all of that Fund's assets in another investment company having the same investment objective and substantially the same investment policies and restrictions as those applicable to that Fund. It is expected that any such investment company would be managed by Janus Capital in substantially the same manner as the existing Fund. The Trust's shareholders of record on April 30, 1992, and the initial shareholder(s) of all Funds created after April 30, 1992, have voted to vest authority to use this investment structure in the sole discretion of the Trustees. No further approval of the shareholders of the Funds is required. You will receive at least 30 days' prior notice of any such investment. Such investment would be made only if the Trustees determine it to be in the best interests of a Fund and its shareholders. In making that determination, the Trustees will consider, among other things, the benefits to shareholders and/or the opportunity to reduce costs and achieve operational efficiencies. Although management of the Funds believe the Trustees will not approve an arrangement that is likely to result in higher costs, no assurance is given that costs will be materially reduced if this option is implemented. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 25 DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- DISTRIBUTIONS TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES EACH FUND TO DISTRIBUTE NET INCOME AND ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. A FUND'S INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM CAPITAL GAINS ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM GAINS, IF ANY, ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS. - -------------------------------------------------------------------------------- THE FIXED-INCOME FUNDS While distributions for the Fixed-Income Funds are paid monthly, the income dividends for these Funds are declared daily, Saturdays, Sundays and holidays included, and are generally paid as of the last business day of each month. If a month begins on a Saturday, Sunday or holiday, dividends for those days are paid at the end of the preceding month. An investor will begin accruing income dividends the day after a purchase is effective. If shares are redeemed, the investor will receive all dividends accrued through the day of the redemption. Capital gains, if any, are declared and paid in December. HOW DISTRIBUTIONS AFFECT A FUND'S NAV Distributions are paid to shareholders as of the record date of a distribution of a Fund, regardless of how long the shares have been held. Dividends and capital gains awaiting distribution are included in each Fund's daily NAV. The share price of a Fund drops by the amount of the distribution, net of any subsequent market fluctuations. As an example, assume that on December 31, Janus Flexible Income Fund declared a dividend in the amount of $0.25 per share. If Janus Flexible Income Fund's share price was $10.00 on December 30, the Fund's share price on December 31 would be $9.75, barring market fluctuations. Shareholders should be aware that distributions from a taxable mutual fund are a taxable event and not a value-enhancing event. Capital gains distributions, if any, for Janus Federal Tax-Exempt Fund will be taxable. "BUYING A DIVIDEND" If you purchase shares of a Fund just before the distribution, you will pay the full price for the shares and receive a portion of the purchase price back as a taxable distribution. This is referred to as "buying a dividend." In the above example, if you bought shares on December 30, you would have paid $10.00 per share. On December 31, the Fund would pay you $0.25 per share as a dividend and your shares would now be worth $9.75 per share. Unless your account is set up as a tax-deferred account, dividends paid to you would be included in your gross income for tax purposes even though you may not have participated in the increase in NAV of the Fund, whether or not you reinvested the dividends. THE MONEY MARKET FUNDS For the Money Market Funds, dividends representing substantially all of the net investment income and any net realized gains on sales of securities are declared daily, Saturdays, Sundays and holidays included, and distributed on the last business day of each month. If a month begins on a Saturday, Sunday or holiday, dividends for those days are declared at the end of the preceding month and distributed on the first business day of the month. Shares of the Money Market Funds purchased by wire on a day on which the Funds calculate their net asset value and the Federal Reserve Banks are open ("bank business day") will receive that day's dividend if the purchase is effected prior to 3:00 p.m. (New York time) for the Janus Money Market and Janus Government Money Market Funds and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund. Otherwise, such Shares begin to accrue dividends on the following bank business day. Orders for purchase accompanied by a check or other negotiable bank draft will be accepted and effected as of 4:00 p.m. (New York time) on the business day of receipt and such Shares will begin to accrue dividends on the first bank business day following receipt of the order. Redemption orders effected on any particular day will generally receive dividends declared through the day of redemption. However, redemptions made by wire which are received prior to 3:00 p.m. (New York time) for the Janus Money Market and Janus Government Money Market Funds and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that day. Proceeds of such a redemption will normally be sent to the predesignated account on that day, and that day's dividend will not be received. Requests for redemptions made by wire which are received after 3:00 p.m. (12:00 p.m. for Janus Tax-Exempt Money Market Fund) will be processed on that day and receive that day's dividend, but will not be wired until the following bank business day. The Funds reserve the right to require purchase and redemption requests and payments prior to these times on days when the bond market closes before 4:00 p.m. DISTRIBUTION OPTIONS When you open an account, you must specify on your application how you want to receive your distributions. You may change your distribution option at any time by writing or calling 1-800-525-3713. The Funds offer the following options: 1. Reinvestment Option. You may reinvest your income dividends and capital gains distributions in additional shares. This option is assigned automatically if no other choice is made. 2. Cash Option. You may receive your income dividends and capital gains distributions in cash. 3. Reinvest And Cash Option (the Fixed-Income Funds only). You may receive either your income dividends or capital gains distributions in cash and reinvest the other in additional shares. 4. Redirect Option. You may direct your dividends or capital gains distributions (dividends in the case of the Money Market Funds) to purchase shares of another Janus fund. The Funds reserve the right to reinvest into your account undeliverable and uncashed dividend and distribution checks that remain outstanding for six months in shares of the applicable Fund at the NAV next computed after the check is cancelled. Subsequent distributions may also be reinvested. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 26 - -------------------------------------------------------------------------------- TAXES As with any investment, you should consider the tax consequences of investing in the Funds. The following discussion does not apply to tax-deferred retirement accounts, nor is it a complete analysis of the federal tax implications of investing in the Funds. You may wish to consult your own tax adviser. Additionally, state or local taxes may apply to your investment, depending upon the laws of your state of residence. TAXES ON DISTRIBUTIONS Janus Federal Tax-Exempt Fund and Janus Tax-Exempt Money Market Fund anticipate that substantially all their income dividends will be exempt from federal income tax, although either Fund may occasionally earn income on taxable investments and dividends attributable to that income would be taxable. In addition, interest from certain private activity bonds is a preference item for purposes of the alternative minimum tax, and to the extent a Fund earns such income, shareholders subject to the alternative minimum tax must include that income as a preference item. Distributions from capital gains, if any, are subject to federal tax. The Funds will advise shareholders of the percentage of dividends, if any, subject to any federal tax. Dividends and distributions for all of the other Funds are subject to federal income tax, regardless of whether the distribution is made in cash or reinvested in additional shares of a Fund. In certain states, a portion of the dividends and distributions (depending on the sources of a Fund's income) may be exempt from state and local taxes. Information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. TAXATION OF THE FUNDS Dividends, interest and some capital gains received by a Fixed-Income Fund on foreign securities may be subject to tax withholding or other foreign taxes. Any foreign taxes paid by a Fund will be treated as an expense to the particular Fund or passed through to shareholders as a foreign tax credit, depending on particular facts and circumstances. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The Funds do not expect to pay any federal income or excise taxes because they intend to meet certain requirements of the Internal Revenue Code. It is important that the Funds meet these requirements so that any earnings on your investment will not be taxed twice. - -------------------------------------------------------------------------------- PERFORMANCE TERMS This section will help you understand various terms that are commonly used to describe a Fund's performance. You may see references to these terms in our newsletters, advertisements and in media articles. Our newsletters and advertisements may include comparisons of the Fund's performance to the performance of other mutual funds, mutual fund averages or recognized stock market indices. The Funds measure performance in terms of yield. Yield shows the rate of income a Fund earns on its investments as a percentage of the Fund's share price. It is calculated by dividing a Fund's net investment income for a 30-day period (7-day period for the Money Market Funds) by the average number of shares entitled to receive dividends and dividing the result by the Fund's NAV per share at the end of such period. Yield does not include changes in NAV. Yields are calculated according to standardized SEC formulas and may not equal the income on an investor's account. Yield is usually quoted on an annualized basis. An annualized yield represents the amount you would earn if you remained in a Fund for a year and that Fund continued to have the same yield for the entire year. Effective yield is similar to yield in that it is calculated over the same time frame, but instead the net investment income is compounded and then annualized. Due to the compounding effect, the effective yield will normally be higher than the yield. Tax-equivalent yield or total return (for Janus Federal Tax-Exempt Fund and Janus Tax-Exempt Money Market Fund) shows the before-tax yield or total return that an investor would have to earn to equal the Funds' tax-free yield or total return. It is calculated by dividing a Fund's tax-free yield or total return by the result of one minus a stated federal tax rate. Cumulative total return represents the actual rate of return on an investment for a specified period. The Financial Highlights tables beginning on page 4 show total return for a single fiscal period. Cumulative total return is generally quoted for more than one year (e.g., the life of the Fund). A cumulative total return does not show interim fluctuations in the value of an investment. Average annual total return represents the average annual percentage change of an investment over a specified period. It is calculated by taking the cumulative total return for the stated period and determining what constant annual return would have produced the same cumulative return. Average annual returns for more than one year tend to smooth out variations in a Fund's return and are not the same as actual annual results. THE FUNDS IMPOSE NO SALES OR OTHER CHARGES THAT WOULD AFFECT YIELD OR TOTAL RETURN COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 27 APPENDIX A GLOSSARY OF INVESTMENT TERMS This glossary provides a more detailed description of some of the types of securities and other instruments in which the Fixed-Income Funds may invest. The Fixed-Income Funds may invest in these instruments to the extent permitted by their investment objectives and policies. The Fixed-Income Funds are not limited by this discussion and may invest in any other types of instruments not precluded by the policies discussed elsewhere in this Prospectus. Please refer to the SAI for a more detailed discussion of certain instruments. I. EQUITY AND DEBT SECURITIES Bonds are debt securities issued by a company, municipality, government or government agency. The issuer of a bond is required to pay the holder the amount of the loan (or par value) at a specified maturity and to make scheduled interest payments. Certificates of Participation ("COPs") are certificates representing an interest in a pool of securities. Holders are entitled to a proportionate interest in the underlying securities. Municipal lease obligations are often sold in the form of COPs. See "Municipal lease obligations" below. 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. For example, the Funds may purchase commercial paper issued under Section 4(2) of the Securities Act of 1933. Common stock represents a share of ownership in a company and usually carries voting rights and earns dividends. Unlike preferred stock, dividends on common stock are not fixed but are declared at the discretion of the issuer's board of directors. Convertible securities are preferred stocks or bonds that pay a fixed dividend or interest payment and are convertible into common stock at a specified price or conversion ratio. Depositary receipts are receipts for shares of a foreign-based corporation that entitle the holder to dividends and capital gains on the underlying security. Receipts include those issued by domestic banks (American Depositary Receipts), foreign banks (Global or European Depositary Receipts) and broker-dealers (depositary shares). Fixed-income securities are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate and municipal obligations that pay a specified rate of interest or coupons for a specified period of time and preferred stock, which pays fixed dividends. Coupon and dividend rates may be fixed for the life of the issue or, in the case of adjustable and floating rate securities, for a shorter period. High-yield/High-risk securities are securities that are rated below investment grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and Ba or lower by Moody's). Other terms commonly used to describe such securities include "lower rated bonds," "noninvestment grade bonds" and "junk bonds." Industrial development bonds are revenue bonds that are issued by a public authority but which may be backed only by the credit and security of a private issuer and may involve greater credit risk. See "Municipal securities" below. 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. Municipal lease obligations are revenue bonds backed by leases or installment purchase contracts for property or equipment. Lease obligations may not be backed by the issuing municipality's credit and may involve risks not normally associated with general obligation bonds and other revenue bonds. For example, their interest may become taxable if the lease is assigned and the holders may incur losses if the issuer does not appropriate funds for the lease payments on an annual basis, which may result in termination of the lease and possible default. Municipal securities are bonds or notes issued by a U.S. state or political subdivision. A municipal security may be a general obligation backed by the full faith and credit (i.e., the borrowing and taxing power) of a municipality or a revenue obligation paid out of the revenues of a designated project, facility or revenue source. Passive foreign investment companies (PFICs) are any foreign corporations which generate certain amounts of passive income or hold certain amounts of assets for the production of passive income. Passive income includes dividends, interest, royalties, rents and annuities. Income tax regulations may require the Funds to recognize income associated with a PFIC prior to the actual receipt of any such income. 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 stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and liquidation. Preferred stock generally does not carry voting rights. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 28 Repurchase agreements involve the purchase of a security by a Fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Fund at a specified date or upon demand. This technique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, a Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. Reverse repurchase agreements involve the sale of a security by a Fund to another party (generally a bank or dealer) in return for cash and an agreement by the Fund to buy the security back at a specified price and time. This technique may be used to provide cash to satisfy unusually high redemption requests, to earn additional income on portfolio securities, such as Treasury bills or notes, or for other temporary or emergency purposes. Rule 144A securities are securities that are not registered for sale to the general public under the Securities Act of 1933, but that may be resold to certain institutional investors. Standby commitments are obligations purchased by a Fund from a dealer that give the Fund the option to sell a security to the dealer at a specified price. Step coupon bonds are debt securities that trade at a discount from their face value and pay coupon interest. The discount from the face value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity. Tender option bonds are generally long-term securities that are coupled with an option to tender the securities to a bank, broker-dealer or other financial institution at periodic intervals and receive the face value of the bond. This type of security is commonly used as a means of enhancing the security's liquidity. U.S. government securities include direct obligations of the U.S. government that are supported by its full faith and credit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to ten years and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S. government securities also include indirect obligations of the U.S. government that are issued by federal agencies and government sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith and credit of the U.S. government. Some agency securities are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. government to purchase the agency's obligations and others are supported only by the credit of the sponsoring agency. Variable and floating rate securities have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. The floating rate tends to decrease the security's price sensitivity to changes in interest rates. Warrants are securities, typically issued with preferred stock or bonds, that give the holder the right to buy a proportionate amount of common stock at a specified price, usually at a price that is higher than the market price at the time of issuance of the warrant. The right may last for a period of years or indefinitely. When-issued, delayed delivery and forward transactions generally involve the purchase of a security with payment and delivery at some time in the future - i.e., beyond normal settlement. The Funds do not earn interest on such securities until settlement and bear the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements and U.S. government securities may be sold in this manner. Zero coupon bonds are debt securities that do not pay regular interest at regular intervals, but are issued at a discount from face value. The discount approximates the total amount of interest the security will accrue from the date of issuance to maturity. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities. II. FUTURES, OPTIONS AND OTHER DERIVATIVES Forward contracts are contracts to purchase or sell a specified amount of property for an agreed upon price at a specified time. Forward contracts are not currently exchange traded and are typically negotiated on an individual basis. The Funds may enter into forward currency contracts to hedge against declines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar or to reduce the impact of currency appreciation on purchases of such securities. They may also enter into forward contracts to purchase or sell securities or other financial indices. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 29 Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. The Funds may buy and sell futures contracts on foreign currencies, securities and financial indices including interest rates or an index of U.S. government, foreign government, equity or fixed-income securities. The Funds may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts and options on futures are standardized and traded on designated exchanges. Indexed/structured securities are typically short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed (i.e. their value may increase or decrease if the reference index or instrument appreciates). Indexed/ structured securities may have return characteristics similar to direct investments in the underlying instruments and may be more volatile than the underlying instruments. A Fund bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer. Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). Inverse floaters are debt instruments whose interest rate bears an inverse relationship to the interest rate on another instrument or index. For example, upon reset the interest rate payable on a security may go down when the underlying index has risen. Certain inverse floaters may have an interest rate reset mechanism that multiplies the effects of change in the underlying index. Such mechanism may increase the volatility of the security's market value. Options are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on or before a fixed date at a predetermined price. The Funds may purchase and write put and call options on securities, securities indices and foreign currencies. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 30 APPENDIX B EXPLANATION OF RATING CATEGORIES The following is a description of credit ratings issued by two of the major credit ratings agencies. Credit ratings evaluate only the safety of principal and interest payments, not the market value risk of lower quality securities. Credit rating agencies may fail to change credit ratings to reflect subsequent events on a timely basis. Although the adviser considers security ratings when making investment decisions, it also performs its own investment analysis and does not rely solely on the ratings assigned by credit agencies. STANDARD & POOR'S RATINGS SERVICES Bond Rating Explanation - -------------------------------------------------------------------------------- Investment Grade AAA Highest rating; extremely strong capacity to pay principal and interest. AA High quality; very strong capacity to pay principal and interest. A Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changing circumstances and economic conditions. BBB Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances more likely to lead to a weakened capacity to pay principal and interest than for higher rated bonds. Non-Investment Grade BB, B, Predominantly speculative with respect to the CCC, CC, C issuer's capacity to meet required interest and principal payments. BB - lowest degree of speculation; C - the highest degree of speculation. Quality and protective characteristics outweighed by large uncertainties or major risk exposure to adverse conditions. D In default. - -------------------------------------------------------------------------------- MOODY'S INVESTORS SERVICE, INC. Investment Grade Aaa Highest quality, smallest degree of investment risk. Aa High quality; together with Aaa bonds, they compose the high-grade bond group. A Upper-medium grade obligations; many favorable investment attributes. Baa Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be unreliable over any great length of time. Non-Investment Grade Ba More uncertain, with speculative elements. Protection of interest and principal payments not well safeguarded during good and bad times. B Lack characteristics of desirable investment; potentially low assurance of timely interest and principal payments or maintenance of other contract terms over time. Caa Poor standing, may be in default; elements of danger with respect to principal or interest payments. Ca Speculative in a high degree; could be in default or have other marked shortcomings. C Lowest-rated; extremely poor prospects of ever attaining investment standing. - -------------------------------------------------------------------------------- Unrated securities will be treated as noninvestment grade securities unless the portfolio manager determines that such securities are the equivalent of investment grade securities. Securities that have received different ratings from more than one agency are considered investment grade if at least one agency has rated the security investment grade. SECURITIES HOLDINGS BY RATING CATEGORY During the fiscal period ended October 31, 1996, the percentage of securities holdings for Janus Flexible Income Fund and Janus High-Yield Fund by rating category based upon a weighted monthly average was: Bonds - S&P Rating Janus Flexible Income Fund Bonds - S&P Rating Janus High-Yield Fund [TO BE FILED BY AMENDMENT] [TO BE FILED BY AMENDMENT] AAA % AAA % AA % AA % A % A % BBB % BBB % BB % BB % B % B % CCC % CCC % CC % CC % C % C % Preferred Stock % Preferred Stock % Cash and Options % Cash and Options % - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL 100% TOTAL 100% - ------------------------------------------------------------------------------------------------------------------------------------
No other Fund held 5% or more of its assets in bonds rated below investment grade for the fiscal period ended October 31, 1996. JANUS INCOME FUNDS COMBINED PROSPECTUS February 17, 1997 31 This page intentionally left blank. This page intentionally left blank. CONTENTS - -------------------------------------------------------------------------------- THE FUND AT A GLANCE Brief description of the Fund 1 - -------------------------------------------------------------------------------- EXPENSE INFORMATION The Fund's annual operating expenses 1 Financial Highlights-a summary of financial data 2 - -------------------------------------------------------------------------------- THE FUND IN DETAIL Investment Objective 3 General Portfolio Policies 4 Additional Risk Factors 5 - -------------------------------------------------------------------------------- PERFORMANCE TERMS An Explanation of Performance Terms 6 - -------------------------------------------------------------------------------- SHAREHOLDER'S MANUAL Types of Account Ownership 7 How to Open Your Janus Account 8 How to Purchase Shares 8 How to Exchange Shares 9 How to Redeem Shares 9 Shareholder Services and Account Policies 10 - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUND Investment Adviser and Portfolio Manager 12 Management Expenses 12 Portfolio Transactions 13 Other Service Providers 13 Other Information 13 - -------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES Distributions 14 Taxes 14 - -------------------------------------------------------------------------------- APPENDIX A Glossary of Investment Terms 15 [LOGO] JANUS VENTURE FUND 100 Fillmore Street Denver, CO 80206-4928 1-800-525-3713 http://www.JanusFunds.com February 17, 1997 Janus Venture Fund (the "Fund") is a no-load, diversified mutual fund that seeks capital appreciation. The Fund normally invests at least 50% of its equity assets in securities of small-sized companies. THE FUND HAS DISCONTINUED PUBLIC SALES OF ITS SHARES TO NEW INVESTORS, BUT SHAREHOLDERS WHO MAINTAIN OPEN FUND ACCOUNTS ARE STILL ABLE TO MAKE INVESTMENTS IN THE FUND AND REINVEST ANY DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. CURRENT SHAREHOLDERS MAY ALSO OPEN ADDITIONAL FUND ACCOUNTS UNDER CERTAIN CONDITIONS. IF A FUND ACCOUNT IS CLOSED, HOWEVER, ADDITIONAL INVESTMENTS IN THE FUND MAY NOT BE POSSIBLE. For complete information on how to purchase, exchange and sell shares, please see the Shareholder's Manual beginning on page 7. The Fund may resume sale of its shares to new investors in the future, although it has no current intention to do so. The Fund is a portfolio of Janus Investment Fund (the "Trust"), which is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. This Prospectus contains information about the Fund that you should consider before investing. Please read it carefully and keep it for future reference. Additional information about the Fund is contained in a Statement of Additional Information ("SAI") filed with the SEC. The SAI dated February 17, 1997, is incorporated by reference into this Prospectus. For a copy of the SAI, write or call the Fund at the address or phone number listed above. The SEC maintains a Web site located at http://www.sec.gov. that contains the SAI, material incorporated by reference, and other information regarding the Fund. THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC NOR HAS THE SEC PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER JURISDICTION. THE FUND AT A GLANCE INVESTMENT OBJECTIVE: The Fund seeks capital appreciation. PRIMARY HOLDINGS: A diversified fund that invests primarily in common stocks with an emphasis on securities of small-sized companies. SHAREHOLDER'S INVESTMENT HORIZON: The Fund is designed for long-term investors who seek capital appreciation and who can tolerate the greater risks associated with investments in foreign and domestic common stocks. The Fund is not designed as a short-term trading vehicle and should not be relied upon for short-term financial needs. FUND ADVISER: Janus Capital Corporation ("Janus Capital") serves as the Fund's investment adviser. Janus Capital has been in the investment advisory business for over 26 years and currently manages approximately $45 billion in assets. FUND MANAGER: James P. Goff FUND INCEPTION: April 30, 1985 EXPENSE INFORMATION The tables and example below are designed to assist you in understanding the various costs and expenses that you will bear directly or indirectly as an investor in the Fund. Shareholder Transaction Expenses are fees charged directly to your individual account when you buy, sell or exchange shares. The table below shows that you pay no such fees. Annual Fund Operating Expenses are paid out of the Fund's assets and include fees for portfolio management, maintenance of shareholder accounts, shareholder servicing, accounting and other services. - -------------------------------------------------------------------------------- SHAREHOLDER TRANSACTION EXPENSES Maximum sales load imposed on purchases None Maximum sales load imposed on reinvested dividends None Deferred sales charges on redemptions None Redemption fees* None Exchange fee None * There is an $8 service fee for redemptions by wire. ANNUAL FUND OPERATING EXPENSES(1) (expressed as a percentage of average net assets) - -------------------------------------------------------------------------------- Management Fee .68% Other Expenses .21% - -------------------------------------------------------------------------------- Total Fund Operating Expenses .89% - -------------------------------------------------------------------------------- (1) The information in the table above is based on expenses before expense offset arrangements for the fiscal year ended October 31, 1996. EXAMPLE - -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------- Assume you invest $1,000, the Fund returns 5% annually and its expense ratio remains as listed above. This example shows the operating expenses that you would indirectly bear as an investor in the Fund. $9 $28 $49 $110 - -------------------------------------------------------------------------------- THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE RETURNS OR EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. JANUS VENTURE FUND PROSPECTUS February 17, 1997 1 FINANCIAL HIGHLIGHTS Unless otherwise noted, the information below is for fiscal periods ending on October 31 of each year. The accounting firm of Price Waterhouse LLP has audited the Fund's financial statements since October 1, 1990. Their report is included in the Fund's Annual Report, which is incorporated by reference into the SAI. Expense and income ratios and portfolio turnover rates have been annualized for periods of less than one year. Total returns for periods of less than one year are not annualized. 1996 [TO BE FILED BY AMENDMENT] 1995 1994 1993 1992(1) 1992(2) 1991(2) 1990(2) 1989(2) 1988(2) 1987(2) - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $52.86 $53.25 $47.74 $45.96 $45.05 $37.90 $36.97 $28.11 $34.63 $30.78 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income 0.05 0.11 0.66 0.17 0.36 0.44 0.28 0.33 1.50 0.12 3. Net gains or (losses) on securities (both realized and unrealized) 9.49 4.40 6.72 1.61 4.23 7.71 3.44 10.05 (3.70) 6.25 - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations 9.54 4.51 7.38 1.78 4.59 8.15 3.72 10.38 (2.20) 6.37 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (0.03) (0.53) (1.16) -- (0.25) (0.11) (0.44) (1.52) (0.15) (0.19) 6. Distributions (from capital gains) (2.84) (4.37) (0.71) -- (3.43) (0.89) (2.35) -- (4.17) (2.33) - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (2.87) (4.90) (1.87) -- (3.68) (1.00) (2.79) (1.52) (4.32) (2.52) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $59.53 $52.86 $53.25 $47.74 $45.96 $45.05 $37.90 $36.97 $28.11 $34.63 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 19.24% 9.23% 15.76% 3.87% 9.90% 22.28% 10.46% 38.73% (4.56%) 22.76% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Net assets, end of period (in millions) $1,753 $1,550 $1,837 $1,545 $1,510 $893 $256 $58 $34 $46 11. Average net assets for the period (in millions) $1,613 $1,563 $1,793 $1,496 $1,382 $427 $127 $40 $35 $37 12. Ratio of gross expenses to average net assets 0.92% N/A N/A N/A N/A N/A N/A N/A N/A N/A 13. Ratio of net expenses to average net assets 0.91% 0.96% 0.97% 1.07% 1.00% 1.04% 1.16% 1.28% 1.41% 1.44% 14. Ratio of net investment income to average net assets 0.29% 0.27% 1.29% 1.32% 1.20% 2.10% 1.24% 1.10% 5.11% 0.40% 15. Portfolio turnover rate 113% 114% 139% 124% 166% 167% 184% 219% 299% 250% 16. Average commission rate $ N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal period from August 1, 1992 to October 31, 1992. (2) The Fund's prior fiscal year ended on July 31st of each year. UNDERSTANDING THE FINANCIAL HIGHLIGHTS This section is designed to help you better understand the information summarized in the Financial Highlights table. The table contains important historical operating information that may be useful in making your investment decision or understanding how your investment has performed. The Fund's Annual Report contains additional information about the Fund's performance, including a comparison to an appropriate securities index. For a copy of the Annual Report, call 1-800-525-8983. Net asset value ("NAV") is the value of a single share of the Fund. It is computed by adding the value of all of the Fund's investments and other assets, subtracting any liabilities and dividing the result by the number of shares outstanding. The difference between line 1 and line 8 in the Financial Highlights table represents the change in value of a Fund share over the fiscal period, but not its total return. Net investment income is the per share amount of dividends and interest income earned on securities held by the Fund, less Fund expenses. Dividends (from net investment income) is the per share amount that the Fund paid from net investment income. Net gains or (losses) on securities is the per share increase or decrease in value of the securities the Fund holds. A gain (or loss) is realized when securities are sold. A gain (or loss) is unrealized when securities increase or decrease in value but are not sold. Distributions (from capital gains) is the per share amount that the Fund paid from net realized gains. Total return is the percentage increase or decrease in the value of an investment over a stated period of time. A total return percentage includes both changes in NAV and income. For the purpose of calculating total return, it is assumed that dividends and distributions are reinvested at the NAV on the day of the distribution. THE FUND'S TOTAL RETURN CANNOT BE COMPUTED DIRECTLY FROM THE FINANCIAL HIGHLIGHTS TABLE. Ratio of net expenses to average net assets is the total of the Fund's operating expenses divided by its average net assets for the stated period. Ratio of gross expenses to average net assets does not reflect reductions in expenses through the use of brokerage commissions and uninvested cash balances earning interest with the Fund's custodian. Ratio of net investment income to average net assets is the Fund's net investment income divided by its average net assets for the stated period. Portfolio turnover rate is a measure of the amount of the Fund's buying and selling activity. It is computed by dividing total purchases or sales, whichever is less, by the average monthly market value of the Fund's portfolio securities. Average commission rate is the total of the Fund's agency commissions paid on equity securities trades divided by the number of shares purchased. JANUS VENTURE FUND PROSPECTUS February 17, 1997 2 THE FUND IN DETAIL This section takes a closer look at the Fund's investment objective, policies and the securities in which it invests. Please carefully review the "Additional Risk Factors" section of this Prospectus for a more detailed discussion of the risks associated with certain investment techniques and refer to Appendix A for a more detailed description of investment terms used throughout this Prospectus. You should carefully consider your own investment goals, time horizon and risk tolerance before investing in the Fund. Policies that are noted as "fundamental" cannot be changed without a shareholder vote. All other policies, including the Fund's investment objective, are not fundamental and may be changed by the Fund's Trustees without a shareholder vote. You will be notified of any such changes that are material. If there is a material change in the Fund's objective or policies, you should consider whether the Fund remains an appropriate investment for you. INVESTMENT OBJECTIVE The investment objective of the Fund is capital appreciation. The Fund pursues its objective by normally investing at least 50% of its equity assets in securities issued by small-sized companies. Small-sized companies are those who have market capitalizations of less than $1 billion or annual gross revenues of less than $500 million. Companies whose capitalization or revenues fall outside these ranges after the Fund's initial purchase continue to be considered small-sized for the purposes of this policy. Subject to the above policy, the Fund may also invest in larger companies. TYPES OF INVESTMENTS The Fund invests primarily in common stocks with an emphasis on securities of small-sized companies. The Fund may also invest in larger companies with strong growth potential or relatively well-known and large companies with potential for capital appreciation. The Fund may invest to a lesser degree in other types of securities including preferred stocks, warrants, convertible securities and debt securities. The Fund may invest up to 25% of its assets in mortgage- and asset-backed securities, up to 10% of its assets in zero coupon, pay-in-kind and step coupon securities, and without limit in indexed/structured securities. The Fund will invest less than 35% of its assets in high-yield/high-risk securities. The Fund may also purchase high-grade commercial paper; certificates of deposit; and repurchase agreements. Such securities may offer growth potential because of anticipated changes in interest rates, credit standing, currency relationships or other factors. The Fund may also invest in short-term debt securities, including money market funds managed by Janus Capital, as a means of receiving a return on idle cash. When the Fund's portfolio manager believes that market conditions are not favorable for profitable investing or when the portfolio manager is otherwise unable to locate favorable investment opportunities, the Fund's investments may be hedged to a greater degree and/or its cash or similar investments may increase. In other words, the Fund does not always stay fully invested in stocks and bonds. Cash or similar investments are a residual - they represent the assets that remain after the portfolio manager has committed available assets to desirable investment opportunities. When the Fund's cash position increases, it might not participate in stock market advances or declines to the extent that it would if it remained more fully invested in common stocks. The Fund may invest without limit in foreign equity and debt securities. The Fund may invest directly in foreign securities denominated in a foreign currency and not publicly traded in the United States. Other ways of investing in foreign securities include depositary receipts or shares, and passive foreign investment companies. The Fund may use options, futures and other types of derivatives for hedging purposes or for non-hedging purposes such as seeking to enhance return. See "Additional Risk Factors" on page 5. The Fund may purchase securities on a when-issued, delayed delivery or forward commitment basis. THE FOLLOWING QUESTIONS ARE DESIGNED TO HELP YOU BETTER UNDERSTAND AN INVESTMENT IN THE FUND. HOW ARE COMMON STOCKS SELECTED? The Fund may invest substantially all of its assets in common stocks to the extent its portfolio manager believes that the relevant market environment favors profitable investing in those securities. The portfolio manager generally takes a "bottom up" approach to building the portfolio. In other words, he seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. Although themes may emerge in the Fund, securities are generally selected without regard to any defined industry sector or other similarly defined selection procedure. Realization of income is not a significant investment consideration. Any income realized on the Fund's investments will be incidental to its objective. - -------------------------------------------------------------------------------- ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES? Generally, yes. The portfolio manager seeks companies that meet his selection criteria regardless of country of organization or place of principal business activity. Foreign securities are generally selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic regions. However, certain factors such as expected levels of inflation, government policies influencing business conditions, the outlook for currency relationships, and prospects for economic growth among countries, regions or geographic areas may warrant greater consideration in selecting foreign securities. See "Additional Risk Factors" on page 5. - -------------------------------------------------------------------------------- WHAT IS THE MAIN RISK OF INVESTING IN A COMMON STOCK FUND? The fundamental risk associated with any common stock fund is the risk that the value of the stocks it holds might decrease. Stock values may fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. Historically, common stocks have provided greater long-term returns and have entailed greater short-term risks than other investment choices. Smaller or newer issuers, such as those in which the Fund invests, are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers. Investments in such companies can be both more volatile and more speculative. See "Additional Risk Factors" on page 5. JANUS VENTURE FUND PROSPECTUS February 17, 1997 3 WHAT IS MEANT BY "MARKET CAPITALIZATION"? Market capitalization is the most commonly used measure of the size and value of a company. It is computed by multiplying the current market price of a share of the company's stock by the total number of its shares outstanding. As noted previously, market capitalization and annual gross revenues are important investment criteria for the Fund. - -------------------------------------------------------------------------------- HOW DOES THE FUND TRY TO REDUCE RISK? Diversification of the Fund's assets reduces the effect of any single holding on its overall portfolio value. The Fund may also use futures, options and other derivative instruments to protect its portfolio from movements in securities prices and interest rates. The Fund may use a variety of currency hedging techniques, including forward currency contracts, to manage exchange rate risk. See "Additional Risk Factors" on page 5. To the extent that the Fund holds a larger cash position, it might not participate in market declines to the same extent as if it had remained more fully invested in common stocks. GENERAL PORTFOLIO POLICIES In investing its portfolio assets, the Fund will follow the general policies listed below. The percentage limitations included in these policies and elsewhere in this Prospectus apply only at the time of purchase of the security. For example, if the Fund exceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose of any securities. DIVERSIFICATION The Investment Company Act of 1940 (the "1940 Act") classifies investment companies as either diversified or nondiversified. The Fund qualifies as a diversified fund under the 1940 Act and is subject to the following requirements: o As a fundamental policy, the Fund may not own more than 10% of the outstanding voting shares of any issuer. o As a fundamental policy, with respect to 75% of its total assets, the Fund will not purchase a security of any issuer (other than cash items and U.S. government securities, as defined in the 1940 Act) if such purchase would cause the Fund's holdings of that issuer to amount to more than 5% of the Fund's total assets. o The Fund will invest no more than 25% of its total assets in a single issuer (other than U.S. government securities). INDUSTRY CONCENTRATION As a fundamental policy, the Fund will not invest 25% or more of its total assets in any particular industry (excluding U.S. government securities). PORTFOLIO TURNOVER The Fund generally intends to purchase securities for long-term investment rather than short-term gains. However, short-term transactions may result from liquidity needs, securities having reached a price or yield objective, changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not foreseen at the time of the investment decision. Changes are made in the Fund's portfolio whenever its portfolio manager believes such changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions. To a limited extent, the Fund may purchase securities in anticipation of relatively short-term price gains. The Fund may also sell one security and simultaneously purchase the same or a comparable security to take advantage of short-term differentials in bond yields or securities prices. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs and may also result in taxable capital gains. Certain tax rules may restrict the Fund's ability to engage in short-term trading if the security has been held for less than three months. ILLIQUID INVESTMENTS The Fund may invest up to 15% of its net assets in illiquid investments, including restricted securities or private placements that are not deemed to be liquid by Janus Capital. An illiquid investment is a security or other position that cannot be disposed of quickly in the normal course of business. Some securities cannot be sold to the U.S. public because of their terms or because of SEC regulations. Janus Capital will follow guidelines established by the Fund's Trustees in making liquidity determinations for Rule 144A securities and certain other securities, including privately placed commercial paper. BORROWING AND LENDING The Fund may borrow money and lend securities or other assets, as follows: o The Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. o The Fund may mortgage or pledge securities as security for borrowings in amounts up to 15% of its net assets. o As a fundamental policy, the Fund may lend securities or other assets if, as a result, no more than 25% of its total assets would be lent to other parties. The Fund intends to seek permission from the SEC to borrow money from or lend money to other funds that permit such transactions and for which Janus Capital serves as investment adviser. All such borrowing and lending will be subject to the above limits. There is no assurance that such permission will be granted. JANUS VENTURE FUND PROSPECTUS February 17, 1997 4 ADDITIONAL RISK FACTORS INVESTMENTS IN SMALLER COMPANIES SMALLER OR NEWER COMPANIES MAY SUFFER MORE SIGNIFICANT LOSSES AS WELL AS REALIZE MORE SUBSTANTIAL GROWTH THAN LARGER OR MORE ESTABLISHED ISSUERS. The Fund may invest in companies that have relatively small revenues, have a small share of the market for their products or services, or have limited geographic or product markets. Small companies may lack depth of management, they may be unable to generate internally funds necessary for growth or potential development or to generate such funds through external financing on favorable terms, or they may be developing or marketing new products or services for which markets are not yet established and may never become established. In addition, such companies may be insignificant factors in their industries and may become subject to intense competition from larger companies. Securities of small companies held by the Fund may have limited trading markets that may be subject to wide price fluctuations. Investments in such companies tend to be more volatile and somewhat more speculative. SPECIAL SITUATIONS The Fund may invest in "special situations" from time to time. A special situation arises when, in the opinion of the Fund's portfolio manager, the securities of a particular issuer will be recognized and appreciate in value due to a specific development with respect to that issuer. Developments creating a special situation might include, among others, a new product or process, a technological breakthrough, a management change or other extraordinary corporate event, or differences in market supply of and demand for the security. Investment in special situations may carry an additional risk of loss in the event that the anticipated development does not occur or does not attract the expected attention. FOREIGN SECURITIES INVESTMENTS IN FOREIGN SECURITIES, INCLUDING THOSE OF FOREIGN GOVERNMENTS, INVOLVE GREATER RISKS THAN INVESTING IN COMPARABLE DOMESTIC SECURITIES. Securities of some foreign companies and governments may be traded in the United States, but most foreign securities are traded primarily in foreign markets. The risks of foreign investing include: o Currency Risk. The Fund may buy the local currency when it buys a foreign currency denominated security and sell the local currency when it sells the security. As long as the Fund holds a foreign security, its value will be affected by the value of the local currency relative to the U.S. dollar. When the Fund sells a foreign security, its value may be worth less in U.S. dollars even though the security increases in value in its home country. U.S. dollar denominated securities of foreign issuers may also be affected by currency risk. o Political and Economic Risk. Foreign investments may be subject to heightened political and economic risks, particularly in underdeveloped or developing countries which may have relatively unstable governments and economies based on only a few industries. In some countries, there is the risk that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of the Fund's assets from that country. The Fund may invest in emerging market countries. Emerging market countries involve greater risks such as immature economic structures, national policies restricting investments by foreigners, and different legal systems. o Regulatory Risk. There may be less government supervision of foreign markets. Foreign issuers may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic issuers. There may be less publicly available information about foreign issuers than domestic issuers. o Market Risk. Foreign securities markets, particularly those of underdeveloped or developing countries, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions. There may be limited legal recourse against an issuer in the event of a default on a debt instrument. o Transaction Costs. Transaction costs of buying and selling foreign securities, including brokerage, tax and custody costs, are generally higher than those involved in domestic transactions. Foreign securities purchased indirectly (e.g., depositary receipts) are subject to many of the above risks, including currency risk, because their values depend on the performance of a foreign security denominated in its home currency. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS The Fund may enter into futures contracts on securities, financial indices and foreign currencies and options on such contracts ("futures contracts") and may invest in options on securities, financial indices and foreign currencies ("options"), forward contracts and interest rate swaps and swap-related products (collectively "derivative instruments"). The Fund intends to use most derivative instruments primarily to hedge the value of its portfolio against potential adverse movements in securities prices, foreign currency markets or interest rates. To a limited extent, the Fund may also use derivative instruments for non-hedging purposes such as seeking to increase the Fund's income or otherwise seeking to enhance return. Please refer to Appendix A to this Prospectus and the SAI for a more detailed discussion of these instruments. The use of derivative instruments exposes the Fund to additional investment risks and transaction costs. Risks inherent in the use of derivative instruments include: JANUS VENTURE FUND PROSPECTUS February 17, 1997 5 o the risk that interest rates, securities prices and currency markets will not move in the direction that the portfolio manager anticipates; o imperfect correlation between the price of derivative instruments and movements in the prices of the securities, interest rates or currencies being hedged; o the fact that skills needed to use these strategies are different from those needed to select portfolio securities; o inability to close out certain hedged positions to avoid adverse tax consequences; o the possible absence of a liquid secondary market for any particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; o leverage risk, that is, the risk that adverse price movements in an instrument can result in a loss substantially greater than the Fund's initial investment in that instrument (in some cases, the potential loss is unlimited); and o particularly in the case of privately negotiated instruments, the risk that the counterparty will fail to perform its obligations, which could leave the Fund worse off than if it had not entered into the position. Although the Fund believes the use of derivative instruments will benefit the Fund, the Fund's performance could be worse than if the Fund had not used such instruments if the portfolio manager's judgement proves incorrect. When the Fund invests in a derivative instrument, it may be required to segregate cash and other liquid assets or certain portfolio securities with its custodian to "cover" the Fund's position. Assets segregated or set aside generally may not be disposed of so long as the Fund maintains the positions requiring segregation or cover. Segregating assets could diminish the Fund's return due to the opportunity losses of foregoing other potential investments with the segregated assets. HIGH-YIELD/HIGH-RISK SECURITIES High-yield/high-risk securities (or "junk" bonds) are debt securities rated below investment grade by the primary rating agencies such as Standard & Poor's Ratings Services ("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's"). The value of lower quality securities generally is more dependent on the ability of the company to meet interest and principal payments (i.e., credit risk) than is the case for higher quality securities. Conversely, the value of higher quality securities may be more sensitive to interest rate movements than lower quality securities. In addition, companies issuing high-yield securities may be more vulnerable to real or perceived economic changes, political changes or other developments adverse to the company and lower quality securities may have less liquid markets than higher quality securities. Investments in companies issuing high-yield securities are considered to be more speculative than higher quality investments. Issuers of high-yield securities are more vulnerable to real or perceived economic changes (for instance, an economic downturn or prolonged period of rising interest rates), political changes or adverse developments specific to the issuer. The market for lower quality securities is generally less liquid than the market for higher quality bonds. Adverse publicity and investor perceptions as well as new or proposed laws may also have a greater negative impact on the market for lower quality securities. Please refer to the SAI for a description of bond rating categories. SHORT SALES The Fund may each engage in "short sales against the box," which involves selling a security that the Fund owns (or has the right to obtain securities equivalent in kind and amount to the securities sold short) for delivery at a specified date in the future, to hedge against anticipated declines in the market price of portfolio securities or to defer an unrealized gain. If the value of the securities sold short increases prior to the scheduled delivery date, the Fund loses the opportunity to participate in the gain. See Appendix A for risks associated with certain other investments. - -------------------------------------------------------------------------------- PERFORMANCE TERMS This section will help you understand various terms that are commonly used to describe the Fund's performance. You may see references to these terms in our newsletters, advertisements and in media articles. Our newsletters and advertisements may include comparisons of the Fund's performance to the performance of other mutual funds, mutual fund averages or recognized stock market indices. The Fund generally measures performance in terms of total return. Cumulative total return represents the actual rate of return on an investment for a specified period. The Financial Highlights table shows total return for a single fiscal period. Cumulative total return is generally quoted for more than one year (e.g., the life of the Fund). A cumulative total return does not show interim fluctuations in the value of an investment. Average annual total return represents the average annual percentage change of an investment over a specified period. It is calculated by taking the cumulative total return for the stated period and determining what constant annual return would have produced the same cumulative return. Average annual returns for more than one year tend to smooth out variations in the Fund's return and are not the same as actual annual results. THE FUND IMPOSES NO SALES OR OTHER CHARGES THAT WOULD AFFECT TOTAL RETURN COMPUTATIONS. FUND PERFORMANCE FIGURES ARE BASED UPON HISTORICAL RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. JANUS VENTURE FUND PROSPECTUS February 17, 1997 6 SHAREHOLDER'S MANUAL This section will help you become familiar with the different types of accounts you can establish with Janus. This section also explains in detail the wide array of services and features you can establish on your account. These services and features may be modified or discontinued without shareholder approval or prior notice. - -------------------------------------------------------------------------------- Although the Fund has discontinued public sales of its shares to new investors, shareholders who maintain open accounts will be able to continue to purchase shares and reinvest any dividends and capital gains distributions in additional shares. In addition, the Fund will continue to accept new accounts which are opened under taxpayer identification numbers that are identical to those for existing Fund accounts. Once a Fund account is closed, it may not be reopened. An account may be considered closed and subject to redemption by the Fund in the circumstances discussed under "Involuntary Redemptions" on page 11. HOW TO GET IN TOUCH WITH JANUS If you have any questions while reading this Prospectus, please call one of our Investor Service Representatives at 1-800-525-3713 Monday-Friday: 8:00 a.m.-10:00 p.m., and Saturday: 10:00 a.m.-7:00 p.m., New York time. - -------------------------------------------------------------------------------- MINIMUM INVESTMENTS* To open a new account ............................ $2,500 To open a new retirement or UGMA/UTMA account ................................ $500 To open a new account with an Automatic Investment Program .................. $500** To add to any type of an account ................... $100 *The Fund reserves the right to change the amount of these minimums from time to time or to waive them in whole or in part for certain types of accounts. **There is a $100 minimum for each subsequent investment. - -------------------------------------------------------------------------------- TYPES OF ACCOUNT OWNERSHIP As discussed above, the Fund will accept new accounts opened under taxpayer identification numbers identical to those on current Fund accounts. You can establish the following types of accounts by completing the New Account Application. To request an application, call 1-800-525-3713. o Individual or Joint Ownership. Individual accounts are owned by one person. Joint accounts have two or more owners. o A Gift or Transfer to Minor (UGMA or UTMA). An UGMA/ UTMA account is a custodial account managed for the benefit of a minor. To open an UGMA or UTMA account, you must include the minor's Social Security number on the application. o Trust. An established trust can open an account. The names of each trustee, the name of the trust and the date of the trust agreement must be included on the application. o Business Accounts. Corporations and partnerships may also open an account. The application must be signed by an authorized officer of the corporation or a general partner of the partnership. RETIREMENT ACCOUNTS If you are eligible, you may set up your account under a tax-sheltered retirement plan. A retirement plan allows you to shelter your investment income and capital gains from current income taxes. A contribution to these plans may also be tax deductible. Distributions from retirement plans are generally subject to income tax and may be subject to an additional tax if withdrawn prior to age 59 1/2. Investors Fiduciary Trust Company serves as custodian for the retirement plans offered by the Fund. There is an annual $12 fee per account to maintain your retirement account. The maximum annual fee is $24 per taxpayer identification number. You may pay the fee by check or have it automatically deducted from your account (usually in December). The following plans require a special application. For an application and more details about our Retirement Plans, call 1-800-525-3713. o Individual Retirement Account: An IRA allows individuals under the age of 70 1/2 with earned income to contribute up to the lesser of $2,000 or 100% of compensation annually. Please refer to the Janus Funds IRA booklet for complete information regarding IRAs. o Simplified Employee Pension Plan ("SEP"): This plan allows small business owners (including sole proprietors) to make tax-deductible contributions for themselves and any eligible employee(s). A SEP requires an IRA (a SEP-IRA) to be set up for each SEP participant. o Profit Sharing or Money Purchase Pension Plan: These plans are open to corporations, partnerships and sole proprietors to benefit their employees and themselves. o Section 403(b)(7) Plan: Employees of educational organizations or other qualifying, tax-exempt organizations may be eligible to participate in a Section 403(b)(7) Plan. JANUS VENTURE FUND PROSPECTUS February 17, 1997 7 HOW TO OPEN YOUR JANUS ACCOUNT If you are a current Fund shareholder and want to open another Fund account, complete and sign the appropriate application. Please be sure to provide your Social Security or taxpayer identification number on the application. Make your check payable to Janus Funds. Send all items to one of following addresses: Janus Funds P.O. Box 173375 Denver, CO 80217-3375 For Overnight Carrier Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 INVESTOR SERVICE CENTERS Janus Funds offers two Investor Service Centers for those individuals who would like to conduct their investing in person. Our representatives will be happy to assist you at either of the following locations: 100 Fillmore Street, Suite 100 Denver, CO 80206 3773 Cherry Creek North Drive, Suite 101 Denver, CO 80209 HOW TO PURCHASE SHARES PAYING FOR SHARES When you purchase shares, your request will be processed at the next NAV calculated after your order is received and accepted. Please note the following: o Cash, credit cards, third party checks and credit card checks will not be accepted. o All purchases must be made in U.S. dollars. o Checks must be drawn on a U.S. bank and made payable to Janus Funds. o If a check does not clear your bank, the Fund reserves the right to cancel the purchase. o If the Fund is unable to debit your predesignated bank account on the day of purchase, it may make additional attempts or cancel the purchase. o The Fund reserves the right to reject any specific purchase request. If your purchase is cancelled you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of any decline in the value of the cancelled purchase. The Fund (or its agents) has the authority to redeem shares in your account(s) to cover any such losses due to fluctuations in share price. Any profit on such cancellation will accrue to the Fund. ONCE YOU HAVE OPENED YOUR JANUS ACCOUNT, THE MINIMUM AMOUNT FOR AN ADDITIONAL INVESTMENT IS $100. You may add to your account at any time through any of the following options: BY MAIL Complete the remittance slip attached at the bottom of your confirmation statement. If you are making a purchase into a retirement account, please indicate whether the purchase is a rollover or a current or prior year contribution. Send your check and remittance slip or written instructions to one of the addresses listed previously. You may also request a booklet of remittance slips for non-retirement accounts. BY TELEPHONE This service allows you to purchase additional shares quickly and conveniently through an electronic transfer of money. When you make an additional purchase by telephone, Janus will automatically debit your predesignated bank account for the desired amount. To establish the telephone purchase option on your new account, complete the "Telephone Purchase of Shares Option" section on the application and attach a "voided" check or deposit slip from your bank account. If your account is already established, call 1-800-525-3713 to request the appropriate form. This option will become effective ten business days after the form is received. BY WIRE Purchases may also be made by wiring money from your bank account to your Janus account. Call 1-800-525-3713 to receive wiring instructions. AUTOMATIC INVESTMENT PROGRAMS Janus offers several automatic investment plans to help you achieve your financial goals as simply and conveniently as possible. You may open a new account with a $500 initial purchase and $100 automatic subsequent investments. o AUTOMATIC MONTHLY INVESTMENT PROGRAM You select the day each month that your money ($100 minimum) will be electronically transferred from your bank account to your Fund account. To establish this option, complete the "Automatic Monthly Investment Program" section on the application and attach a "voided" check or deposit slip from your bank account. If your Fund account is already established, call 1-800-525-3713 to request the appropriate form. o PAYROLL DEDUCTION If your employer can initiate an automatic payroll deduction, you may have all or a portion of your paycheck ($100 minimum) invested directly into your Fund account. To obtain information on establishing this option, call 1-800-525-3713. o SYSTEMATIC EXCHANGE With a Systematic Exchange you determine the amount of money ($100 minimum) you would like automatically exchanged from one Janus account to another on any day of the month. For more information on how to establish this option, call 1-800-525-3713. JANUS VENTURE FUND PROSPECTUS February 17, 1997 8 HOW TO EXCHANGE SHARES On any business day, you may exchange all or a portion of your shares into any other available Janus fund. IN WRITING To request an exchange in writing, please follow the instructions for written requests on page 10. BY TELEPHONE All accounts are automatically eligible for the telephone exchange option. To exchange shares by telephone, call an Investor Service Representative at 1-800-525-3713 during normal business hours or call the Janus Electronic Telephone Service (JETS(R)) line at 1-800-525-6125. BY SYSTEMATIC EXCHANGE As noted above, you may establish a Systematic Exchange for as little as a $100 subsequent purchase per month on established accounts. You may establish a new account with a $500 initial purchase and subsequent $100 systematic exchanges. If the balance in the account you are exchanging from falls below the systematic exchange amount, all remaining shares will be exchanged and the program will be discontinued. EXCHANGE POLICIES o Except for Systematic Exchanges, new accounts established by exchange must meet the $2,500 minimum, or be for the total account value if less than $2,500. o Exchanges between existing accounts must meet the $100 subsequent investment requirement. o You may make four exchanges out of the Fund during a calendar year (exclusive of Systematic Exchanges) free of charge. o Exchanges between accounts will be accepted only if the registrations are identical. o If the shares you are exchanging are held in certificate form, you must return the certificate to the Fund prior to making any exchanges. o Be sure to read the prospectus for the fund into which you are exchanging. o The Fund reserves the right to reject any exchange request and to modify or terminate the exchange privilege at any time. For example, the Fund may reject exchanges from accounts engaged in excessive trading (including market timing transactions) that are believed to be detrimental to the Fund. o An exchange represents the sale of shares from one fund and the purchase of shares of another fund, which may produce a taxable gain or loss in a non-tax deferred account. QUICK ADDRESS AND TELEPHONE REFERENCE MAILING ADDRESS Janus Funds P.O. Box 173375 Denver, CO 80217-3375 FOR OVERNIGHT CARRIER Janus Funds Suite 101 3773 Cherry Creek North Drive Denver, CO 80209-3811 JANUS INTERNET ADDRESS http://www.JanusFunds.com JANUS INVESTOR SERVICES 1-800-525-3713 To speak to a service representative JETS(R) 1-800-525-6125 For 24-hour access to account and Fund information. TDD 1-800-525-0056 A telecommunications device for our hearing- and speech-impaired shareholders. JANUS QUOTELINE(R) 1-800-525-0024 For automated daily quotes on Fund share prices, yields and total returns. JANUS LITERATURE LINE 1-800-525-8983 To request a prospectus, shareholder reports or marketing materials. HOW TO REDEEM SHARES On any business day, you may redeem all or a portion of your shares. REMEMBER THAT THE FUND IS CLOSED TO NEW INVESTORS AND IF A TOTAL REDEMPTION IS MADE ADDITIONAL INVESTMENTS IN YOUR FUND ACCOUNT MIGHT NOT BE POSSIBLE. If the shares are held in certificate form, the certificate must be returned with or before your redemption request. Your transaction will be processed at the next NAV calculated after your order is received and accepted. IN WRITING To request a redemption in writing, please follow the instructions for written requests noted on page 10. BY TELEPHONE Most accounts have the telephone redemption option, unless this option was specifically declined on the application or in writing. This option enables you to redeem up to $100,000 daily from your account by simply calling 1-800-525-3713 by 4:00 p.m. New York time. SYSTEMATIC REDEMPTION OPTION Systematic Redemption Options allow you to redeem a specific dollar amount from your Fund account on a regular basis. For more information or to request the appropriate form, please call 1-800-525-3713. PAYMENT OF REDEMPTION PROCEEDS o BY CHECK Redemption proceeds will be sent to the shareholder(s) of record at the address of record within seven days after receipt of a valid redemption request. o ELECTRONIC TRANSFER If you have established this option, your redemption proceeds can be electronically transferred to your predesignated bank account on the second business day after receipt of your redemption request. To establish this option, call 1-800-525-3713. There is no fee for this option. JANUS VENTURE FUND PROSPECTUS February 17, 1997 9 o BY WIRE If you are authorized for the wire redemption service, your redemption proceeds will be wired directly into your designated bank account on the next business day after receipt of your redemption request. There is no limitation on redemptions by wire; however, there is an $8 fee for each wire and your bank may charge an additional fee to receive the wire. If you would like to establish this option on an existing account, please call 1-800-525-3713 to request the appropriate form. Wire redemptions are not available for retirement accounts. IF THE SHARES BEING REDEEMED WERE PURCHASED BY CHECK, TELEPHONE OR THROUGH THE AUTOMATIC MONTHLY INVESTMENT PROGRAM, THE FUND MAY DELAY THE PAYMENT OF YOUR REDEMPTION PROCEEDS FOR UP TO 15 DAYS FROM THE DAY OF PURCHASE TO ALLOW THE PURCHASE TO CLEAR. Unless you provide alternate instructions, your proceeds will be invested in Janus Money Market Fund - Investor Shares during the 15 day hold period. WRITTEN INSTRUCTIONS To redeem all or part of your shares in writing, your request should be sent to one of the addresses listed on page 8 and must include the following information: o the name of the Fund o the account number o the amount of money or number of shares being redeemed o the name(s) on the account registration o the signature(s) of all registered account owners o your daytime telephone number o SIGNATURE REQUIREMENTS BASED ON ACCOUNT TYPE o Individual, Joint Tenants, Tenants in Common: Written instructions must be signed by each shareholder, exactly as the names appear in the account registration. o UGMA or UTMA: Written instructions must be signed by the custodian in his/her capacity as it appears in the account registration. o Sole Proprietor, General Partner: Written instructions must be signed by an authorized individual in his/her capacity as it appears on the account registration. o Corporation, Association: Written instructions must be signed by the person(s) authorized to act on the account. In addition, a certified copy of the corporate resolution authorizing the signer to act must accompany the request. o Trust: Written instructions must be signed by the trustee(s). If the name(s) of the current trustee(s) does not appear in the account registration, a certificate of incumbency dated within 60 days must also be submitted. o IRA: Written instructions must be signed by the account owner. If you do not want federal income tax withheld from your redemption, you must state that you elect not to have such withholding apply. In addition, your instructions must state whether the distribution is normal (after age 59 1/2) or premature (before age 59 1/2) and, if premature, whether any exceptions such as death or disability apply with regard to the 10% additional tax on early distributions. PRICING OF FUND SHARES All purchases, redemptions and exchanges will be processed at the NAV next calculated after your request is received and approved. The Fund's NAV is calculated at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4:00 p.m. New York time) each day that the NYSE is open. In order to receive a day's price, your order must be received by the close of the regular trading session of the NYSE. Securities are valued at market value or, if a market quotation is not readily available, at their fair value determined in good faith under procedures established by and under the supervision of the Trustees. Short-term instruments maturing within 60 days are valued at amortized cost, which approximates market value. See the SAI for more detailed information. SIGNATURE GUARANTEE In addition to the signature requirements, a signature guarantee is also required if any of the following is applicable: o The redemption exceeds $100,000. o You would like the check made payable to anyone other than the shareholder(s) of record. o You would like the check mailed to an address which has been changed within 10 days of the redemption request. o You would like the check mailed to an address other than the address of record. THE FUNDS RESERVE THE RIGHT TO REQUIRE A SIGNATURE GUARANTEE UNDER OTHER CIRCUMSTANCES OR TO REJECT OR DELAY A REDEMPTION ON CERTAIN LEGAL GROUNDS. FOR MORE INFORMATION PERTAINING TO SIGNATURE GUARANTEES, PLEASE CALL 1-800-525-3713. HOW TO OBTAIN A SIGNATURE GUARANTEE A signature guarantee assures that a signature is genuine. The signature guarantee protects shareholders from unauthorized account transfers. The following financial institutions may guarantee signatures: banks, savings and loan associations, trust companies, credit unions, broker-dealers, and member firms of a national securities exchange. Call your financial institution to see if they have the ability to guarantee a signature. A SIGNATURE GUARANTEE MAY NOT BE PROVIDED BY A NOTARY PUBLIC. If you live outside the United States, a foreign bank properly authorized to do business in your country of residence or a U.S. consulate may be able to authenticate your signature. SHAREHOLDER SERVICES AND ACCOUNT POLICIES JANUS ELECTRONIC TELEPHONE SERVICE (JETS(R)) JETS, our electronic telephone service line, offers you 24-hour access by TouchTone(TM) telephone to obtain your account balance, to confirm your last transaction or dividend posted to your account, to order duplicate account or tax statements, to reorder money market fund checks, to exchange your JANUS VENTURE FUND PROSPECTUS February 17, 1997 10 shares or to purchase shares. JETS can be accessed by calling 1-800-525-6125. Calls on JETS are limited to seven minutes. JANUS WEB SITE Janus maintains a Web site located at http://www.JanusFunds.com. You can access information such as your account balance and the Fund's NAV through the Web site. In addition, you may request and/or download a Janus funds prospectus. ACCOUNT MINIMUMS Minimum account sizes are noted on page 7. An account established on or before February 18, 1996 is required to meet the minimum balances in effect when the account was established ($1,000 for regular accounts and $250 for retirement and UGMA/UTMA accounts). An active Automatic Monthly Investment (AMI) on any such account exempted it from any minimum initial investment requirement and continues to do so. In addition, an active AMI on these accounts may continue at $50 per month, provided there is no interruption in the AMI program. All other subsequent investments must meet the $100 required minimum. Due to the proportionately higher costs of maintaining small accounts, Janus reserves the right to deduct a $10 minimum balance fee (or the value of the account if less than $10) from accounts with values below the minimums described on page 7 or to close such accounts. This policy will apply to accounts participating in the Automatic Monthly Investment Program only if your account balance does not reach the required minimum initial investment or falls below such minimum and you have discontinued monthly investments. This policy does not apply to accounts that fall below the minimums solely as a result of market value fluctuations. It is expected that accounts will be valued in September. The $10 fee will be assessed on the second Friday of September of each year. You will receive notice before we charge the $10 fee or close your account so that you may increase your account balance to the required minimum. TRANSACTIONS THROUGH PROCESSING ORGANIZATIONS You may purchase or sell Fund shares through a broker-dealer, bank or other financial institution, or an organization that provides recordkeeping and consulting services to 401(k) plans or other employee benefit plans (a "Processing Organization"). Processing Organizations may charge you a fee for this service and may require different minimum initial and subsequent investments than the Fund. A Processing Organization may also impose other charges or restrictions different from those applicable to shareholders who invest in the Fund directly. The Processing Organization, rather than its customer, may be the shareholder of record of your shares. The Fund is not responsible for the failure of any Processing Organization to carry out its obligations to its customers. Certain Processing Organizations may receive compensation from Janus Capital or its affiliates and certain Processing Organizations may receive compensation from the Fund for shareholder recordkeeping and similar services. TAXPAYER IDENTIFICATION NUMBER On your application or other appropriate form, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to backup withholding for failing to report income to the IRS. If you are subject to the 31% backup withholding or you did not certify your taxpayer identification, the IRS requires the Fund to withhold 31% of any dividends paid and redemption or exchange proceeds. In addition to the 31% backup withholding, you may be subject to a $50 fee to reimburse the Fund for any penalty that the IRS may impose. SHARE CERTIFICATES Most shareholders choose not to hold their shares in certificate form because account transactions such as exchanges and redemptions cannot be completed until the certificate has been returned to the Fund. The Fund will issue share certificates upon written request only. Share certificates will not be issued until the shares have been held for at least 15 days and will not be issued for accounts that do not meet the minimum investment requirements. Share certificates cannot be issued for retirement accounts. In addition, if the certificate is lost, there may be a replacement charge. INVOLUNTARY REDEMPTIONS The Fund reserves the right to close an account if the shareholder is deemed to engage in activities which are illegal or otherwise believed to be detrimental to the Fund. TELEPHONE TRANSACTIONS You may initiate many transactions by telephone. The Fund and its agents will not be responsible for any losses resulting from unauthorized transactions when procedures designed to verify the identity of the caller are followed. It may be difficult to reach the Fund by telephone during periods of unusual market activity. If you are unable to reach a representative by telephone, please consider sending written instructions, stopping by a Service Center, or in the case of purchases and exchanges, calling the JETS line. TEMPORARY SUSPENSION OF SERVICES The Fund or its agents may, in case of emergency, temporarily suspend telephone transactions or other shareholder services. ADDRESS CHANGES To change the address on your account, call 1-800-525-3713 or send a written request signed by all account owners. Include the name of the Fund, the account number(s), the name(s) on the account and both the old and new addresses. Certain options may be suspended for 10 days following an address change unless a signature guarantee is provided. REGISTRATION CHANGES To change the name on an account, the shares are generally transferred to a new account. In some cases, legal documentation may be required. For more information call 1-800-525-3713. STATEMENTS AND REPORTS Investors participating in an automatic investment program will receive quarterly confirmations of all transactions. (Dividend information will be distributed annually.) The Fund will send you a confirmation statement after every non-systematic transaction. Tax information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. Account tax information will also be sent to the IRS. Financial reports for the Fund, which include a list of the Fund's portfolio holdings, will be mailed semiannually to all shareholders. To reduce expenses, only one copy of most financial reports will be mailed to accounts with the same record address. Upon request, such reports will be mailed to all accounts in the same household. Please call 1-800-525-3713 if you would like to receive additional reports. JANUS VENTURE FUND PROSPECTUS February 17, 1997 11 MANAGEMENT OF THE FUND TRUSTEES The Trustees oversee the business affairs of the Trust and are responsible for major decisions relating to the Fund's investment objective and policies. The Trustees delegate the day-to-day management of the Fund to the officers of the Trust and meet at least quarterly to review the Fund's investment policies, performance, expenses and other business affairs. INVESTMENT ADVISER Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928, is the investment adviser to the Fund and is responsible for the day-to-day management of its investment portfolio and other business affairs. Janus Capital began serving as investment adviser to certain series of the Trust in 1970 and currently serves as investment adviser to all of the Janus funds, as well as adviser or subadviser to other mutual funds and individual, corporate, charitable and retirement accounts. Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock of Janus Capital, most of which it acquired in 1984. KCSI is a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services. Thomas H. Bailey, President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. Janus Capital furnishes continuous advice and recommendations concerning the Fund's investments. Janus Capital also furnishes certain administrative, compliance and accounting services for the Fund, and may be reimbursed by the Fund for its costs in providing those services. In addition, Janus Capital employees serve as officers of the Trust and Janus Capital provides office space for the Fund and pays the salaries, fees and expenses of all Fund officers and those Trustees who are affiliated with Janus Capital. PORTFOLIO MANAGER James P. Goff is Executive Vice President and portfolio manager of the Fund. Mr. Goff joined Janus Capital in 1988. He has managed Janus Enterprise Fund since its inception in September 1992 and co-managed the Fund from December 1993 to December 1996. Effective January 1, 1997, he became sole portfolio manager of the Fund. He holds a Bachelor of Arts in Economics from Yale University and is a Chartered Financial Analyst. - -------------------------------------------------------------------------------- PERSONAL INVESTING Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts, except under the limited exceptions contained in Janus Capital's policy governing personal investing. Janus Capital's policy requires investment and other personnel to conduct their personal investment activities in a manner that Janus Capital believes is not detrimental to the Fund or Janus Capital's other advisory clients. See the SAI for more detailed information. BREAKDOWN OF MANAGEMENT EXPENSES The Fund pays Janus Capital a management fee which is accrued daily and paid monthly. The advisory agreement with the Fund spells out the management fee and other expenses that the Fund must pay. The Fund's management fee schedule (expressed as an annual rate) is set out in the chart below. Average Daily Net Annual Rate Assets of Fund Percentage (%) - -------------------------------------------------------------------------------- First $ 30 Million 1.00 Next $270 Million .75 Next $200 Million .70 Over $500 Million .65 - -------------------------------------------------------------------------------- The actual management fee paid by the Fund for the fiscal year ended October 31, 1996 was .68% of the value of the Fund's average daily net assets. The Fund incurs expenses not assumed by Janus Capital, including transfer agent and custodian fees and expenses, legal and auditing fees, printing and mailing costs of sending reports and other information to existing shareholders, and independent Trustees' fees and expenses. JANUS VENTURE FUND PROSPECTUS February 17, 1997 12 PORTFOLIO TRANSACTIONS Purchases and sales of securities on behalf of the Fund are executed by broker-dealers selected by Janus Capital. Broker-dealers are selected on the basis of their ability to obtain best price and execution for the Fund's transactions and recognizing brokerage, research and other services provided to the Fund and to Janus Capital. Janus Capital may also consider payments made by brokers effecting transactions for the Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. Janus Capital may also consider sales of shares of the Fund as a factor in the selection of broker-dealers. The Fund's Trustees have authorized Janus Capital to place portfolio transactions on an agency basis with a broker-dealer affiliated with Janus Capital. When transactions for the Fund are effected with that broker-dealer, the commissions payable by the Fund are credited against certain Fund operating expenses. The SAI further explains the selection of broker-dealers. OTHER SERVICE PROVIDERS The following parties provide the Fund with administrative and other services. CUSTODIAN State Street Bank and Trust Company P.O. Box 0351 Boston, Massachusetts 02117-0351 TRANSFER AGENT Janus Service Corporation P.O. Box 173375 Denver, Colorado 80217-3375 DISTRIBUTOR Janus Distributors, Inc. 100 Fillmore Street Denver, Colorado 80206-4928 Janus Service Corporation and Janus Distributors, Inc. are wholly-owned subsidiaries of Janus Capital. OTHER INFORMATION ORGANIZATION The Trust is a "mutual fund" that was organized as a Massachusetts business trust on February 11, 1986. A mutual fund is an investment vehicle that pools money from numerous investors and invests the money to achieve a specified objective. As of the date of this Prospectus, the Trust offers 19 separate series, three of which currently offer three classes of shares. The Fund became a series of the Trust on August 7, 1992. It was previously known as Janus Venture Fund, Inc., a Maryland corporation. All references in this Prospectus to the Fund prior to the above date are to its predecessor entity and all references after such date are to the series of the Trust. The Trust currently offers the other 18 series by other prospectuses. SHAREHOLDER MEETINGS The Trust does not intend to hold annual shareholder meetings. However, special meetings may be called specifically for the Fund or for the Trust as a whole for purposes such as electing or removing Trustees, terminating or reorganizing the Trust, changing fundamental policies, or for any other purpose requiring a shareholder vote under the 1940 Act. Separate votes are taken by the Fund only if a matter affects or requires the vote of just the Fund or that Fund's interest in the matter differs from the interest of other portfolios of the Trust. As a shareholder, you are entitled to one vote for each share that you own. SIZE OF THE FUND The Fund has discontinued sales of its shares because its management believes that a substantial increase in size may adversely affect the Fund's ability to achieve its investment objective by reducing its flexibility in making investments and in effecting portfolio changes. Although sales to new investors have been discontinued, existing shareholders are permitted to continue to purchase shares and to reinvest any dividends or capital gains distributions. See the Shareholder's Manual beginning on page 7. MASTER/FEEDER OPTION The Trust may in the future seek to achieve the Fund's investment objective by investing all of the Fund's assets in another investment company having the same investment objective and substantially the same investment policies and restrictions as those applicable to the Fund. It is expected that any such investment company would be managed by Janus Capital in substantially the same manner as the Fund. The Fund's shareholders of record on April 30, 1992, and the initial shareholder(s) of all series of the Trust created after April 30, 1992, voted to vest authority to use this investment structure in the sole discretion of the Trustees. No further approval of the shareholders of the Fund is required. You will receive at least 30 days' prior notice of any such investment. Such investment would be made only if the Trustees determine it to be in the best interests of the Fund and its shareholders. In making that determination the Trustees will consider, among other things, the benefits to shareholders and/or the opportunity to reduce costs and achieve operational efficiencies. Although management of the Fund believes that the Trustees will not approve an arrangement that is likely to result in higher costs, no assurance is given that costs will be materially reduced if this option is implemented. JANUS VENTURE FUND PROSPECTUS February 17, 1997 13 DISTRIBUTIONS AND TAXES - -------------------------------------------------------------------------------- DISTRIBUTIONS TO AVOID TAXATION, THE INTERNAL REVENUE CODE REQUIRES THE FUND TO DISTRIBUTE NET INCOME AND ANY NET GAINS REALIZED BY ITS INVESTMENTS ANNUALLY. THE FUND'S INCOME FROM DIVIDENDS AND INTEREST AND ANY NET REALIZED SHORT-TERM CAPITAL GAINS ARE PAID TO SHAREHOLDERS AS ORDINARY INCOME DIVIDENDS. NET REALIZED LONG-TERM GAINS ARE PAID TO SHAREHOLDERS AS CAPITAL GAINS DISTRIBUTIONS. HOW DISTRIBUTIONS AFFECT THE FUND'S NAV Distributions are paid to shareholders as of the record date of the distribution of the Fund, regardless of how long the shares have been held. Dividends and capital gains awaiting distribution are included in the Fund's daily NAV. The share price of the Fund drops by the amount of the distribution, net of any subsequent market fluctuations. As an example, assume that on December 31, the Fund declared a dividend in the amount of $0.25 per share. If the Fund's share price was $10.00 on December 30, the Fund's share price on December 31 would be $9.75, barring market fluctuations. Shareholders should be aware that distributions from a taxable mutual fund are a taxable event and not a value-enhancing event. "BUYING A DIVIDEND" If you purchase shares of the Fund just before the distribution, you will pay the full price for the shares and receive a portion of the purchase price back as a taxable distribution. This is referred to as "buying a dividend." In the above example, if you bought shares on December 30, you would have paid $10.00 per share. On December 31, the Fund would pay you $0.25 per share as a dividend and your shares would now be worth $9.75 per share. Unless your account is set up as a tax-deferred account, dividends paid to you would be included in your gross income for tax purposes, even though you may not have participated in the increase in NAV of the Fund, whether or not you reinvested the dividends. DISTRIBUTION OPTIONS When you open an account, you must specify on your application how you want to receive your distributions. You may change your distribution option at any time by writing or calling 1-800-525-3713. The Fund offers the following options: 1. Reinvestment Option. You may reinvest your income dividends and capital gains distributions in additional shares. This option is assigned automatically if no other choice is made. 2. Cash Option. You may receive your income dividends and capital gains distributions in cash. 3. Reinvest And Cash Option. You may receive either your income dividends or capital gains distributions in cash and reinvest the other in additional shares. 4. Redirect Option. You may direct your dividends or capital gains to purchase shares of another Janus fund. The Fund reserves the right to reinvest into your account undeliverable and uncashed dividend and distribution checks that remain outstanding for six months in shares of the Fund at the NAV next computed after the check is cancelled. Subsequent distributions may also be reinvested. - -------------------------------------------------------------------------------- TAXES As with any investment, you should consider the tax consequences of investing in the Fund. The following discussion does not apply to tax-deferred retirement accounts, nor is it a complete analysis of the federal tax implications of investing in the Fund. You may wish to consult your own tax adviser. Additionally, state or local taxes may apply to your investment, depending upon the laws of your state of residence. TAXES ON DISTRIBUTIONS Dividends and distributions by the Fund are subject to federal income tax, regardless of whether the distribution is made in cash or reinvested in additional shares of the Fund. In certain states, a portion of the dividends and distributions (depending on the source of the Fund's income) may be exempt from state and local taxes. Information regarding the tax status of income dividends and capital gains distributions will be mailed to shareholders on or before January 31st of each year. TAXATION OF THE FUND Dividends, interest and some capital gains, received by the Fund on foreign securities may be subject to tax withholding or other foreign taxes. Any foreign taxes paid by the Fund will be treated as an expense to the Fund or passed through to shareholders as a foreign tax credit, depending on particular facts and circumstances. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The Fund does not expect to pay any federal income or excise taxes because it intends to meet certain requirements of the Internal Revenue Code. It is important that the Fund meet these requirements so that any earnings on your investment will not be taxed twice. JANUS VENTURE FUND PROSPECTUS February 17, 1997 14 APPENDIX A GLOSSARY OF INVESTMENT TERMS This glossary provides a more detailed description of some of the types of securities and other instruments in which the Fund may invest. The Fund may invest in these instruments to the extent permitted by its investment objective and policies. The Fund is not limited by this discussion and may invest in any other types of instruments not precluded by the policies discussed elsewhere in this Prospectus. Please refer to the SAI for a more detailed discussion of certain instruments. I. EQUITY AND DEBT SECURITIES Bonds are debt securities issued by a company, municipality, government or government agency. The issuer of a bond is required to pay the holder the amount of the loan (or par value) at a specified maturity and to make scheduled interest payments. Commercial paper is a short-term debt obligation with a maturity ranging from 1 to 270 days issued by banks, corporations and other borrowers to investors seeking to invest idle cash. For example, the Fund may purchase commercial paper issued under Section 4(2) of the Securities Act of 1933. Common stock represents a share of ownership in a company, and usually carries voting rights and earns dividends. Unlike preferred stock, dividends on common stocks are not fixed but are declared at the discretion of the issuer's board of directors. Convertible securities are preferred stocks or bonds that pay a fixed dividend or interest payment and are convertible into common stock at a specified price or conversion ratio. Depositary receipts are receipts for shares of a foreign-based corporation that entitle the holder to dividends and capital gains on the underlying security. Receipts include those issued by domestic banks (American Depositary Receipts), foreign banks (Global or European Depositary Receipts) and broker-dealers (depositary shares). Fixed-income securities are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate and municipal obligations that pay a specified rate of interest or coupons for a specified period of time and preferred stock, which pays fixed dividends. Coupon and dividend rates may be fixed for the life of the issue or, in the case of adjustable and floating rate securities, for a shorter period. High-yield/High-risk securities are securities that are rated below investment grade by the primary rating agencies (e.g., BB or lower by Standard & Poor's and Ba or lower by Moody's). Other terms commonly used to describe such securities include "lower rated bonds," "noninvestment grade bonds" and "junk bonds." Mortgage- and asset-backed securities are shares in a pool of mortgages or other debt. These securities are generally pass-through securities, which means that principal and interest payments on the underlying securities (less servicing fees) are passed through to shareholders on a pro rata basis. These securities involve prepayment risk, which is the risk that the underlying mortgages or other debt may be refinanced or paid off prior to their maturities during periods of declining interest rates. In that case, the portfolio manager may have to reinvest the proceeds from the securities at a lower rate. Potential market gains on a security subject to prepayment risk may be more limited than potential market gains on a comparable security that is not subject to prepayment risk. Passive foreign investment companies (PFICs) are any foreign corporations which generate certain amounts of passive income or hold certain amounts of assets for the production of passive income. Passive income includes dividends, interest, royalties, rents and annuities. Income tax regulations may require the Fund to recognize income associated with a PFIC prior to the actual receipt of any such income. 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 stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and liquidation. Preferred stock generally does not carry voting rights. Repurchase agreements involve the purchase of a security by the Fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Fund at a specified date or upon demand. This technique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, the Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. Reverse repurchase agreements involve the sale of a security by the Fund to another party (generally a bank or dealer) in return for cash and an agreement by the Fund to buy the security back at a specified price and time. This technique will be used to provide cash to satisfy unusually heavy redemption requests, to earn additional income on portfolio securities, such as Treasury bills or notes, or for other temporary or emergency purposes. Rule 144A securities are securities that are not registered for sale to the general public under the Securities Act of 1933, but that may be resold to certain institutional investors. Standby commitments are obligations purchased by the Fund from a dealer that give the Fund the option to sell a security to the dealer at a specified price. JANUS VENTURE FUND PROSPECTUS February 17, 1997 15 Step coupon bonds are debt securities that trade at a discount from their face value and pay coupon interest. The discount from their 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. U.S. government securities include direct obligations of the U.S. government that are supported by its full faith and credit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to ten years and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S. government securities also include indirect obligations of the U.S. government that are issued by federal agencies and government sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith and credit of the U.S. government. Some agency securities are supported by the right of the issuer to borrow from the Treasury, others are supported by the discretionary authority of the U.S. government to purchase the agency's obligations and others are supported only by the credit of the sponsoring agency. Warrants are securities, typically issued with preferred stocks or bonds, that give the holder the right to buy a proportionate amount of common stock at a specified price, usually at a price that is higher than the market price at the time of issuance of the warrant. The right may last for a period of years or indefinitely. When-issued, delayed delivery and forward transactions generally involve the purchase of a security with payment and delivery at some time in the future - i.e., beyond normal settlement. The Fund does not earn interest on such securities until settlement and bears the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements and U.S. government securities may be sold in this manner. Zero coupon bonds are debt securities that do not pay interest at regular intervals, but are issued at a discount from face value. The discount approximates the total amount of interest the security will accrue from the date of issuance to maturity. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity. II. FUTURES, OPTIONS AND OTHER DERIVATIVES Forward contracts are contracts to purchase or sell a specified amount of property for an agreed upon price at a specified time. Forward contracts are not currently exchange traded and are typically negotiated on an individual basis. The Fund may enter into forward currency contracts to hedge against declines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar or to reduce the impact of currency appreciation on purchases of such securities. It may also enter into forward contracts to purchase or sell securities or other financial indices. Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. The Fund may buy and sell futures contracts on foreign currencies, securities and financial indices including interest rates or an index of U.S. government, foreign government, equity or fixed-income securities. The Fund may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts and options on futures are standardized and traded on designated exchanges. Indexed/structured securities are typically short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed (i.e., their value may increase or decrease if the reference index or instrument appreciates). Indexed/structured securities may have return characteristics similar to direct investments in the underlying instrument and may be more volatile than the underlying instrument. The Fund bears the market risk of an investment in the underlying instrument, as well as the credit risk of the issuer. 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). Options are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on or before a fixed date at a predetermined price. The Fund may purchase and write put and call options on securities, securities indices and foreign currencies. JANUS VENTURE FUND PROSPECTUS February 17, 1997 16 This page intentionally left blank. [LOGO] JANUS MONEY MARKET FUND JANUS GOVERNMENT MONEY MARKET FUND JANUS TAX-EXEMPT MONEY MARKET FUND Institutional Shares 100 Fillmore Street Denver, CO 80206-4928 (800) 29JANUS February 17, 1997 Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds") are designed for investors who seek maximum current income consistent with stability of capital. This prospectus offers a separate class of shares of each Fund (collectively, the "Shares") exclusively to institutional and individual clients meeting minimum investment requirements. Each Fund is a separate series of Janus Investment Fund (the "Trust"), an open-end management investment company. Each Fund invests exclusively in high quality money market instruments. AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. The Shares are offered with no sales charges, commissions, redemption fees, Rule 12b-1 fees or deferred sales charges. The minimum initial investment is $250,000. There is no minimum amount required for subsequent investments. For complete details on how to purchase, redeem and exchange Shares, please see the Shareholder's Guide beginning at page 10. This prospectus contains information about the Shares that prospective investors should consider before investing and should be read carefully and retained for future reference. Additional information about the Shares is contained in the Statement of Additional Information ("SAI") dated February 17, 1997, which is filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into this Prospectus. The SAI is available upon request and without charge by writing or calling the Funds at the address or telephone number shown above. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER JURISDICTION. CONTENTS - -------------------------------------------------------------------------------- FEE TABLE ........................................................................ 2 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ....................................................................... 3 - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES ........................................................................ 4 - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR ........................................................................ 7 - -------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES ........................................................................ 8 - -------------------------------------------------------------------------------- PERFORMANCE ........................................................................ 9 - -------------------------------------------------------------------------------- MISCELLANEOUS INFORMATION ........................................................................ 9 - -------------------------------------------------------------------------------- SHAREHOLDER'S GUIDE How to Open an Account ...................................................... 10 Purchasing Shares ........................................................... 10 How to Exchange Shares ...................................................... 11 How to Redeem Shares ........................................................ 11 Special Shareholder Services and Other Information .................................................... 12 JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 1 FEE TABLE SHAREHOLDER TRANSACTION EXPENSES (Applicable to each Fund) Sales Load Imposed on Purchases None Sales Load Imposed on Reinvested Dividends None Deferred Sales Load None Redemption Fees None Exchange Fee None ANNUAL OPERATING EXPENSES* (Expressed as a percentage of average net assets) - ------------------------------------------------------------------------------------------------------------------------------------ Management Fee Other Expenses Total Operating Expenses - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Institutional Shares .10% .05% .15% Janus Government Money Market Fund - Institutional Shares .10% .05% .15% Janus Tax-Exempt Money Market Fund - Institutional Shares .10% .05% .15% - ------------------------------------------------------------------------------------------------------------------------------------
*The information in the table above is based on expenses for the fiscal period ended October 31, 1996, net of fee waivers from the investment adviser. Without such waivers, the Management Fee, Other Expenses and Total Operating Expenses would have been .20%, .15% and .35%, respectively. Janus Capital may modify or terminate the waivers at any time upon 90 days' notice to the Trustees. See "Investment Adviser and Administrator" for a more detailed discussion of the fees. EXAMPLE You would indirectly pay the following expenses on a $1,000 investment, assuming expense ratios remain as listed above and assuming a 5% annual return, with or without redemption at the end of each period: - ------------------------------------------------------------------------------------------------------------------------------------ 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Institutional Shares $2 $5 $8 $19 Janus Government Money Market Fund - Institutional Shares $2 $5 $8 $19 Janus Tax-Exempt Money Market Fund - Institutional Shares $2 $5 $8 $19 - ------------------------------------------------------------------------------------------------------------------------------------
THE EXPENSES IN THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. The purpose of the preceding table and example is to assist the investor in understanding the various costs and expenses that an investor in each Fund will bear directly or indirectly. These expenses are described in greater detail under "Investment Adviser and Administrator." JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 2 FINANCIAL HIGHLIGHTS The information below is for fiscal periods ending October 31 of each year. The accounting firm of Price Waterhouse LLP has audited the Funds' financial statements and their report is included in the Funds' Annual Report, which is incorporated by reference into the SAI. Expense and income ratios have been annualized while total returns have not been annualized. Janus Janus Janus Government Tax-Exempt Money Market Money Market Money Market Fund Fund Fund 1996 1995(1) 1996 1995(1) 1996 1995(1) [TO BE FILED BY [TO BE FILED BY [TO BE FILED BY Institutional Shares AMENDMENT] AMENDMENT] AMENDMENT] - ------------------------------------------------------------------------------------------------------------------------------------ 1. Net asset value, beginning of period $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: 2. Net investment income .03 .03 .02 3. Net gains or (losses) on securities (both realized and unrealized) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 4. Total from investment operations .03 .03 .02 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: 5. Dividends (from net investment income) (.03) (.03) (.02) 6. Distributions (from capital gains) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 7. Total distributions (.03) (.03) (.02) - ------------------------------------------------------------------------------------------------------------------------------------ 8. Net asset value, end of period $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------------ 9. Total return 3.25% 3.20% 2.09% - ------------------------------------------------------------------------------------------------------------------------------------ 10. Average net assets for the period (millions) $202 $25 $1 11. Net assets, end of period (in thousands) $304,952 $44,164 $11,192 12. Ratio of expenses to average net assets 0.15%(2) 0.15%(2) 0.15%(2) 13. Ratio of net investment income to average net assets 5.86% 5.75% 3.82% - ------------------------------------------------------------------------------------------------------------------------------------
(1) Period from April 14, 1995 (inception) through October 31, 1995. (2) The ratio was .35% before voluntary reduction of fees. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 3 INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES Unless otherwise stated, the investment objectives and policies set forth in this Prospectus are not fundamental and may be changed by the Trustees of the Trust (the "Trustees") without shareholder approval. Shareholders will be notified of material changes in investment objectives or policies. If there is a change in the investment objective or policies of any Fund, shareholders should consider whether that Fund remains an appropriate investment in light of their then current financial position and needs. The Funds are subject to additional investment policies and restrictions described in the SAI, some of which are fundamental and may not be changed without shareholder approval. INVESTMENT OBJECTIVES The investment objective of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or that the Shares will be able to maintain a stable net asset value of $1.00 per share. COMMON INVESTMENT POLICIES The Funds will invest only in eligible high quality, short-term money market instruments that present minimal credit risks, as determined by Janus Capital Corporation, the Funds' investment adviser ("Janus Capital"), pursuant to procedures adopted by the Trustees. Each Fund may invest only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act")) and will maintain a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities (as defined below), each Fund will not invest more than 5% of its total assets in the securities of any one issuer. A guarantor is not considered an issuer for the purpose of this limit, provided that the value of all securities held by a Fund that are issued or guaranteed by that institution does not exceed 10% of the Fund's total assets. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's total assets may be invested without regard to the foregoing limitations. A Fund may not invest more than 25% of its total assets in any one industry, except that this limit does not apply to U.S. Government Securities, bank obligations or municipal securities. To ensure adequate liquidity, no Fund may invest more than 10% of its net assets in illiquid investments, including repurchase agreements maturing in more than seven days (unless subject to a demand feature) and certain time deposits that are subject to early withdrawal penalties and mature in more than seven days. Because the Funds are typically used as a cash management vehicle, they intend to maintain a high degree of liquidity. Janus Capital determines and monitors the liquidity of portfolio securities under the supervision of the Trustees. RATINGS High quality money market instruments include those that (i) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in one of the two highest rating categories for short-term debt by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise unrated and determined by Janus Capital to be of comparable quality. Each Fund, except Janus Tax-Exempt Money Market Fund, will invest at least 95% of its total assets in securities in the highest rating category (as determined pursuant to Rule 2a-7). Descriptions of the rating categories of Standard & Poor's Ratings Services, Moody's Investors Service, Inc., and certain other NRSROs are contained in the SAI, as is a further description of the Funds' investment policies. Although each Fund only invests in high quality money market instruments, an investment in a Fund is subject to risk even if all securities in its portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities, can change in value as a result of changes in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. TYPES OF INVESTMENTS JANUS MONEY MARKET FUND Janus Money Market Fund pursues its objective by investing primarily in high quality debt obligations and obligations of financial institutions. The Fund may also invest in U.S. Government Securities (as defined below) and municipal securities, although the Fund expects to invest in such securities to a lesser degree. DEBT OBLIGATIONS The Fund may invest in debt obligations of domestic issuers, including commercial paper (short-term promissory notes issued by companies to finance their, or their affiliates', current obligations), notes and bonds, and variable amount master demand notes. The payment obligations on these instruments may be backed by securities, swap agreements or other assets, by the guarantee of a third party or solely by the unsecured promise of the issuer to make payments when due. The Fund may invest in privately issued commercial paper or other securities that are restricted as to disposition under the federal securities laws. In general, sales of these securities may not be made absent registration under the Securities Act of 1933 (the "1933 Act") or the availability of an appropriate exemption. 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 Fund may invest in obligations of financial institutions. Examples of obligations in which the Fund may invest include negotiable certificates of deposit, bankers' acceptances and time deposits of U.S. banks (including savings and loan associations) JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 4 having total assets in excess of one billion dollars and U.S. branches of foreign banks having total assets in excess of ten billion dollars. The Fund may also invest in Eurodollar and Yankee bank obligations as discussed below. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Fixed time deposits, which are payable at a stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Fund but may be subject to early withdrawal penalties that could reduce the Fund's yield. Unless there is a readily available market for them, time deposits that are subject to early withdrawal penalties and that mature in more than seven days will be treated as illiquid securities. EURODOLLAR OR YANKEE OBLIGATIONS The Fund may invest in Eurodollar and Yankee bank obligations. Eurodollar bank obligations are dollar-denominated certificates of deposit or time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks. Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks. One such risk is the possibility that a foreign government might prevent dollar-denominated funds from flowing across its borders. Other risks include: adverse political and economic developments in a foreign country; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes; and expropriation or nationalization of foreign issuers. U.S. GOVERNMENT SECURITIES The Fund may invest without limit in U.S. Government Securities as described below under "Janus Government Money Market Fund." MUNICIPAL SECURITIES The Fund may invest in obligations of states, territories or possessions of the United States and their subdivisions, authorities and corporations as described below under "Janus Tax-Exempt Money Market Fund." These obligations may pay interest that is exempt from federal income taxation. JANUS GOVERNMENT MONEY MARKET FUND Janus Government Money Market Fund pursues its objective by investing exclusively in obligations issued and/or guaranteed as to principal and interest by the United States government or by its agencies and instrumentalities and repurchase agreements secured by such obligations. U.S. GOVERNMENT SECURITIES U.S. Government Securities shall have the meaning set forth in the 1940 Act. The 1940 Act defines U.S. Government Securities to include securities issued or guaranteed by the U.S. government, its agencies and instrumentalities. U.S. Government Securities may also include repurchase agreements collateralized by and municipal securities escrowed with or refunded with U.S. government securities. U.S. Government Securities in which the Fund may invest include U.S. Treasury securities and obligations issued or guaranteed by U.S. government agencies and instrumentalities that are backed by the full faith and credit of the U.S. government, such as those guaranteed by the Small Business Administration or issued by the Government National Mortgage Association. In addition, U.S. Government Securities in which the Fund may invest include securities supported primarily or solely by the creditworthiness of the issuer, such as securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority. There is no guarantee that the U.S. government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the full faith and credit of the U.S. government. JANUS TAX-EXEMPT MONEY MARKET FUND Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily in municipal securities whose interest is exempt from federal income taxes, including the federal alternative minimum tax. Although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income taxes, the Fund reserves the right to invest up to 20% of the value of its net assets in securities whose interest is federally taxable. Additionally, when its portfolio manager is unable to locate investment opportunities with desirable risk/ reward characteristics, the Fund may invest without limit in cash and cash equivalents, including obligations that may be federally taxable (see "Taxable Investments"). MUNICIPAL SECURITIES The municipal securities in which the Fund may invest include municipal notes and short-term municipal bonds. Municipal notes are generally used to provide for the issuer's short-term capital needs and generally have maturities of 397 days or less. Examples include tax anticipation and revenue anticipation notes, which generally are issued in anticipation of various seasonal revenues, bond anticipation notes, construction loan notes and tax-exempt commercial paper. Short-term municipal bonds may include "general obligation bonds," which are secured by the issuer's pledge of its faith, credit and taxing power for payment of principal and interest; "revenue bonds," which are generally paid from the revenues of a particular facility or a specific excise tax or other source; and "industrial development bonds," which are issued by or on behalf of public authorities to provide funding for various privately operated industrial and commercial facilities. The Fund may also invest in high quality participation interests in municipal securities. A more detailed description of various types of municipal securities is contained in Appendix B in the SAI. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 5 When the assets and revenues of an agency, authority, instrumentality or other political subdivision are separate from those of the government creating the issuing entity and a security is backed only by the assets and revenues of the issuing entity, that entity will be deemed to be the sole issuer of the security. Similarly, in the case of an industrial development bond backed only by the assets and revenues of the non-governmental issuer, the non-governmental issuer will be deemed to be the sole issuer of the bond. At times, the Fund may invest more than 25% of the value of its total assets in tax-exempt securities that are related in such a way that an economic, business, or political development or change affecting one such security could similarly affect the other securities; for example, securities whose issuers are located in the same state, or securities whose interest is derived from revenues of similar type projects. The Fund may also invest more than 25% of its assets in industrial development bonds or participation interests therein. Yields on municipal securities are dependent on a variety of factors, including the general conditions of the money market and of the municipal bond and municipal note markets, the size of a particular offering, the maturity of the obligation and the rating of the issue. The achievement of the Fund's investment objective is dependent in part on the continuing ability of the issuers of municipal securities in which the Fund invests to meet their obligations for the payment of principal and interest when due. Obligations of issuers of municipal securities are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978, as amended. Therefore, the possibility exists that, as a result of litigation or other conditions, the ability of any issuer to pay, when due, the principal of and interest on its municipal securities may be materially affected. MUNICIPAL LEASES The Fund may invest in municipal leases or participation interests therein. 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. Lease obligations may not be backed by the issuing municipality's credit and may involve risks not normally associated with general obligation bonds and other revenue bonds. For example, their interest may become taxable if the lease is assigned and the holders may incur losses if the issuer does not appropriate funds for the lease payment on an annual basis, which may result in termination of the lease and possible default. Janus Capital may determine that a liquid market exists for municipal lease obligations pursuant to guidelines established by the Trustees. TAXABLE INVESTMENTS As discussed above, although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income tax, the Fund may under certain circumstances invest in certain securities whose interest is subject to such taxation. These securities include: (i) short-term obligations of the U.S. government, its agencies or instrumentalities, (ii) certificates of deposit, bankers' acceptances and interest-bearing savings deposits of banks having total assets of more than one billion dollars and whose deposits are insured by the Federal Deposit Insurance Corporation, (iii) commercial paper and (iv) repurchase agreements as described below covering any of the securities described in items (i)-(iii) above or any other obligations of the U.S. government, its agencies or instrumentalities. COMMON INVESTMENT TECHNIQUES PARTICIPATION INTERESTS The Funds may invest in participation interests in any type of security in which the Funds may invest. A participation interest gives a Fund an undivided interest in the underlying securities in the proportion that the Fund's participation interest bears to the total principal amount of the underlying securities. Participation interests usually carry a demand feature, as described below, backed by a letter of credit or guarantee of the institution that issued the interests permitting the holder to tender them back to the institution. DEMAND FEATURES The Funds may invest in securities that are subject to puts and stand-by commitments ("demand features"). Demand features give the Fund the right to resell securities at specified periods prior to their maturity dates to the seller or to some third party at an agreed-upon price or yield. Securities with demand features may involve certain expenses and risks, including the inability of the issuer of the instrument to pay for the securities at the time the instrument is exercised, non-marketability of the instrument and differences between the maturity of the underlying security and the maturity of the instrument. Securities may cost more with demand features than without them. Demand features can serve three purposes: to shorten the maturity of a variable or floating rate security, to enhance the instrument's credit quality and to provide a source of liquidity. Demand features are often issued by third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Funds' investments may be dependent in part on the credit quality of the banks supporting the Funds' investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. Brokerage firms and insurance companies also provide certain liquidity and credit support. A substantial portion of the Janus Tax-Exempt Money Market Fund's portfolio in particular may consist of securities backed by banks and other financial institutions, and thus adverse changes in the credit quality of these institutions could cause losses to the Fund and affect its share price. VARIABLE AND FLOATING RATE SECURITIES The securities in which the Funds invest may have variable or floating rates of interest. These securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. Securities with ultimate maturities of greater than 397 days may be purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term instruments that have demand features which comply with certain requirements and certain variable rate U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's or guarantor's creditworthiness. The rate of interest on securities purchased by a Fund may be tied to short-term Treasury JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 6 or other government securities or indices on securities that are permissible investments of the Funds, as well as other money market rates of interest. The Funds will not purchase securities whose values are tied to interest rates or indices that are not appropriate for the duration and volatility standards of a money market fund. MORTGAGE- AND ASSET-BACKED SECURITIES Janus Money Market Fund and Janus Government Money Market Fund may purchase fixed or adjustable 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 entities. In addition, Janus Money Market Fund may purchase other asset-backed securities, including securities backed by automobile loans, equipment leases or credit card receivables. These securities directly or indirectly represent a participation in, or are secured by and payable from, fixed or adjustable rate mortgage or other loans which may be secured by real estate or other assets. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayments of the principal of underlying loans may shorten the effective maturities of these securities and may result in a Fund having to reinvest proceeds at a lower interest rate. REPURCHASE AGREEMENTS Each Fund may seek additional income by entering into collateralized repurchase agreements. Repurchase agreements are transactions in which a Fund purchases securities and simultaneously commits to resell those securities to the seller at an agreed-upon price on an agreed-upon future date. The resale price reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased securities. If the seller of the securities underlying a repurchase agreement fails to pay the agreed resale price on the agreed delivery date, a Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. REVERSE REPURCHASE AGREEMENTS Each Fund may enter into reverse repurchase agreements. Reverse repurchase agreements are transactions in which a Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. This technique will be used only for temporary or emergency purposes, such as meeting redemption requests, or to earn additional income on portfolio securities. DELAYED DELIVERY SECURITIES Each Fund may purchase securities on a when-issued or delayed delivery basis. Securities so purchased are subject to market price fluctuation from the time of purchase but no interest on the securities accrues to a Fund until delivery and payment for the securities take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Forward commitments will be entered into only when a Fund has the intention of taking possession of the securities, but a Fund may sell the securities before the settlement date if deemed advisable. BORROWING AND LENDING Each Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. A Fund may not mortgage or pledge securities except to secure permitted borrowings. As a fundamental policy, a Fund will not lend securities or other assets if, as a result, more than 25% of its total assets would be lent to other parties; however, the Funds do not currently intend to engage in securities lending. Each Fund intends to seek permission from the SEC to borrow money from or lend money to other funds that permit such transactions and are advised by Janus Capital. There is no assurance that such permission will be granted. INVESTMENT ADVISER AND ADMINISTRATOR INVESTMENT ADVISER Each Fund has a separate Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923. Janus Capital has served as investment adviser to Janus Fund since 1970 and currently serves as investment adviser to all of the Janus funds, as well as adviser or subadviser to other mutual funds and individual, corporate, charitable and retirement accounts. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of the outstanding voting stock of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. Pursuant to the Investment Advisory Agreements, Janus Capital furnishes continuous advice and recommendations concerning each Fund's investments. Each of the Funds has agreed to compensate Janus Capital for its advisory services by the monthly payment of a fee at the annual rate of 0.20% of the value of the average daily net assets of each Fund. Janus Capital has agreed to waive a portion of its fee and accordingly, the advisory fee of each Fund will be calculated at the annual rate of 0.10% of the value of each Fund's average daily net assets. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 7 ADMINISTRATOR Each of the Funds has also entered into an Administration Agreement with Janus Capital, pursuant to which Janus Capital furnishes certain administrative, compliance and accounting services for the Funds, pays the costs of printing reports and prospectuses for existing shareholders, provides office space for the Funds and pays the salaries, fees and expenses of all Fund officers and of those Trustees who are affiliated with Janus Capital. Administrative services provided by Janus Capital under the Administration Agreements include custody and transfer agency services. Janus Capital is paid an administration fee, calculated daily and paid monthly, at the annual rate of 0.15% of the value of the average daily net assets of each Fund attributable to Shares for services rendered pursuant to the Administration Agreements. Janus Capital has agreed to waive a portion of its fee and accordingly, the administration fee paid by the Shares will be calculated at the annual rate of 0.05% of the value of each Fund's average daily net assets attributable to the Shares. Janus Capital may modify or terminate this waiver upon 90 days' notice to the Trustees. Each Fund pays all of its expenses not assumed by Janus Capital, including auditing fees and independent Trustees' fees and expenses. PORTFOLIO TRANSACTIONS Purchases and sales of securities on behalf of each Fund are executed by brokers and dealers selected by Janus Capital. Broker-dealers are selected on the basis of their ability to obtain best price and execution for the Funds' transactions and recognizing brokerage, research and other services provided to the Fund and to Janus Capital. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. The Funds' Trustees have also authorized the Funds to place portfolio transactions on an agency basis with a broker-dealer that is affiliated with Janus Capital. Agency trades, if any, that are placed with such affiliated party serve to reduce certain expenses of the Funds. The SAI further explains the selection of broker-dealers. PERSONAL INVESTING Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy governing personal investing. Janus Capital's policy requires investment and other personnel to conduct their personal investment activities in a manner that Janus Capital believes is not detrimental to the Funds and Janus Capital's other advisory clients. See the SAI for more detailed information. DISTRIBUTIONS AND TAXES Dividends representing substantially all of the net investment income and any net realized gains on sales of securities are declared daily, Saturdays, Sundays and holidays included, and distributed on the last business day of each month. If a month begins on a Saturday, Sunday or holiday, dividends for those days are declared at the end of the preceding month and distributed on the first business day of the month. Distributions will be reinvested in Shares of a Fund or wired to a predesignated bank account at the election of the shareholder. If no election is made, all distributions will be reinvested in additional Shares of a Fund. Shares purchased by wire on a day on which the Funds calculate their net asset value and the Federal Reserve Banks are open ("bank business day") will receive that day's dividend if the purchase is effected prior to 3:00 p.m. (New York time) for the Janus Money Market and Janus Government Money Market Funds and 12:00 p.m. (New York time) for the Janus Tax-Exempt Money Market Fund. Otherwise, such Shares begin to accrue dividends on the first bank business day following receipt of the order. Redemption orders effected on any particular day will generally receive dividends declared through the day of redemption. However, redemptions made by wire which are received prior to 3:00 p.m. (New York time) for the Janus Money Market and Janus Government Money Market Funds and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that day. Proceeds of such a redemption will normally be sent to the predesignated account on that day and that day's dividend will not be received. Requests for redemptions made by wire which are received after 3:00 p.m. (12:00 p.m. for Janus Tax-Exempt Money Market Fund) will be processed on that day and receive that day's dividend, but will not be wired until the following bank business day. The Funds reserve the right to require purchase and redemption requests prior to these times on days when the bond market closes before 4:00 p.m. (New York time). Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund) are taxable income and are subject to federal income tax (except for shareholders exempt from income tax), whether such distributions are received in cash or are reinvested in additional Shares. Full information regarding the tax status of income dividends and any capital gains distributions will be mailed to shareholders for tax purposes on or before January 31st of each year. Because the Funds are money market funds, they do not anticipate making any capital gains distributions. Janus Tax-Exempt Money Market Fund anticipates that substantially all income dividends it pays will be exempt from federal income tax. However, dividends attributable to interest on taxable investments, together with distributions from any net realized capital gains, are taxable. In addition, interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum taxes. To the extent that the Fund earns such income, shareholders who are subject to the alternative minimum tax must include such income as a preference item. The Fund will advise shareholders of the percentage of dividends, if any, subject to the alternative minimum tax. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 8 Dividends and capital gains distributions may also be subject to state and local taxes. In certain states some portion of dividends and distributions (depending on the sources of the Fund's net income) of Janus Tax-Exempt Money Market Fund may be exempt from state and local taxes. Shareholders should consult their own tax advisor regarding exemption from any applicable state and local tax, as well as the tax treatment of any dividends or distributions from the Shares. The Funds intend to comply with provisions of the Internal Revenue Code applicable to investment companies, and thus it is not expected that any of the Funds will be required to pay any federal income or excise taxes. The SAI further explains the Funds' tax status. PERFORMANCE The Shares may measure performance in several ways, including "yield," "effective yield," and "tax equivalent yield" (for Janus Tax-Exempt Money Market Fund only). Yield is a way of showing the rate of income the Shares earn on investments as a percentage of the Share price. Yield represents the income, less expenses generated by an investment, in the Shares over a seven-day period expressed as an annual percentage rate. Effective yield is similar in that it is calculated over the same time frame, but instead the net investment income is compounded and then annualized. Due to the compounding effect, the effective yield will normally be higher than the yield. Shares of Janus Tax-Exempt Money Market Fund may also quote tax-equivalent yield, which shows the taxable yield an investor would have to earn before taxes to equal such Shares' tax-free yield. A tax-equivalent yield is calculated by dividing such Shares' tax-exempt yield by the result of one minus a stated federal tax rate. Only that portion of the Fund's income that is tax-exempt is adjusted in this calculation. Performance figures are based upon historical results and are not intended to indicate future performance. MISCELLANEOUS INFORMATION ORGANIZATION Each Fund is an open-end management investment company registered under the 1940 Act as a series of the Trust, which was created on February 11, 1986. Each Fund currently offers three classes of shares by separate prospectuses. The Shares offered by this Prospectus are available only to institutional clients, including corporations, foundations and trusts, and individuals meeting certain initial investment requirements. A second class of shares of each Fund, Service Shares, are available only through Financial Institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs. A third class of shares of each Fund, Investor Shares, are available to the general public. Because the expenses of each class may differ, the performance of each class is expected to differ. If you would like additional information, please call Janus Extended Services at 1-800-29JANUS. PRINCIPAL SHAREHOLDERS As of January 20, 1997, the following individuals and/or corporations owned more than 25% of the Shares of the following Funds: [INFORMATION TO BE FILED BY AMENDMENT] Thus, these shareholders may have power to control any vote of the Shares of the Fund. TRUSTEES The Trustees oversee the business affairs of the Trust and are responsible for major decisions relating to each Fund's investment objective and policies. The Trustees delegate the day-to-day management of the Funds to the officers of the Trust and meet at least quarterly to review the Funds' investment policies, performance, expenses and other business affairs. VOTING RIGHTS The Trust is not required to hold annual shareholder meetings. However, special meetings may be called for a specific class of shares, a specific Fund, or for the Trust as a whole, for purposes such as electing or removing Trustees, terminating or reorganizing the Trust, changing fundamental policies or voting on matters when required by the 1940 Act. Separate votes are taken by a separate Fund (or a separate class of shares) only if a matter affects or requires the vote of just that Fund (or those shares). Shareholders are entitled to cast one vote for each Share they own. CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the custodian of the Funds' assets. The custodian holds each Fund's assets in safekeeping and collects and remits the income thereon subject to the instructions of each Fund. Janus Service Corporation, P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, provides transfer agency and shareholder services for the Funds. Janus Distributors, Inc., 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Shares. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 9 SHAREHOLDER'S GUIDE HOW TO OPEN AN ACCOUNT ESTABLISHING YOUR ACCOUNT The Application enclosed with this Prospectus describes the options available to you as an institutional shareholder of the Funds. After reviewing the Application carefully, complete, sign and forward it to: Via Regular Mail Via Express Mail - Overnight Delivery Janus Funds Janus Funds P.O. Box 173375 100 Fillmore Street Denver, CO 80217-3375 Denver, CO 80206-4928 Attn: Extended Services Attn: Extended Services Do not include any purchase money with the Application. All purchases of Shares should be effected by wire transfer. See "Purchasing Shares." The Funds reserve the right to suspend the offering of the Shares for a period of time and to reject any specific purchase request. You may set up your account for Investment Retirement Plan rollovers (in excess of $250,000) under a tax-sheltered retirement plan. A retirement plan allows you to shelter your investment income from current income taxes. A contribution to these plans may also be tax deductible. Distributions from a retirement plan are generally subject to income tax and may be subject to an additional tax if withdrawn prior to age 59 1/2. Investors Fiduciary Trust Company serves as custodian for the retirement plans offered by the Funds. There is an annual $12 fee per account to maintain your retirement account. The maximum annual fee is $24 per taxpayer identification number. You may pay the fee by check or have it automatically deducted from your account (usually in December). Please refer to the Janus Funds IRA booklet for complete information regarding IRAs. You will need a special application to be enrolled in the plan. For an application and more details, call 1-800-525-3713. TAXPAYER IDENTIFICATION NUMBERS On the application or other appropriate form, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to backup withholding for failing to report income to the IRS. If you are subject to the 31% backup withholding or you did not certify your taxpayer identification, the IRS requires the Funds to withhold 31% of any dividends paid and redemption or exchange proceeds. In addition, to the 31% backup withholding, you may be subject to a $50 fee to reimburse the Funds for any penalty that the IRS may impose. DISTRIBUTION OPTIONS Shareholders have the option of having their dividends and distributions automatically reinvested in Shares of a Fund or wired to a predesignated bank account. If no election is made, all dividends and distributions will be reinvested in additional Shares. PURCHASING SHARES You must establish a Fund account and receive an account number before making purchases by wire. Requests to purchase Janus Money Market Fund and Janus Government Money Market Fund received before 3:00 p.m. (New York time) on a business day will receive dividends declared on the purchase date. Requests to purchase Janus Tax-Exempt Money Market Fund must be received before 12:00 p.m. (New York time) on a business day in order to receive the dividend declared on the day of purchase. In addition, the Funds' transfer agent must receive payment in federal funds by 4:00 p.m. (New York time). The Funds reserve the right to require purchase requests and payments prior to these times on days when the bond market closes before 4:00 p.m. (New York time). Purchase orders received after these times will receive the dividend declared the following day. WIRE INSTRUCTIONS: Request your bank to transmit immediately available funds by wire for purchase of Shares to the Funds' custodian bank as follows: United Missouri Bank, N.A., Kansas City, Missouri ABA # 101000695 BNF = Janus Money Market Funds Account # 9870610000 For credit to: Name of Shareholder: ____________________________________________ Shareholder Account No.: ______________________________________________________ Name of Fund(s): ______________________________________________________________ Complete information regarding your account must be included in all wire instructions in order to facilitate prompt and accurate handling of investments. Please contact the Janus Extended Services Team at 1-800-29JANUS when you intend to make a wire purchase. The Funds do not charge any fees for transactions by wire in Shares of the Funds. Once you have established a Fund account, you may purchase Shares for such account or open additional accounts with other Funds at any time. The Funds reserve the right to suspend the offering of Shares for a period of time and to reject any specific purchase request. If you have any questions, please call 1-800-29JANUS. MINIMUM INVESTMENT The minimum initial investment in the Shares is $250,000. The Funds may, in their discretion, waive this minimum under certain circumstances but, in such event, the minimum must be reached within 90 days of opening the account. Shareholders who do not maintain the $250,000 minimum will be given the option of exchanging into Investor Shares or having their Shares redeemed. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 10 NET ASSET VALUE The net asset value ("NAV") of the Shares is determined at the close of the regular trading session of the New York Stock Exchange (normally 4:00 p.m., New York time) each day that both the Exchange and the New York Federal Reserve Bank are open. NAV per share is determined by dividing the total value of the securities and other assets, less liabilities, by the total number of Shares outstanding. Portfolio securities are valued at their amortized cost. Amortized cost valuation involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity (or such other date as permitted by Rule 2a-7) of any discount or premium. If fluctuating interest rates cause the market value of a portfolio to deviate more than 1/2 of 1% from the value determined on the basis of amortized cost, the Trustees will consider whether any action, such as adjusting the Share's NAV to reflect current market conditions, should be initiated to prevent any material dilutive effect on shareholders. SHARE CERTIFICATES Share certificates are not available for the Shares in order to maintain the general liquidity that is representative of a money market fund and to help facilitate transactions in shareholder accounts. HOW TO EXCHANGE SHARES The Janus funds include several funds with a variety of investment objectives. You may exchange your Shares for shares of any other Janus fund that is available to the public and registered in your state of residence. There are certain procedures which should be followed to effect the transfer of the entire or partial balance in your Shares to one of the other Janus funds. The Funds reserve the right to reject any exchange request and to modify or terminate the exchange privilege at any time. For example, the Funds may reject exchanges from accounts engaged in excessive trading (including market timing transactions) that are detrimental to the Funds. If you would like more information regarding this option, please call the Janus Extended Services Team at 1-800-29JANUS. HOW TO REDEEM SHARES PARTIAL OR COMPLETE REDEMPTIONS You may redeem all or a portion of your Shares on any business day. Your Shares will be redeemed at the NAV next calculated after your Fund has received your redemption request in good order and meeting all the requirements of this Prospectus. Proceeds of such redemption generally will be wired to your predesignated bank account as of the day of redemption, or, if that day is a bank holiday, on the next bank business day. IN WRITING To redeem all or part of your Shares in writing, send a letter of instruction to the following address: Via Regular Mail Via Express Mail - Overnight Delivery Janus Funds Janus Funds P.O. Box 173375 100 Fillmore Street Denver, CO 80217-3375 Denver, CO 80206-4928 Attn: Extended Services Attn: Extended Services The letter should be on company letterhead (in the case of institutional clients) and should specify the name of the Fund, the number of Shares or dollars being redeemed, the account number, appropriate wiring instructions, the name(s) on the account, your name and your daytime telephone number. The letter must be signed by an authorized person whose signature is on file with the Fund. For IRA shareholders, written instructions must be signed by the account owner. If you do not want federal income tax withheld from your redemption, you must state that you elect not to have such withholding apply. In addition, your instructions must state whether the distribution is normal (after age 59 1/2) or premature (before age 59 1/2) and, if premature, whether any exceptions such as death or disability apply with regard to the 10% additional tax on early distributions. BY TELEPHONE Shares may be redeemed by telephone. If a request for a redemption is received by 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and by 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund, Shares will be redeemed and the redemption amount wired in federal funds to the shareholder's predesignated bank account that day. After 3:00 p.m. (12:00 p.m. for Janus Tax-Exempt Money Market Fund), a redemption request will be processed at that day's NAV and will include that day's dividends, but generally will not be wired until the next bank business day. The Funds reserve the right to require redemption requests prior to these times on days when the bond market closes before 4:00 p.m. (New York time). There is no fee for redemptions by wire. BY A FUND Your account may be terminated by your Fund if, due to the transfer or redemption of Shares, the value of the remaining Shares in your account falls below the minimum investment required to open a new account, or if you engage in illegal or other conduct detrimental to the Funds. In the case of insufficient account size, your Fund will notify you that you have 60 days to increase your account to the minimum required before redeeming your account. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 11 SPECIAL SHAREHOLDER SERVICES AND OTHER INFORMATION PORTFOLIO INFORMATION You may call 1-800-29JANUS by TouchTone(TM) telephone for access to certain information regarding your account, including current yield and dividend rate information, Monday through Friday from 7:00 a.m. to 10:00 p.m. (New York time). TELEPHONE INSTRUCTIONS You may initiate many transactions by telephone. The Funds and their agents will not be responsible for any losses resulting from unauthorized transactions when procedures designed to verify the identity of the caller are followed. ACCOUNT ADDRESS AND NAME CHANGES To change the address on your account, you may call 1-800-29JANUS or send a written request signed by all registered owners of your account. Please include the name of the Fund(s), the account number(s), the name(s) on the account and both the old and new addresses. Within the first 10 days of an address change, redemptions by institutional clients are permissible only if the redemption proceeds are wired to a pre-designated bank account or you provide the Funds with appropriate corporate resolutions changing wire instructions. Please call 1-800-29JANUS for additional information. To change the name on an account, the Shares must be transferred to a new account. Such a change generally requires written instructions with the guaranteed signatures of all registered owners, as well as an Application and supporting legal documentation, if applicable. Please call 1-800-29JANUS for additional information. STATEMENTS AND REPORTS Each shareholder will receive daily confirmations of purchases and redemptions made in the Funds. On the last day of each month, the shareholder will receive a statement reporting all purchases and redemptions made during that month, and dividends paid during the month. Twice each year you will receive the financial statements of the Funds, including a statement listing portfolio securities. To reduce expenses, only one copy of most reports (such as the Funds' Annual Report) may be mailed to all accounts with the same tax identification number. Please call 1-800-29JANUS if you need additional reports sent each time. TEMPORARY SUSPENSION OF SERVICES The Funds or their agents may temporarily suspend telephone transactions and other shareholder services described in this Prospectus upon reasonable notice or to the extent that any circumstance reasonably beyond the control of the Funds or their agents materially hampers the provision of such services. JANUS INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS February 17, 1997 12 CONTENTS - -------------------------------------------------------------------------------- FEE TABLE ........................................................................ 1 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ........................................................................ 2 - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES ........................................................................ 2 - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR ........................................................................ 5 - -------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES ........................................................................ 6 - -------------------------------------------------------------------------------- PERFORMANCE ........................................................................ 7 - -------------------------------------------------------------------------------- MISCELLANEOUS INFORMATION ........................................................................ 8 - -------------------------------------------------------------------------------- SHAREHOLDER'S GUIDE Purchases ................................................................... 9 Redemptions ................................................................. 9 Shareholder Communications .................................................. 9 [LOGO] JANUS MONEY MARKET FUND JANUS GOVERNMENT MONEY MARKET FUND JANUS TAX-EXEMPT MONEY MARKET FUND Service Shares 100 Fillmore Street Denver, CO 80206-4923 February 17, 1997 Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds") are designed for investors who seek maximum current income consistent with stability of capital. This prospectus offers a separate class of shares of each Fund (collectively, the "Shares") exclusively through banks and other financial institutions ("Financial Institutions") in connection with trust accounts, cash management programs and similar programs provided to their customers. Each Fund is a separate series of Janus Investment Fund (the "Trust"), an open-end management investment company. Each Fund invests exclusively in high quality money market instruments. AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. The Shares are offered with no sales charges, commissions, redemption fees, Rule 12b-1 fees or deferred sales charges. There is a $250,000 initial investment minimum by each Financial Institution. The Financial Institution may aggregate investments by all of its customers to achieve this minimum. There is no minimum amount required for subsequent investments. For complete details on how to purchase, redeem and exchange Shares, please see the Shareholder's Guide beginning at page 9. This prospectus contains information about the Shares that prospective investors should consider before investing and should be read carefully and retained for future reference. Additional information about the Shares is contained in the Statement of Additional Information ("SAI") dated February 17, 1997, which is filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into this Prospectus. The SAI is available upon request and without charge by writing or calling your Financial Institution. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE OR OTHER JURISDICTION. FEE TABLE SHAREHOLDER TRANSACTION EXPENSES (Applicable to each Fund) Sales Load Imposed on Purchases None Sales Load Imposed on Reinvested Dividends None Deferred Sales Load None Redemption Fees None Exchange Fee None ANNUAL OPERATING EXPENSES(1) (Expressed as a percentage of average net assets) - ------------------------------------------------------------------------------------------------------------------------------------ Management Other Total Operating Fee(1) Expenses(1,2) Expenses(1) - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Service Shares 0.10% 0.30% 0.40% Janus Government Money Market Fund - Service Shares 0.10% 0.30% 0.40% Janus Tax-Exempt Money Market Fund - Service Shares 0.10% 0.30% 0.40% - ------------------------------------------------------------------------------------------------------------------------------------
(1) The fees and expenses in the table above are based on the estimated fees and expenses that the Service Shares of the Funds expect to incur in their initial fiscal year, net of fee waivers from the investment adviser. Without such waivers, the Management Fee, Other Expenses and Total Operating Expenses for Service Shares are estimated to be 0.20%, 0.40% and 0.60%, respectively. Janus Capital may modify or terminate the waivers at any time upon 90 days' notice to the Trustees. See "Investment Adviser and Administrator" for a more detailed discussion of the fees. (2) A portion of the administration fee included in "other expense" may be used to compensate Financial Institutions for providing administrative services to their customers who invest in the Shares. See "Administrator" for more details. Certain Financial Institutions may charge additional fees directly to their customers for other services. Consult your Financial Institution to determine whether it charges any additional fees. EXAMPLE You would indirectly pay the following expenses on a $1,000 investment, assuming expense ratios remain as listed above and assuming a 5% annual return, with or without redemption at the end of each period: - ------------------------------------------------------------------------------------------------------------------------------------ 1 Year 3 Years - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Service Shares $4 $13 Janus Government Money Market Fund - Service Shares $4 $13 Janus Tax-Exempt Money Market Fund - Service Shares $4 $13 - ------------------------------------------------------------------------------------------------------------------------------------
THE EXPENSES IN THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. The purpose of the preceding table and example is to assist the investor in understanding the various costs and expenses that an investor in each Fund will bear directly or indirectly. These expenses are described in greater detail under "Investment Adviser and Administrator." JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 1 FINANCIAL HIGHLIGHTS No Financial Highlights are presented for the Shares because the Shares did not commence operations until November 22, 1996. INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES Unless otherwise stated, the investment objectives and policies set forth in this Prospectus are not fundamental and may be changed by the Trustees of the Trust (the "Trustees") without shareholder approval. Shareholders will be notified of material changes in investment objectives or policies. If there is a change in the investment objective or policies of any Fund, shareholders should consider whether that Fund remains an appropriate investment in light of their then current financial position and needs. The Funds are subject to additional investment policies and restrictions described in the SAI, some of which are fundamental and may not be changed without shareholder approval. INVESTMENT OBJECTIVES The investment objective of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or that the Shares will be able to maintain a stable net asset value of $1.00 per share. COMMON INVESTMENT POLICIES The Funds will invest only in eligible high quality, short-term money market instruments that present minimal credit risks, as determined by Janus Capital Corporation, the Funds' investment adviser ("Janus Capital"), pursuant to procedures adopted by the Trustees. Each Fund may invest only in U.S. dollar-denominated instruments that have a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act")) and will maintain a dollar-weighted average portfolio maturity of 90 days or less. Except to the limited extent permitted by Rule 2a-7 and except for U.S. Government Securities (as defined below), each Fund will not invest more than 5% of its total assets in the securities of any one issuer. A guarantor is not considered an issuer for the purpose of this limit, provided that the value of all securities held by a Fund that are issued or guaranteed by that institution does not exceed 10% of the Fund's total assets. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's total assets may be invested without regard to the foregoing limitations. A Fund may not invest more than 25% of its total assets in any one industry, except that this limit does not apply to U.S. Government Securities, bank obligations or municipal securities. To ensure adequate liquidity, no Fund may invest more than 10% of its net assets in illiquid investments, including repurchase agreements maturing in more than seven days (unless subject to a demand feature) and certain time deposits that are subject to early withdrawal penalties and mature in more than seven days. Because the Funds are typically used as a cash management vehicle, they intend to maintain a high degree of liquidity. Janus Capital determines and monitors the liquidity of portfolio securities under the supervision of the Trustees. RATINGS High quality money market instruments include those that (i) are rated (or, if unrated, are issued by an issuer with comparable outstanding short-term debt that is rated) in one of the two highest rating categories for short-term debt by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO or (ii) are otherwise unrated and determined by Janus Capital to be of comparable quality. Each Fund, except Janus Tax-Exempt Money Market Fund, will invest at least 95% of its total assets in securities in the highest rating category (as determined pursuant to Rule 2a-7). Descriptions of the rating categories of Standard & Poor's Ratings Services, Moody's Investors Service, Inc., and certain other NRSROs are contained in the SAI, as is a further description of the Funds' investment policies. Although each Fund only invests in high quality money market instruments, an investment in a Fund is subject to risk even if all securities in its portfolio are paid in full at maturity. All money market instruments, including U.S. Government Securities, can change in value as a result of changes in interest rates, the issuer's actual or perceived creditworthiness or the issuer's ability to meet its obligations. TYPES OF INVESTMENTS JANUS MONEY MARKET FUND Janus Money Market Fund pursues its objective by investing primarily in high quality debt obligations and obligations of financial institutions. The Fund may also invest in U.S. Government Securities (as defined below) and municipal securities, although the Fund expects to invest in such securities to a lesser degree. DEBT OBLIGATIONS The Fund may invest in debt obligations of domestic issuers, including commercial paper (short-term promissory notes issued by companies to finance their, or their affiliates', current obligations), notes and bonds, and variable amount master demand notes. The payment obligations on these instruments may be backed by securities, swap agreements or other assets, by the guarantee of a third party or solely by the unsecured promise of the issuer to make payments when due. The Fund may invest in privately issued commercial paper or other securities that are restricted as to disposition under the federal securities laws. In general, sales of these securities may not be made absent registration under the Securities Act of 1933 (the "1933 Act") or the availability of an appropriate exemption. 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. JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 2 OBLIGATIONS OF FINANCIAL INSTITUTIONS The Fund may invest in obligations of financial institutions. Examples of obligations in which the Fund may invest include negotiable certificates of deposit, bankers' acceptances and time deposits of U.S. banks (including savings and loan associations) having total assets in excess of one billion dollars and U.S. branches of foreign banks having total assets in excess of ten billion dollars. The Fund may also invest in Eurodollar and Yankee bank obligations as discussed below. Certificates of deposit represent an institution's obligation to repay funds deposited with it that earn a specified interest rate over a given period. Bankers' acceptances are negotiable obligations of a bank to pay a draft which has been drawn by a customer and are usually backed by goods in international trade. Time deposits are non-negotiable deposits with a banking institution that earn a specified interest rate over a given period. Fixed time deposits, which are payable at a stated maturity date and bear a fixed rate of interest, generally may be withdrawn on demand by the Fund but may be subject to early withdrawal penalties that could reduce the Fund's yield. Unless there is a readily available market for them, time deposits that are subject to early withdrawal penalties and that mature in more than seven days will be treated as illiquid securities. EURODOLLAR OR YANKEE OBLIGATIONS The Fund may invest in Eurodollar and Yankee bank obligations. Eurodollar bank obligations are dollar-denominated certificates of deposit or time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks. Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks. One such risk is the possibility that a foreign government might prevent dollar-denominated funds from flowing across its borders. Other risks include: adverse political and economic developments in a foreign country; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes; and expropriation or nationalization of foreign issuers. U.S. GOVERNMENT SECURITIES The Fund may invest without limit in U.S. Government Securities as described below under "Janus Government Money Market Fund." MUNICIPAL SECURITIES The Fund may invest in obligations of states, territories or possessions of the United States and their subdivisions, authorities and corporations as described below under "Janus Tax-Exempt Money Market Fund." These obligations may pay interest that is exempt from federal income taxation. JANUS GOVERNMENT MONEY MARKET FUND Janus Government Money Market Fund pursues its objective by investing exclusively in obligations issued and/or guaranteed as to principal and interest by the United States government or by its agencies and instrumentalities and repurchase agreements secured by such obligations. U.S. GOVERNMENT SECURITIES U.S. Government Securities shall have the meaning set forth in the 1940 Act. The 1940 Act defines U.S. Government Securities to include securities issued or guaranteed by the U.S. government, its agencies and instrumentalities. U.S. Government Securities may also include repurchase agreements collateralized by and municipal securities escrowed with or refunded with U.S. government securities. U.S. Government Securities in which the Fund may invest include U.S. Treasury securities and obligations issued or guaranteed by U.S. government agencies and instrumentalities that are backed by the full faith and credit of the U.S. government, such as those guaranteed by the Small Business Administration or issued by the Government National Mortgage Association. In addition, U.S. Government Securities in which the Fund may invest include securities supported primarily or solely by the creditworthiness of the issuer, such as securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority. There is no guarantee that the U.S. government will support securities not backed by its full faith and credit. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the full faith and credit of the U.S. government. JANUS TAX-EXEMPT MONEY MARKET FUND Janus Tax-Exempt Money Market Fund pursues its objective by investing primarily in municipal securities whose interest is exempt from federal income taxes, including the federal alternative minimum tax. Although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income taxes, the Fund reserves the right to invest up to 20% of the value of its net assets in securities whose interest is federally taxable. Additionally, when its portfolio manager is unable to locate investment opportunities with desirable risk/reward characteristics, the Fund may invest without limit in cash and cash equivalents, including obligations that may be federally taxable (see "Taxable Investments"). MUNICIPAL SECURITIES The municipal securities in which the Fund may invest include municipal notes and short-term municipal bonds. Municipal notes are generally used to provide for the issuer's short-term capital needs and generally have maturities of 397 days or less. Examples include tax anticipation and revenue anticipation notes, which generally are issued in anticipation of various seasonal revenues, bond anticipation notes, construction loan notes and tax-exempt commercial paper. Short-term municipal bonds may include "general obligation bonds," which are secured by the issuer's pledge of its faith, credit and taxing power for payment of principal and interest; "revenue bonds," which are generally paid from the revenues of a particular facility or a specific excise tax or other source; and "industrial development bonds," which are issued by or on behalf of public authorities JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 3 to provide funding for various privately operated industrial and commercial facilities. The Fund may also invest in high quality participation interests in municipal securities. A more detailed description of various types of municipal securities is contained in Appendix B in the SAI. When the assets and revenues of an agency, authority, instrumentality or other political subdivision are separate from those of the government creating the issuing entity and a security is backed only by the assets and revenues of the issuing entity, that entity will be deemed to be the sole issuer of the security. Similarly, in the case of an industrial development bond backed only by the assets and revenues of the non-governmental issuer, the non-governmental issuer will be deemed to be the sole issuer of the bond. At times, the Fund may invest more than 25% of the value of its total assets in tax-exempt securities that are related in such a way that an economic, business, or political development or change affecting one such security could similarly affect the other securities; for example, securities whose issuers are located in the same state, or securities whose interest is derived from revenues of similar type projects. The Fund may also invest more than 25% of its assets in industrial development bonds or participation interests therein. Yields on municipal securities are dependent on a variety of factors, including the general conditions of the money market and of the municipal bond and municipal note markets, the size of a particular offering, the maturity of the obligation and the rating of the issue. The achievement of the Fund's investment objective is dependent in part on the continuing ability of the issuers of municipal securities in which the Fund invests to meet their obligations for the payment of principal and interest when due. Obligations of issuers of municipal securities are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978, as amended. Therefore, the possibility exists that, as a result of litigation or other conditions, the ability of any issuer to pay, when due, the principal of and interest on its municipal securities may be materially affected. MUNICIPAL LEASES The Fund may invest in municipal leases or participation interests therein. 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. Lease obligations may not be backed by the issuing municipality's credit and may involve risks not normally associated with general obligation bonds and other revenue bonds. For example, their interest may become taxable if the lease is assigned and the holders may incur losses if the issuer does not appropriate funds for the lease payment on an annual basis, which may result in termination of the lease and possible default. Janus Capital may determine that a liquid market exists for municipal lease obligations pursuant to guidelines established by the Trustees. TAXABLE INVESTMENTS As discussed above, although the Fund will attempt to invest substantially all of its assets in municipal securities whose interest is exempt from federal income tax, the Fund may under certain circumstances invest in certain securities whose interest is subject to such taxation. These securities include: (i) short-term obligations of the U.S. government, its agencies or instrumentalities, (ii) certificates of deposit, bankers' acceptances and interest-bearing savings deposits of banks having total assets of more than one billion dollars and whose deposits are insured by the Federal Deposit Insurance Corporation, (iii) commercial paper and (iv) repurchase agreements as described below covering any of the securities described in items (i)-(iii) above or any other obligations of the U.S. government, its agencies or instrumentalities. COMMON INVESTMENT TECHNIQUES PARTICIPATION INTERESTS The Funds may invest in participation interests in any type of security in which the Funds may invest. A participation interest gives a Fund an undivided interest in the underlying securities in the proportion that the Fund's participation interest bears to the total principal amount of the underlying securities. Participation interests usually carry a demand feature, as described below, backed by a letter of credit or guarantee of the institution that issued the interests permitting the holder to tender them back to the institution. DEMAND FEATURES The Funds may invest in securities that are subject to puts and stand-by commitments ("demand features"). Demand features give the Fund the right to resell securities at specified periods prior to their maturity dates to the seller or to some third party at an agreed-upon price or yield. Securities with demand features may involve certain expenses and risks, including the inability of the issuer of the instrument to pay for the securities at the time the instrument is exercised, non-marketability of the instrument and differences between the maturity of the underlying security and the maturity of the instrument. Securities may cost more with demand features than without them. Demand features can serve three purposes: to shorten the maturity of a variable or floating rate security, to enhance the instrument's credit quality and to provide a source of liquidity. Demand features are often issued by third party financial institutions, generally domestic and foreign banks. Accordingly, the credit quality and liquidity of the Funds' investments may be dependent in part on the credit quality of the banks supporting the Funds' investments. This will result in exposure to risks pertaining to the banking industry, including the foreign banking industry. Brokerage firms and insurance companies also provide certain liquidity and credit support. A substantial portion of the Janus Tax-Exempt Money Market Fund's portfolio in particular may consist of securities backed by banks and other financial institutions, and thus adverse changes in the credit quality of these institutions could cause losses to the Fund and affect its share price. VARIABLE AND FLOATING RATE SECURITIES The securities in which the Funds invest may have variable or floating rates of interest. These securities pay interest JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 4 at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate. Securities with ultimate maturities of greater than 397 days may be purchased only pursuant to Rule 2a-7. Under that Rule, only those long-term instruments that have demand features which comply with certain requirements and certain variable rate U.S. Government Securities may be purchased. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in market interest rates or changes in the issuer's or guarantor's creditworthiness. The rate of interest on securities purchased by a Fund may be tied to short-term Treasury or other government securities or indices on securities that are permissible investments of the Funds, as well as other money market rates of interest. The Funds will not purchase securities whose values are tied to interest rates or indices that are not appropriate for the duration and volatility standards of a money market fund. MORTGAGE- AND ASSET-BACKED SECURITIES Janus Money Market Fund and Janus Government Money Market Fund may purchase fixed or adjustable 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 entities. In addition, Janus Money Market Fund may purchase other asset-backed securities, including securities backed by automobile loans, equipment leases or credit card receivables. These securities directly or indirectly represent a participation in, or are secured by and payable from, fixed or adjustable rate mortgage or other loans which may be secured by real estate or other assets. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayments of the principal of underlying loans may shorten the effective maturities of these securities and may result in a Fund having to reinvest proceeds at a lower interest rate. REPURCHASE AGREEMENTS Each Fund may seek additional income by entering into collateralized repurchase agreements. Repurchase agreements are transactions in which a Fund purchases securities and simultaneously commits to resell those securities to the seller at an agreed-upon price on an agreed-upon future date. The resale price reflects a market rate of interest that is not related to the coupon rate or maturity of the purchased securities. If the seller of the securities underlying a repurchase agreement fails to pay the agreed resale price on the agreed delivery date, a Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so. REVERSE REPURCHASE AGREEMENTS Each Fund may enter into reverse repurchase agreements. Reverse repurchase agreements are transactions in which a Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. This technique will be used only for temporary or emergency purposes, such as meeting redemption requests, or to earn additional income on portfolio securities. DELAYED DELIVERY SECURITIES Each Fund may purchase securities on a when-issued or delayed delivery basis. Securities so purchased are subject to market price fluctuation from the time of purchase but no interest on the securities accrues to a Fund until delivery and payment for the securities take place. Accordingly, the value of the securities on the delivery date may be more or less than the purchase price. Forward commitments will be entered into only when a Fund has the intention of taking possession of the securities, but a Fund may sell the securities before the settlement date if deemed advisable. BORROWING AND LENDING Each Fund may borrow money for temporary or emergency purposes in amounts up to 25% of its total assets. A Fund may not mortgage or pledge securities except to secure permitted borrowings. As a fundamental policy, a Fund will not lend securities or other assets if, as a result, more than 25% of its total assets would be lent to other parties; however, the Funds do not currently intend to engage in securities lending. Each Fund intends to seek permission from the SEC to borrow money from or lend money to other funds that permit such transactions and are advised by Janus Capital. There is no assurance that such permission will be granted. INVESTMENT ADVISER AND ADMINISTRATOR INVESTMENT ADVISER Each Fund has a separate Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4923. Janus Capital has served as investment adviser to Janus Fund since 1970 and currently serves as investment adviser to all of the Janus funds, as well as adviser or subadviser to other mutual funds and individual, corporate, charitable and retirement accounts. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of the outstanding voting stock of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 5 Pursuant to the Investment Advisory Agreements, Janus Capital furnishes continuous advice and recommendations concerning each Fund's investments. Each of the Funds has agreed to compensate Janus Capital for its advisory services by the monthly payment of a fee at the annual rate of 0.20% of the value of the average daily net assets of each Fund. Janus Capital has agreed to waive a portion of its fee and accordingly, the advisory fee of each Fund will be calculated at the annual rate of 0.10% of the value of each Fund's average daily net assets. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. ADMINISTRATOR Each of the Funds has also entered into an Administration Agreement with Janus Capital, pursuant to which Janus Capital furnishes certain administrative, compliance and accounting services for the Funds, pays the costs of printing reports and prospectuses for existing shareholders, provides office space for the Funds and pays the salaries, fees and expenses of all Fund officers and of those Trustees who are affiliated with Janus Capital. Administrative services provided by Janus Capital under the Administration Agreements include custody and transfer agency services. Janus Capital is paid an administration fee, calculated daily and paid monthly, at the annual rate of 0.40% of the value of the average daily net assets of each Fund attributable to Shares for services rendered pursuant to the Administration Agreements. Janus Capital has agreed to waive a portion of its fee and accordingly, the administration fee paid by the Shares will be calculated at the annual rate of 0.30% of the value of each Fund's average daily net assets attributable to the Shares. Janus Capital may modify or terminate this waiver at any time upon 90 days' notice to the Trustees. Each Fund pays all of its expenses not assumed by Janus Capital, including auditing fees and independent Trustees' fees and expenses. Janus Capital may use all or a portion of its administration fee to compensate Financial Institutions for providing administrative services to their customers who invest in the Shares. The types of services that the Financial Institutions would provide include serving as the sole shareholder of record, shareholder recordkeeping, processing and aggregating purchase and redemption transactions, providing periodic statements, forwarding shareholder reports and other materials, providing tax information, and providing other similar services that the Funds would have to perform if they were dealing directly with the beneficial owners, rather than the Financial Institutions, as shareholders of record. The Glass-Steagall Act prohibits a depository institution (such as a commercial bank or a savings and loan association) from being an underwriter or distributor of most securities. In the event the Glass-Steagall Act is deemed to prohibit depository institutions from acting in the administrative capacities described above or should Congress relax current restrictions on depository institutions, the Trustees will consider appropriate changes in the services. PORTFOLIO TRANSACTIONS Purchases and sales of securities on behalf of each Fund are executed by brokers and dealers selected by Janus Capital. Broker-dealers are selected on the basis of their ability to obtain best price and execution for the Funds' transactions and recognizing brokerage, research and other services provided to the Fund and to Janus Capital. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. The Funds' Trustees have also authorized the Funds to place portfolio transactions on an agency basis with a broker-dealer that is affiliated with Janus Capital. Agency trades, if any, that are placed with such affiliated party serve to reduce certain expenses of the Funds. The SAI further explains the selection of broker-dealers. PERSONAL INVESTING Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy governing personal investing. Janus Capital's policy requires investment and other personnel to conduct their personal investment activities in a manner that Janus Capital believes is not detrimental to the Funds and Janus Capital's other advisory clients. See the SAI for more detailed information. DISTRIBUTIONS AND TAXES Dividends representing substantially all of the net investment income and any net realized gains on sales of securities are declared daily, Saturdays, Sundays and holidays included, and distributed on the last business day of each month. If a month begins on a Saturday, Sunday or holiday, dividends for those days are declared at the end of the preceding month and distributed on the first business day of the month. Distributions will be reinvested in Shares of a Fund unless otherwise elected by the shareholder pursuant to the options offered by the Financial Institution. Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund) are taxable income and are subject to federal income tax (except for shareholders exempt from income tax), whether such distributions are received in cash or are reinvested in additional Shares. Full JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 6 information regarding the tax status of income dividends and any capital gains distributions will be mailed to Financial Institutions who will forward the information to their customers for tax purposes on or before January 31st of each year. Because the Funds are money market funds, they do not anticipate making any capital gains distributions. Janus Tax-Exempt Money Market Fund anticipates that substantially all income dividends it pays will be exempt from federal income tax. However, dividends attributable to interest on taxable investments, together with distributions from any net realized capital gains, are taxable. In addition, interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum taxes. To the extent that the Fund earns such income, shareholders who are subject to the alternative minimum tax must include such income as a preference item. The Fund will advise shareholders of the percentage of dividends, if any, subject to the alternative minimum tax. Dividends and capital gains distributions may also be subject to state and local taxes. In certain states some portion of dividends and distributions (depending on the sources of the Fund's net income) of Janus Tax-Exempt Money Market Fund may be exempt from state and local taxes. Shareholders should consult their own tax advisor regarding exemption from any applicable state and local tax, as well as the tax treatment of any dividends or distributions from the Shares. The Funds intend to comply with provisions of the Internal Revenue Code applicable to investment companies, and thus it is not expected that any of the Funds will be required to pay any federal income or excise taxes. The SAI further explains the Funds' tax status. PERFORMANCE The Shares may measure performance in several ways, including "yield," "effective yield," and "tax equivalent yield" (for Janus Tax-Exempt Money Market Fund only). Yield is a way of showing the rate of income the Shares earn on investments as a percentage of the Share price. Yield represents the income, less expenses generated by an investment, in the Shares over a seven-day period expressed as an annual percentage rate. Effective yield is similar in that it is calculated over the same time frame, but instead the net investment income is compounded and then annualized. Due to the compounding effect, the effective yield will normally be higher than the yield. Shares of Janus Tax-Exempt Money Market Fund may also quote tax-equivalent yield, which shows the taxable yield an investor would have to earn before taxes to equal such Shares' tax-free yield. A tax-equivalent yield is calculated by dividing such Shares' tax-exempt yield by the result of one minus a stated federal tax rate. Only that portion of the Fund's income that is tax-exempt is adjusted in this calculation. Performance figures are based upon historical results and are not intended to indicate future performance. JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 7 MISCELLANEOUS INFORMATION ORGANIZATION Each Fund is an open-end management investment company registered under the 1940 Act as a series of the Trust, which was created on February 11, 1986. Each Fund currently offers three classes of shares by separate prospectuses. The Shares offered by this Prospectus are available only through Financial Institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs provided to their customers. A second class of shares, Institutional Shares of each Fund, are available only to institutional clients, including corporations, foundations and trusts, and individuals meeting certain initial investment requirements. A third class of shares, Investor Shares of each Fund, are available to the general public. Because the expenses of each class may differ, the performance of each class is expected to differ. If you would like additional information, please call 1-800-29JANUS. TRUSTEES The Trustees oversee the business affairs of the Trust and are responsible for major decisions relating to each Fund's investment objective and policies. The Trustees delegate the day-to-day management of the Funds to the officers of the Trust and meet at least quarterly to review the Funds' investment policies, performance, expenses and other business affairs. VOTING RIGHTS The Trust is not required to hold annual shareholder meetings. However, special meetings may be called for a specific class of shares, a specific Fund, or for the Trust as a whole, for purposes such as electing or removing Trustees, terminating or reorganizing the Trust, changing fundamental policies or voting on matters when required by the 1940 Act. Separate votes are taken by a separate Fund (or a separate class of shares) only if a matter affects or requires the vote of just that Fund (or those shares). Shareholders are entitled to cast one vote for each Share they own. CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the custodian of the Funds' assets. The custodian holds each Fund's assets in safekeeping and collects and remits the income thereon subject to the instructions of each Fund. Janus Service Corporation, P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, provides transfer agency and shareholder services for the Funds. Janus Distributors, Inc., 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Shares. JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 8 SHAREHOLDER'S GUIDE INVESTORS MAY NOT PURCHASE OR REDEEM SHARES OF THE FUNDS DIRECTLY. SHARES MAY BE PURCHASED OR REDEEMED ONLY THROUGH FINANCIAL INSTITUTIONS IN CONNECTION WITH TRUST ACCOUNTS, CASH MANAGEMENT PROGRAMS AND SIMILAR PROGRAMS. YOUR FINANCIAL INSTITUTION WILL PROVIDE YOU WITH INSTRUCTIONS ON PURCHASING OR REDEEMING SHARES. The Financial Institutions are responsible for promptly transmitting purchase, redemption and other requests to the Funds under the arrangements made between the Financial Institutions and their customers. The Funds are not responsible for the failure of any Financial Institution to carry out its obligations to its customers. PURCHASES Purchases of Fund Shares may be made only through omnibus accounts of Financial Institutions in connection with trust accounts, cash management programs and similar programs. Your Financial Institution will provide you with instructions on purchasing Shares. The Financial Institutions may impose charges and restrictions different from those imposed by the Funds. The Financial Institutions may also require different minimum initial and subsequent investments than required by the Funds. All investments in the Funds are credited to a participating Financial Institution's omnibus account upon acceptance of the investment by a Fund. Investments will be processed at the NAV next determined after an order is received and accepted by a Fund. Each Fund reserves the right to reject any specific purchase order. Purchase orders may be refused if, in Janus Capital's opinion, they are of a size that would disrupt the management of a Fund. Any Fund may discontinue sales of its Shares if management believes that a substantial further increase may adversely affect that Fund's ability to achieve its investment objective. In such event, however, it is anticipated that existing Financial Institution customers in that Fund would be permitted to continue to authorize investment in such Fund and to reinvest any dividends or capital gains distributions. MINIMUM INVESTMENT There is a $250,000 initial aggregate investment minimum by each Financial Institution. The Funds may, in their discretion, waive this minimum under certain circumstances but, in such event, the minimum must be reached within 90 days of opening the account. Financial Institutions who do not maintain the $250,000 minimum will be given the option of requesting their customers to exchange into Investor Shares if the required minimum investment for Investor Shares is met or having their customers' Shares redeemed. NET ASSET VALUE The net asset value ("NAV") of the Shares is determined at the close of the regular trading session of the New York Stock Exchange (normally 4:00 p.m., New York time) each day that both the Exchange and the New York Federal Reserve Bank are open. NAV per share is determined by dividing the total value of the securities and other assets, less liabilities, by the total number of Shares outstanding. Portfolio securities are valued at their amortized cost. Amortized cost valuation involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity (or such other date as permitted by Rule 2a-7) of any discount or premium. If fluctuating interest rates cause the market value of a portfolio to deviate more than 1/2 of 1% from the value determined on the basis of amortized cost, the Trustees will consider whether any action, such as adjusting the Share's NAV to reflect current market conditions, should be initiated to prevent any material dilutive effect on shareholders. SHARE CERTIFICATES Share certificates are not available for the Shares in order to maintain the general liquidity that is representative of a money market fund and to help facilitate transactions in shareholder accounts. REDEMPTIONS Redemptions, like purchases, may be effected only through the accounts of participating Financial Institutions. Your Financial Institution will provide you with instructions on redeeming shares. Shares of any Fund 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 Fund. Redemption proceeds will normally be wired to the participating Financial Institution the business day following receipt of the redemption order, but in no event later than seven days after receipt of such order. SHAREHOLDER COMMUNICATIONS Shareholders will receive annual and semiannual reports including the financial statements of the Funds that they have authorized for investment from their Financial Institution. Each report will show the investments owned by each Fund and the market values thereof, as well as other information about the Funds and their operations. The Trust's fiscal year ends October 31. JANUS MONEY MARKET FUNDS - SERVICE SHARES PROSPECTUS February 17, 1997 9 [LOGO] JANUS INVESTMENT FUND 100 Fillmore Street Denver, CO 80206-4928 (800) 525-3713 - -------------------------------------------------------------------------------- Statement of Additional Information February 17, 1997 - -------------------------------------------------------------------------------- GROWTH FUNDS FIXED-INCOME FUNDS Janus Fund Janus Flexible Income Fund Janus Enterprise Fund Janus High-Yield Fund Janus Equity Income Fund Janus Federal Tax-Exempt Fund Janus Mercury Fund Janus Short-Term Bond Fund Janus Olympus Fund Janus Overseas Fund Janus Twenty Fund Janus Worldwide Fund COMBINATION FUNDS Janus Balanced Fund Janus Growth and Income Fund This Statement of Additional Information ("SAI") pertains to the funds listed above, each of which is a separate series of Janus Investment Fund, a Massachusetts business trust (the "Trust"). Each of these series of the Trust represents shares of beneficial interest in a separate portfolio of securities and other assets with its own objective and policies (individually, a "Fund" and collectively, the "Funds"). Each Fund is managed separately by Janus Capital Corporation ("Janus Capital"). This SAI is not a Prospectus and should be read in conjunction with the Prospectus of each Fund dated February 17, 1997, which are incorporated by reference into this SAI and may be obtained from the Trust at the above phone number or address. This SAI contains additional and more detailed information about the Funds' operations and activities than the Prospectuses. JANUS INVESTMENT FUND STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page - -------------------------------------------------------------------------------- Investment Policies, Restrictions and Techniques .................. 3 Investment Objectives .......................................... 3 Portfolio Policies ............................................. 4 Investment Restrictions Applicable to All Funds ................ 4 Investment Policies Applicable to Certain Funds ................ 5 Types of Securities and Investment Techniques .................. 6 Illiquid Investments ......................................... 6 Zero Coupon, Pay-In-Kind and Step Coupon Securities .......... 6 Pass-Through Securities ...................................... 6 Investment Company Securities ................................ 7 Depositary Receipts .......................................... 7 Municipal Obligations ........................................ 8 Other Income-Producing Securities ............................ 8 Repurchase and Reverse Repurchase Agreements ................. 8 High-Yield/High-Risk Securities .............................. 8 Futures, Options and Other Derivative Instruments ............ 9 Investment Adviser ................................................ 15 Custodian, Transfer Agent and Certain Affiliations ................ 17 Portfolio Transactions and Brokerage .............................. 18 Officers and Trustees ............................................. 20 Purchase of Shares ................................................ 23 Net Asset Value Determination .................................. 23 Reinvestment of Dividends and Distributions .................... 24 Redemption of Shares .............................................. 24 Shareholder Accounts .............................................. 24 Telephone Transactions ......................................... 24 Systematic Redemptions ......................................... 25 Retirement Plans .................................................. 25 Income Dividends, Capital Gains Distributions and Tax Status ...... 25 Principal Shareholders ............................................ 26 Miscellaneous Information ......................................... 26 Shares of the Trust ............................................ 27 Voting Rights .................................................. 27 Independent Accountants ........................................ 27 Registration Statement ......................................... 27 Performance Information ........................................... 27 Financial Statements .............................................. 29 Appendix A ........................................................ 30 Explanation of Ratings Categories .............................. 30 - -------------------------------------------------------------------------------- 2 INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES Each Fund's investment objective is discussed in the Prospectus and summarized below. There is no assurance that the Funds will achieve their respective objectives. The investment objectives of the Funds are not fundamental and may be changed by the Trustees without shareholder approval. INVESTMENT OBJECTIVES Janus Fund is a diversified fund that seeks long-term growth of capital in a manner consistent with the preservation of capital by investing primarily in common stocks of issuers of any size. Generally, this Fund emphasizes issuers with larger market capitalizations. Janus Enterprise Fund is a nondiversified fund that seeks long-term growth of capital by investing primarily in common stocks. The Fund intends to normally invest at least 50% of its equity assets in securities issued by medium-sized companies (as defined in the Prospectus). Janus Equity Income Fund is a diversified fund that seeks current income and long-term growth of capital by investing primarily in income-producing equity securities. Janus Mercury Fund is a diversified fund that seeks long-term growth of capital by investing in common stocks of issuers of any size, including larger, well-established companies and/or smaller, emerging growth companies. Janus Olympus Fund is a nondiversified fund that seeks long-term growth of capital by investing primarily in common stocks of issuers of any size, including larger, well-established companies and/or smaller, emerging growth companies. Janus Overseas Fund is a diversified fund that seeks long-term growth of capital by investing primarily in common stocks of foreign issuers of any size. The Fund normally invests at least 65% of its total assets in issuers from at least five different countries excluding the United States. Janus Twenty Fund is a nondiversified fund that seeks long-term growth of capital. Under normal conditions, this Fund concentrates its investments in a core position of 20-30 common stocks. Janus Worldwide Fund is a diversified fund that seeks long-term growth of capital in a manner consistent with the preservation of capital by investing in common stocks of foreign and domestic issuers of any size. Janus Worldwide Fund normally invests in issuers from at least five different countries including the United States. Janus Balanced Fund is a diversified fund that seeks long-term capital growth, consistent with preservation of capital and balanced by current income. Janus Balanced Fund normally invests 40-60% of its assets in securities selected primarily for growth potential and 40-60% of its assets in securities selected for their income potential. Janus Growth and Income Fund is a diversified fund that seeks both long-term capital growth and current income. Janus Growth and Income Fund places a stronger emphasis on the growth objective and normally invests up to 75% of its assets in equity securities selected primarily for their growth potential and at least 25% of its assets in securities that have income potential. In unusual circumstances, the Fund may reduce the growth component of its portfolio to 25% of its assets. Janus Flexible Income Fund is a diversified fund that seeks to maximize total return consistent with preservation of capital. Total return is expected to result from a combination of current income and capital appreciation, although income will normally be the dominant component of total return. Janus Flexible Income Fund invests in all types of income-producing securities. This Fund may have substantial holdings of debt securities rated below investment grade. Janus High-Yield Fund is a diversified fund that seeks high current income as its primary objective and capital appreciation as its secondary objective when consistent with the primary objective by investing in high-yield/high-risk fixed-income securities. The Fund emphasizes investments in high-yield corporate debt securities ("junk bonds") and may invest all of its assets in such securities. Janus Federal Tax-Exempt Fund is a diversified fund that seeks as high a level of current income exempt from federal income tax as is consistent with preservation of capital. It will normally invest at least 80% of its net assets in securities whose income is not subject to federal income tax. Janus Short-Term Bond Fund is a diversified fund that seeks as high a level of current income as is consistent with the preservation of capital by investing primarily in short- and intermediate-term fixed-income securities. It will normally maintain an average weighted effective maturity not to exceed three years. 3 PORTFOLIO POLICIES The Funds' Prospectuses discuss the types of securities in which the Funds will invest, portfolio policies of the Funds and the investment techniques of the Funds. The Prospectuses include a discussion of portfolio turnover policies. Portfolio turnover is calculated by dividing total purchases or sales, whichever is less, by the average monthly value of a Fund's portfolio securities. The following table summarizes the portfolio turnover rates for the fiscal periods indicated. The information below is for fiscal years ended October 31. 1996 Fund Name [TO BE FILED BY AMENDMENT] 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund ___% 118% Janus Enterprise Fund ___% 194% Janus Equity Income Fund ___% N/A Janus Mercury Fund ___% 201% Janus Olympus Fund ___% N/A Janus Overseas Fund ___% 188% Janus Twenty Fund ___% 147% Janus Worldwide Fund ___% 142% Janus Balanced Fund ___% 185% Janus Growth and Income Fund ___% 195% Janus Flexible Income Fund ___% 250% Janus High-Yield Fund ___% N/A Janus Federal Tax-Exempt Fund ___% 164% Janus Short-Term Bond Fund ___% 337% - ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS As indicated in the Prospectus, the Funds are subject to certain fundamental policies and restrictions that may not be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or a particular Fund if a matter affects just that Fund), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or a particular Fund) are present or represented by proxy. As fundamental policies, each of the Funds 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 for Janus Twenty Fund, Janus Enterprise Fund and Janus Olympus Fund and as to seventy-five percent (75%) of the value of the total assets of the other Funds, purchase the securities of any one issuer (except cash items and "government securities" as defined under the Investment Company Act of 1940, as amended (the "1940 Act")), if immediately after and as a result of such purchase, the value of the holdings of a Fund in the securities of such issuer exceeds 5% of the value of such Fund's total assets. With respect to the other 50% of the value of their total assets, Janus Twenty Fund, Janus Enterprise Fund and Janus Olympus Fund 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); provided, however, that for Janus Federal Tax-Exempt Fund this limitation does not apply to municipal obligations. For the purposes of this limitation only, industrial development bonds issued by nongovernmental users shall not be deemed to be municipal obligations. Industrial development bonds shall be classified according to the industry of the entity that has the ultimate responsibility for the payment of principal and interest on the obligation. (3) Invest directly in real estate or interests in real estate; however, the Funds may own debt or equity securities issued by companies engaged in those businesses. (4) Purchase or sell physical commodities other than foreign currencies unless acquired as a result of ownership of securities (but this limitation shall not prevent the Funds from purchasing or selling options, futures, swaps and forward contracts or from investing in securities or other instruments backed by physical commodities). (5) Lend any security or make any other loan if, as a result, more than 25% of a Fund's total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements). (6) Act as an underwriter of securities issued by others, except to the extent that a Fund may be deemed an underwriter in connection with the disposition of portfolio securities of such Fund. As a fundamental policy, each Fund may, notwithstanding any other investment policy or limitation (whether or not fundamental), invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and limitations as such Fund. 4 The Trustees have adopted additional investment restrictions for the Funds. These restrictions are operating policies of the Funds and may be changed by the Trustees without shareholder approval. The additional investment restrictions adopted by the Trustees to date include the following: (a) A Fund will not (i) enter into any futures contracts and related options for purposes other than bona fide hedging transactions within the meaning of Commodity Futures Trading Commission ("CFTC") regulations if the aggregate initial margin and premiums required to establish positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions will exceed 5% of the fair market value of a Fund's net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; and (ii) enter into any futures contracts if the aggregate amount of such Fund's commitments under outstanding futures contracts positions would exceed the market value of its total assets. (b) The Funds do not currently intend to sell securities short, unless they own or have the right to obtain securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling securities short. (c) The Funds do not currently intend to purchase securities on margin, except that the Funds may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits in connection with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing securities on margin. (d) A Fund may not mortgage or pledge any securities owned or held by such Fund in amounts that exceed, in the aggregate, 15% of that Fund's net asset value, provided that this limitation does not apply to reverse repurchase agreements, deposits of assets to margin, guarantee positions in futures, options, swaps or forward contracts, or the segregation of assets in connection with such contracts. (e) The Funds may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 25% of the value of their respective total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 25% of the value of a Fund's total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three business days to the extent necessary to comply with the 25% limitation. This policy shall not prohibit reverse repurchase agreements, deposits of assets to margin or guarantee positions in futures, options, swaps or forward contracts, or the segregation of assets in connection with such contracts. (f) The Funds do not currently intend to purchase any security or enter into a repurchase agreement if, as a result, more than 15% of their respective net assets would be invested in repurchase agreements not entitling the holder to payment of principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. The Trustees, or the Funds' investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. (g) The Funds may not invest in companies for the purpose of exercising control of management. 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 Funds' restriction on investing in a particular industry, the Funds 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 Funds may further classify issuers in accordance with industry classifications as published by the Securities and Exchange Commission ("SEC"). INVESTMENT POLICIES APPLICABLE TO CERTAIN FUNDS Janus Balanced Fund. As an operational policy, at least 25% of the assets of Janus Balanced Fund normally will be invested in fixed-income senior securities, which include debt securities and preferred stock. Janus Flexible Income Fund. As a fundamental policy, this Fund may not purchase a non-income-producing security if, after such purchase, less than 80% of the Fund's total assets would be invested in income-producing securities. Income-producing securities include securities that make periodic interest payments as well as those that make interest payments on a deferred basis or pay interest only at maturity (e.g., Treasury bills or zero coupon bonds). 5 Janus Federal Tax-Exempt Fund. As a fundamental policy, this Fund will normally invest at least 80% of its net assets in securities whose income is not subject to federal income taxes, including the alternative minimum tax. Janus Short-Term Bond Fund. As an operational policy, this Fund will not invest in any debt security that, at the time of purchase, causes its portfolio of debt securities to have a dollar-weighted average, then remaining effective term to maturity of three years or more. The portfolio manager may consider estimated prepayment dates or call dates of certain securities in computing the portfolio's effective maturity. TYPES OF SECURITIES AND INVESTMENT TECHNIQUES ILLIQUID INVESTMENTS Each Fund may invest up to 15% of its net assets in illiquid investments (i.e., securities that are not readily marketable). The Trustees of the Funds have authorized Janus Capital to make liquidity determinations with respect to its securities, including Rule 144A Securities, commercial paper and municipal lease obligations. Under the guidelines established by the Trustees, Janus Capital will consider the following factors: 1) the frequency of trades and quoted prices for the obligation; 2) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; 3) the willingness of dealers to undertake to make a market in the security; and 4) the nature of the security and the nature of 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"). With respect to municipal lease obligations, Janus Capital will also consider factors unique to municipal lease obligations including the general creditworthiness of the municipality, the importance of the property covered by the lease obligation and the likelihood that the marketability of the obligation will be maintained throughout the time the obligation is held by a Fund. 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. ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES Each Fund may invest up to 10% (without limit for Janus High-Yield Fund) of its assets in zero coupon, pay-in-kind and step coupon securities. Zero coupon bonds are issued and traded at a discount from their face value. They do not entitle the holder to any periodic payment of interest prior to maturity. Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. 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 Fund must distribute its investment company taxable income, including the original issue discount accrued on zero coupon or step coupon bonds. Because a Fund will not receive cash payments on a current basis in respect of accrued original-issue discount on zero coupon bonds or step coupon bonds during the period before interest payments begin, in some years that Fund may have to distribute cash obtained from other sources in order to satisfy the distribution requirements under the Code. A Fund might obtain such cash from selling other portfolio holdings which might cause that Fund to incur capital gains or losses on the sale. Additionally, these actions are likely to reduce the assets to which Fund expenses could be allocated and to reduce the rate of return for that Fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for a Fund to sell the securities at the time. Generally, the market prices of zero coupon, step coupon and pay-in-kind securities are more volatile than the prices of securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree than other types of debt securities having similar maturities and credit quality. PASS-THROUGH SECURITIES The Funds may invest in various types of pass-through securities, such as mortgage-backed securities, asset-backed securities and participation interests. A pass-through security is a share or certificate of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser of a pass-through security receives an undivided interest in the underlying pool of securities. The issuers of the underlying securities make interest and 6 principal payments to the intermediary which are passed through to purchasers, such as the Funds. The most common type of pass-through securities are mortgage-backed securities. Government National Mortgage Association ("GNMA") Certificates are mortgage-backed securities that evidence an undivided interest in a pool of mortgage loans. GNMA Certificates differ from bonds in that principal is paid back monthly by the borrowers over the term of the loan rather than returned in a lump sum at maturity. A Fund will generally purchase "modified pass-through" GNMA Certificates, which entitle the holder to receive a share of all interest and principal payments paid and owned on the mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor actually makes the payment. GNMA Certificates are backed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. 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 Funds), like the payments on the underlying loans, represent both principal and interest. Although the underlying mortgage loans are for specified periods of time, such as 20 or 30 years, the borrowers can, and typically do, pay them off sooner. Thus, the security holders frequently receive prepayments of principal in addition to the principal that is part of the regular monthly payments. A portfolio manager will consider estimated prepayment rates in calculating the average weighted maturity of a Fund. A borrower is more likely to prepay a mortgage that bears a relatively high rate of interest. This means that in times of declining interest rates, higher yielding mortgage-backed securities held by a Fund might be converted to cash and that Fund will be forced to accept lower interest rates when that cash is used to purchase additional securities in the mortgage-backed securities sector or in other investment sectors. Additionally, prepayments during such periods will limit a Fund's ability to participate in as large a market gain as may be experienced with a comparable security not subject to prepayment. Asset-backed securities represent interests in pools of consumer loans and are backed by paper or accounts receivables originated by banks, credit card companies or other providers of credit. Generally, the originating bank or credit provider is neither the obligor or 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, a Fund may invest in securities of other investment companies, including money market funds managed by Janus Capital. The Funds' investments in such money market funds are subject to the terms of an exemptive order obtained by the Janus funds which currently provides that each Fund will limit its aggregate investment in a Janus money market fund to the greater of (i) 5% of the investing Fund's total assets or (ii) $2.5 million. The Funds are subject to the provisions of Section 12(d)(1) of the 1940 Act, which currently limits each Fund's investment in other investment companies to no more than 10% of the investing Fund's assets. DEPOSITARY RECEIPTS The Funds may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. The Funds may also invest in European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in other similar instruments representing securities of foreign companies. EDRs are receipts issued by a European financial institution evidencing an arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use in European securities markets. 7 MUNICIPAL OBLIGATIONS The Funds may invest in municipal obligations issued by states, territories and possessions of the United States and the District of Columbia. Janus Federal Tax-Exempt Fund may, at times, invest more than 25% of the value of its assets in industrial development bonds, a type of revenue bond which, although issued by a public authority, may be backed only by the credit and security of a private issuer, thus presenting a greater credit risk. The value of municipal obligations can be affected by changes in their actual or perceived credit quality. The credit quality of municipal obligations can be affected by among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the region where the security is issued, and the liquidity of the security. Because municipal securities are generally traded over-the-counter, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal obligations may be enhanced by demand features, which would enable a Fund to demand payment on short notice from the issuer or a financial intermediary. OTHER INCOME-PRODUCING SECURITIES Other types of income producing securities that the Funds may purchase include, but are not limited to, the following types of securities: Variable and floating rate obligations. These types of securities are relatively long-term instruments that often carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. Standby commitments. These instruments, which are similar to a put, give a Fund the option to obligate a broker, dealer or bank to repurchase a security held by that Fund at a specified price. Tender option bonds. Tender option bonds are relatively long-term bonds that are coupled with the agreement of a third party (such as a broker, dealer or bank) to grant the holders of such securities the option to tender the securities to the institution at periodic intervals. Inverse floaters. Inverse floaters are debt instruments whose interest bears an inverse relationship to the interest rate on another security. The Funds will not invest more than 5% of their respective assets in inverse floaters. The Funds will purchase standby commitments, tender option bonds and instruments with demand features primarily for the purpose of increasing the liquidity of their portfolios. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS In a repurchase agreement, a Fund purchases a security and simultaneously commits to resell that security to the seller at an agreed upon price on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon incremental amount that is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed upon resale price and marked-to-market daily) of the underlying security or "collateral." A Fund may engage in a repurchase agreement with respect to any security in which it is authorized to invest. A risk associated with repurchase agreements is the failure of the seller to repurchase the securities as agreed, which may cause a Fund to suffer a loss if the market value of such securities declines before they can be liquidated on the open market. In the event of bankruptcy or insolvency of the seller, a Fund may encounter delays and incur costs in liquidating the underlying security. Repurchase agreements that mature in more than seven days will be subject to the 15% limit on illiquid investments. While it is not possible to eliminate all risks from these transactions, it is the policy of the Funds to limit repurchase agreements to those parties whose creditworthiness has been reviewed and found satisfactory by Janus Capital. A Fund may use reverse repurchase agreements to provide cash to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities, or to earn additional income on portfolio securities, such as Treasury bills or notes. In a reverse repurchase agreement, a Fund sells a portfolio security to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, a Fund will maintain cash and appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. The Funds will enter into reverse repurchase agreements only with parties that Janus Capital deems creditworthy. HIGH-YIELD/HIGH-RISK SECURITIES Janus Flexible Income Fund and Janus High-Yield Fund may invest without limit in corporate debt securities that are rated below investment grade (e.g., securities rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower by Moody's Investors Service, Inc. ("Moody's")). No other Fund intends to invest 35% or more of its net assets in such 8 securities. 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 Fund would experience a reduction in its income, and could expect a decline in the market value of the securities so affected. Each Fund may also invest in unrated debt securities of foreign and domestic issuers. Unrated debt, while not necessarily of lower quality than rated securities, may not have as broad a market. Because of the size and perceived demand of the issue, among other factors, certain municipalities may not incur the costs of obtaining a rating. A Fund's portfolio manager will analyze the creditworthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, in determining whether to purchase unrated municipal bonds. Unrated debt securities will be included in the 35% limit of each Fund unless its portfolio manager deems such securities to be the equivalent of investment grade securities. Subject to the above limits, each Fund may purchase defaulted securities only when their portfolio managers believe, based upon their analysis of the financial condition, results of operations and economic outlook of an issuer, that there is potential for resumption of income payments and that the securities offer an unusual opportunity for capital appreciation. Notwithstanding the respective portfolio manager's belief as to the resumption of income, however, the purchase of any security on which payment of interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following: Financial and Market Risks. Investments in securities that are in default involve a high degree of financial and market risks that can result in substantial or, at times, even total losses. Issuers of defaulted securities may have substantial capital needs and may become involved in bankruptcy or reorganization proceedings. Among the problems involved in investments in such issuers is the fact that it may be difficult to obtain information about the condition of such issuers. The market prices of such securities also are subject to abrupt and erratic movements and above average price volatility, and the spread between the bid and asked prices of such securities may be greater than normally expected. Disposition of Portfolio Securities. Although these Funds generally will purchase securities for which their portfolio managers expect an active market to be maintained, defaulted securities may be less actively traded than other securities and it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Funds will limit holdings of any such securities to amounts that the portfolio managers believe could be readily sold, and holdings of such securities would, in any event, be limited so as not to limit the Funds' ability to readily dispose of securities to meet redemptions. Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or receivership proceedings on behalf of the Funds. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS Futures Contracts. The Funds may enter into contracts for the purchase or sale for future delivery of fixed-income securities, foreign currencies or contracts based on financial indices, including indices of U.S. government securities, foreign government securities, equity or fixed-income securities. U.S. futures contracts are traded on exchanges which have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), or brokerage firm, which is a member of the relevant contract market. Through their clearing corporations, the exchanges guarantee performance of the contracts as between the clearing members of the exchange. 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 Funds' custodian for the benefit of the FCM. Initial margin payments are similar to good faith deposits or performance bonds. Unlike margin extended by a securities broker, initial margin payments do not constitute purchasing securities on margin for purposes of the Fund's investment limitations. If the value of either party's position declines, that party will be required to make additional "variation margin" payments for the benefit of the FCM to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. In the event of the bankruptcy of the FCM that holds margin on behalf of a Fund, that Fund may be entitled to return of margin owed to such Fund only in proportion to the amount received by the FCM's other customers. Janus Capital will attempt to minimize the risk by careful monitoring of the creditworthiness of the FCMs with which the Funds do business and by depositing margin payments in a segregated account with the Funds' custodian. The Funds intend to comply with guidelines of eligibility for exclusion from the definition of the term "commodity pool operator" adopted by the CFTC and the National Futures Association, which regulate trading in the futures markets. The Funds will use futures contracts and related options primarily for bona fide hedging purposes within the meaning of CFTC regulations. To the extent that the Funds hold positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions, the aggregate initial margin and premiums required to establish such positions will not exceed 5% of the fair market value of a Fund's net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. 9 Although a Fund will segregate cash and liquid assets in an amount sufficient to cover its open futures obligations, the segregated assets would be available to that Fund immediately upon closing out the futures position, while settlement of securities transactions could take several days. However, because a Fund's cash that may otherwise be invested would be held uninvested or invested in other liquid assets so long as the futures position remains open, such Fund's return could be diminished due to the opportunity losses of foregoing other potential investments. A Fund's primary purpose in entering into futures contracts is to protect that Fund from fluctuations in the value of securities or interest rates without actually buying or selling the underlying debt or equity security. For example, if the Fund anticipates an increase in the price of stocks, and it intends to purchase stocks at a later time, that Fund could enter into a futures contract to purchase a stock index as a temporary substitute for stock purchases. If an increase in the market occurs that influences the stock index as anticipated, the value of the futures contracts will increase, thereby serving as a hedge against that Fund not participating in a market advance. This technique is sometimes known as an anticipatory hedge. To the extent a Fund enters into futures contracts for this purpose, the segregated assets maintained to cover such Fund's obligations with respect to the futures contracts will consist of other liquid assets from its portfolio in an amount equal to the difference between the contract price and the aggregate value of the initial and variation margin payments made by that Fund with respect to the futures contracts. Conversely, if a Fund holds stocks and seeks to protect itself from a decrease in stock prices, the Fund might sell stock index futures contracts, thereby hoping to offset the potential decline in the value of its portfolio securities by a corresponding increase in the value of the futures contract position. A Fund could protect against a decline in stock prices by selling portfolio securities and investing in money market instruments, but the use of futures contracts enables it to maintain a defensive position without having to sell portfolio securities. If a Fund owns Treasury bonds and the portfolio manager expects interest rates to increase, that Fund may take a short position in interest rate futures contracts. Taking such a position would have much the same effect as that Fund selling Treasury bonds in its portfolio. If interest rates increase as anticipated, the value of the Treasury bonds would decline, but the value of that Fund's interest rate futures contract will increase, thereby keeping the net asset value of that Fund from declining as much as it may have otherwise. If, on the other hand, a portfolio manager expects interest rates to decline, that Fund may take a long position in interest rate futures contracts in anticipation of later closing out the futures position and purchasing the bonds. Although a Fund can accomplish similar results by buying securities with long maturities and selling securities with short maturities, given the greater liquidity of the futures market than the cash market, it may be possible to accomplish the same result more easily and more quickly by using futures contracts as an investment tool to reduce risk. The ordinary spreads between prices in the cash and futures markets, due to differences in the nature of those markets, are subject to distortions. First, all participants in the futures market are subject to initial margin and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close out futures contracts through offsetting transactions which could distort the normal price relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery of the instrument underlying a futures contract. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced and prices in the futures market distorted. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of the foregoing distortions, a correct forecast of general price trends by a portfolio manager still may not result in a successful use of futures. Futures contracts entail risks. Although the Funds believe that use of such contracts will benefit the Funds, a Fund's overall performance could be worse than if such Fund had not entered into futures contracts if the portfolio manager's investment judgement proves incorrect. For example, if a Fund has hedged against the effects of a possible decrease in prices of securities held in its portfolio and prices increase instead, that Fund will lose part or all of the benefit of the increased value of these securities because of offsetting losses in its futures positions. In addition, if a Fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements. Those sales may be, but will not necessarily be, at increased prices which reflect the rising market and may occur at a time when the sales are disadvantageous to such Fund. The prices of futures contracts depend primarily on the value of their underlying instruments. Because there are a limited number of types of futures contracts, it is possible that the standardized futures contracts available to a Fund will not match exactly such Fund's current or potential investments. A Fund may buy and sell futures contracts based on underlying instruments with different characteristics from the securities in which it typically invests - for example, by hedging investments in portfolio securities with a futures contract based on a broad index of securities - which involves a risk that the futures position will not correlate precisely with the performance of such Fund's investments. Futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments closely correlate with a Fund's investments. Futures prices are affected by factors such as current and anticipated short-term interest rates, changes in volatility of the underlying instruments and the time remaining until expiration of the contract. Those factors may affect securities prices differently from futures prices. Imperfect correlations between a Fund's investments and its futures positions also may result from differing levels of demand in the futures markets and the securities markets, from structural differences in how futures and securities are traded, and from imposition of daily price fluctuation limits for futures contracts. 10 A Fund may buy or sell futures contracts with a greater or lesser value than the securities it wishes to hedge or is considering purchasing in order to attempt to compensate for differences in historical volatility between the futures contract and the securities, although this may not be successful in all cases. If price changes in a Fund's futures positions are poorly correlated with its other investments, its futures positions may fail to produce desired gains or result in losses that are not offset by the gains in that Fund's other investments. Because futures contracts are generally settled within a day from the date they are closed out, compared with a settlement period of three days for some types of securities, the futures markets can provide superior liquidity to the securities markets. Nevertheless, there is no assurance that a liquid secondary market will exist for any particular futures contract at any particular time. In addition, futures exchanges may establish daily price fluctuation limits for futures contracts and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached, it may be impossible for a Fund to enter into new positions or close out existing positions. If the secondary market for a futures contract is not liquid because of price fluctuation limits or otherwise, a Fund may not be able to promptly liquidate unfavorable futures positions and potentially could be required to continue to hold a futures position until the delivery date, regardless of changes in its value. As a result, such Fund's access to other assets held to cover its futures positions also could be impaired. Options on Futures Contracts. The Funds may buy and write put and call options on futures contracts. An option on a future gives a Fund the right (but not the obligation) to buy or sell a futures contract at a specified price on or before a specified date. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or the price of the underlying instrument, ownership of the option may or may not be less risky than ownership of the futures contract or the underlying instrument. As with the purchase of futures contracts, when a Fund is not fully invested it may buy a call option on a futures contract to hedge against a market advance. 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 Fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in that Fund's portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the security or foreign currency which is deliverable under, or of the index comprising, the futures contract. If the futures' price at expiration of the option is higher than the exercise price, a Fund will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which that Fund is considering buying. If a call or put option a Fund has written is exercised, such Fund will incur a loss which will be reduced by the amount of the premium it received. Depending on the degree of correlation between the change in the value of its portfolio securities and changes in the value of the futures positions, a Fund's losses from existing options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. The purchase of a put option on a futures contract is similar in some respects to the purchase of protective put options on portfolio securities. For example, a Fund may buy a put option on a futures contract to hedge its portfolio against the risk of falling prices or rising interest rates. The amount of risk a Fund assumes when it buys an option on a futures contract is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the options bought. Forward Contracts. A forward contract is an agreement between two parties in which one party is obligated to deliver a stated amount of a stated asset at a specified time in the future and the other party is obligated to pay a specified amount for the assets at the time of delivery. The Funds may enter into forward contracts to purchase and sell government securities, equity or income securities, foreign currencies or other financial instruments. Forward contracts generally are traded in an interbank market conducted directly between traders (usually large commercial banks) and their customers. Unlike futures contracts, which are standardized contracts, forward contracts can be specifically drawn to meet the needs of the parties that enter into them. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated exchange. The following discussion summarizes the Funds' principal uses of forward foreign currency exchange contracts ("forward currency contracts"). A Fund may enter into forward currency contracts with stated contract values of up to the value of that Fund's assets. A forward currency contract is an obligation to buy or sell an amount of a specified currency for an agreed price (which may be in U.S. dollars or a foreign currency). A Fund will exchange foreign currencies for U.S. dollars and for other foreign currencies in the normal course of business and may buy and sell currencies through forward currency contracts in order to fix a price for securities it has agreed to buy or sell ("transaction hedge"). A Fund also may hedge some or all of its investments denominated in a foreign currency or exposed to foreign currency fluctuations against a decline in the value of that currency relative to the U.S. dollar by entering into forward currency contracts to sell an amount of that currency (or a proxy currency whose performance is expected to replicate or exceed the performance of that currency relative to the U.S. dollar) approximating the value 11 of some or all of its portfolio securities denominated in that currency ("position hedge") or by participating in options or futures contracts with respect to the currency. A Fund also may enter into a forward currency contract with respect to a currency where the Fund is considering the purchase or sale of investments denominated in that currency but has not yet selected the specific investments ("anticipatory hedge"). In any of these circumstances a Fund may, alternatively, enter into a forward currency contract to purchase or sell one foreign currency for a second currency that is expected to perform more favorably relative to the U.S. dollar if the portfolio manager believes there is a reasonable degree of correlation between movements in the two currencies ("cross-hedge"). These types of hedging minimize the effect of currency appreciation as well as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar equivalent value of the proceeds of or rates of return on a Fund's foreign currency denominated portfolio securities. The matching of the increase in value of a forward contract and the decline in the U.S. dollar equivalent value of the foreign currency denominated asset that is the subject of the hedge generally will not be precise. Shifting a Fund's currency exposure from one foreign currency to another removes that Fund's opportunity to profit from increases in the value of the original currency and involves a risk of increased losses to such Fund if its portfolio manager's projection of future exchange rates is inaccurate. Proxy hedges and cross-hedges may result in losses if the currency used to hedge does not perform similarly to the currency in which hedged securities are denominated. Unforeseen changes in currency prices may result in poorer overall performance for a Fund than if it had not entered into such contracts. The Funds will cover outstanding forward currency contracts by maintaining liquid portfolio securities denominated in or whose value is tied to, the currency underlying the forward contract or the currency being hedged. To the extent that a Fund is not able to cover its forward currency positions with underlying portfolio securities, the Funds' custodian will segregate cash or other liquid assets having a value equal to the aggregate amount of such Fund's commitments under forward contracts entered into with respect to position hedges, cross-hedges and anticipatory hedges. If the value of the securities used to cover a position or the value of segregated assets declines, a Fund will find alternative cover or segregate additional cash or liquid assets on a daily basis so that the value of the covered and segregated assets will be equal to the amount of such Fund's commitments with respect to such contracts. As an alternative to segregating assets, a Fund may buy call options permitting such Fund to buy the amount of foreign currency being hedged by a forward sale contract or a Fund may buy put options permitting it to sell the amount of foreign currency subject to a forward buy contract. While forward contracts are not currently regulated by the CFTC, the CFTC may in the future assert authority to regulate forward contacts. In such event, the Funds' ability to utilize forward contracts may be restricted. In addition, a Fund may not always be able to enter into forward contracts at attractive prices and may be limited in its ability to use these contracts to hedge Fund assets. Options on Foreign Currencies. The Funds may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. For example, a decline in the U.S. dollar value of a foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, a Fund may buy put options on the foreign currency. If the value of the currency declines, such Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio. Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, a Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to a Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, a Fund could sustain losses on transactions in foreign currency options that would require such Fund to forego a portion or all of the benefits of advantageous changes in those rates. The Funds may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, a Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the decline in value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, a Fund could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow that Fund to hedge the increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and a Fund would be required to buy or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Fund also may lose all or a portion of the benefits which might otherwise have been obtained from favorable movements in exchange rates. The Funds may write covered call options on foreign currencies. A call option written on a foreign currency by a Fund is "covered" if that Fund owns the foreign currency underlying the call or has an absolute and immediate right to acquire that 12 foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currencies held in its portfolio. A call option is also covered if a Fund has a call on the same foreign currency in the same principal amount as the call written if the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written, if the difference is maintained by such Fund in cash or other liquid assets in a segregated account with the Funds' custodian. The Funds also may write call options on foreign currencies for cross-hedging purposes. A call option on a foreign currency is for cross-hedging purposes if it is designed to provide a hedge against a decline due to an adverse change in the exchange rate in the U.S. dollar value of a security which a Fund owns or has the right to acquire and which is denominated in the currency underlying the option. Call options on foreign currencies which are entered into for cross-hedging purposes are not covered. However, in such circumstances, a Fund will collateralize the option by segregating cash or other liquid assets in an amount not less than the value of the underlying foreign currency in U.S. dollars marked-to-market daily. Options on Securities. In an effort to increase current income and to reduce fluctuations in net asset value, the Funds may write covered put and call options and buy put and call options on securities that are traded on United States and foreign securities exchanges and over-the-counter. The Funds may write and buy options on the same types of securities that the Funds may purchase directly. A put option written by a Fund is "covered" if that Fund (i) segregates cash not available for investment or other liquid assets with a value equal to the exercise price of the put with the Funds' custodian or (ii) holds a put on the same security and in the same principal amount as the put written and the exercise price of the put held is equal to or greater than the exercise price of the put written. The premium paid by the buyer of an option will reflect, among other things, the relationship of the exercise price to the market price and the volatility of the underlying security, the remaining term of the option, supply and demand and interest rates. A call option written by a Fund is "covered" if that Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by the Funds' custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also deemed to be covered if a Fund holds a call on the same security and in the same principal amount as the call written and the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the difference is maintained by that Fund in cash and other liquid assets in a segregated account with its custodian. The Funds also may write call options that are not covered for cross-hedging purposes. A Fund collateralizes its obligation under a written call option for cross-hedging purposes by segregating cash or other liquid assets in an amount not less than the market value of the underlying security, marked-to-market daily. A Fund would write a call option for cross-hedging purposes, instead of writing a covered call option, when the premium to be received from the cross-hedge transaction would exceed that which would be received from writing a covered call option and its portfolio manager believes that writing the option would achieve the desired hedge. 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 Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. In the case of a written put option, such transaction will permit a Fund to write another put option to the extent that the exercise price is secured by other liquid assets. Effecting a closing transaction also will permit a Fund to use the cash or proceeds from the concurrent sale of any securities subject to the option for other investments. If a Fund desires to sell a particular security from its portfolio on which it has written a call option, such Fund will effect a closing transaction prior to or concurrent with the sale of the security. A Fund will realize a profit from a closing transaction if the price of the purchase transaction is less than the premium received from writing the option or the price received from a sale transaction is more than the premium paid to buy the option. A Fund will realize a loss from a closing transaction if the price of the purchase transaction is more than the premium received 13 from writing the option or the price received from a sale transaction is less than the premium paid to buy the option. Because increases in the market of a call option generally will reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by a Fund. An option position may be closed out only where a secondary market for an option of the same series exists. If a secondary market does not exist, the Fund may not be able to effect closing transactions in particular options and the Fund would have to exercise the options in order to realize any profit. If a Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise. The absence of a liquid secondary market may be due to the following: (i) insufficient trading interest in certain options, (ii) restrictions imposed by a national securities exchange ("Exchange") on which the option is traded on opening or closing transactions or both, (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities, (iv) unusual or unforeseen circumstances that interrupt normal operations on an Exchange, (v) the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may not at all times be adequate to handle current trading volume, or (vi) one or more Exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that Exchange (or in that class or series of options) would cease to exist, although outstanding options on that Exchange that had been issued by the OCC as a result of trades on that Exchange would continue to be exercisable in accordance with their terms. A Fund may write options in connection with buy-and-write transactions. In other words, a Fund may buy a security and then write a call option against that security. The exercise price of such call will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below ("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time the option is written. Buy-and-write transactions using in-the-money call options may be used when it is expected that the price of the underlying security will remain flat or decline moderately during the option period. Buy-and-write transactions using at-the-money call options may be used when it is expected that the price of the underlying security will remain fixed or advance moderately during the option period. Buy-and-write transactions using out-of-the-money call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the underlying security alone. If the call options are exercised in such transactions, a Fund's maximum gain will be the premium received by it for writing the option, adjusted upwards or downwards by the difference between that Fund's purchase price of the security and the exercise price. If the options are not exercised and the price of the underlying security declines, the amount of such decline will be offset by the amount of premium received. The writing of covered put options is similar in terms of risk and return characteristics to buy-and-write transactions. If the market price of the underlying security rises or otherwise is above the exercise price, the put option will expire worthless and a Fund's gain will be limited to the premium received. If the market price of the underlying security declines or otherwise is below the exercise price, a Fund may elect to close the position or take delivery of the security at the exercise price and that Fund's return will be the premium received from the put options minus the amount by which the market price of the security is below the exercise price. A Fund may buy put options to hedge against a decline in the value of its portfolio. By using put options in this way, a Fund will reduce any profit it might otherwise have realized in the underlying security by the amount of the premium paid for the put option and by transaction costs. A Fund may buy call options to hedge against an increase in the price of securities that it may buy in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by such Fund upon exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire worthless to that Fund. Eurodollar Instruments. A Fund may make investments in Eurodollar instruments. Eurodollar instruments are U.S. dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offered Rate ("LIBOR"), although foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income instruments are linked. Swaps and Swap-Related Products. A Fund may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with a Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of a Fund's obligations over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Funds' custodian. If a Fund enters into an interest rate swap on other than a net basis, it would maintain a segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. A Fund will not enter into any interest rate swap, cap or floor transaction 14 unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one NRSRO at the time of entering into such transaction. Janus Capital will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, a Fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. Janus Capital has determined that, as a result, the swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. To the extent a Fund sells (i.e., writes) caps and floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount, accrued on a daily basis, of its obligations with respect to any caps or floors. There is no limit on the amount of interest rate swap transactions that may be entered into by a Fund. These transactions may in some instances involve the delivery of securities or other underlying assets by a Fund or its counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of loss with respect to interest rate swaps is limited to the net amount of the payments that a Fund is contractually obligated to make. If the other party to an interest rate swap that is not collateralized defaults, a Fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. A Fund may buy and sell (i.e., write) caps and floors without limitation, subject to the segregation requirement described above. Additional Risks of Options on Foreign Currencies, Forward Contracts and Foreign Instruments. Unlike transactions entered into by the Funds in futures contracts, options on foreign currencies and forward contracts are not traded on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) by the SEC. To the contrary, such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain Exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on currencies may be traded over-the-counter. In an over-the-counter trading environment, many of the protections afforded to Exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the buyer of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, an option writer and a buyer or seller of futures or forward contracts could lose amounts substantially in excess of any premium received or initial margin or collateral posted due to the potential additional margin and collateral requirements associated with such positions. Options on foreign currencies traded on Exchanges are within the jurisdiction of the SEC, as are other securities traded on Exchanges. As a result, many of the protections provided to traders on organized Exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on an Exchange are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on an Exchange may be more readily available than in the over-the-counter market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of the availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. 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 Fund's ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) low trading volume. INVESTMENT ADVISER As stated in the Prospectus, each Fund has an Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each Advisory Agreement provides that Janus Capital will furnish continuous advice and recommendations concerning the Funds' investments, provide office space for the Funds, and pay the salaries, fees and expenses of 15 all Fund officers and of those Trustees who are affiliated with Janus Capital. Janus Capital also may make payments to selected broker-dealer firms or institutions which perform recordkeeping or other services with respect to shareholder accounts. The minimum aggregate size required for eligibility for such payments, and the factors in selecting the broker-dealer firms and institutions to which they will be made, are determined from time to time by Janus Capital. Janus Capital is also authorized to perform the management and administrative services necessary for the operation of the Funds. The Funds pay custodian and transfer agent fees and expenses, brokerage commissions and dealer spreads and other expenses in connection with the execution of portfolio transactions, legal and accounting expenses, interest and taxes, registration fees, expenses of shareholders' meetings and reports to shareholders, fees and expenses of Trustees who are not affiliated with Janus Capital, costs of preparing, printing and mailing the Funds' Prospectuses and SAI to current shareholders, and other costs of complying with applicable laws regulating the sale of Fund shares. Pursuant to the Advisory Agreements, Janus Capital furnishes certain other services, including net asset value determination and fund accounting, recordkeeping, and blue sky registration and monitoring services, for which the Funds may reimburse Janus Capital for its costs. Janus Fund, Janus Enterprise Fund, Janus Equity Income Fund, Janus Mercury Fund, Janus Olympus Fund, Janus Overseas Fund, Janus Twenty Fund, Janus Worldwide Fund, Janus Balanced Fund and Janus Growth and Income Fund have each agreed to compensate Janus Capital for its services by the monthly payment of a fee at the annual rate of 1% of the first $30 million of the average daily net assets of each Fund, .75% of the next $270 million of the average daily net assets of each Fund, .70% of the next $200 million of the average daily net assets of each Fund and .65% of the average daily net assets of each Fund in excess of $500 million. Janus High Yield Fund has agreed to compensate Janus Capital for its services by the monthly payment of a fee at the annual rate of .75% of the first $300 million of average daily net assets of the Fund and .65% of the average daily net assets in excess of $300 million. Janus Flexible Income Fund and Janus Short-Term Bond Fund have each agreed to compensate Janus Capital for its services by the monthly payment of a fee at the annual rate of .65% of the first $300 million of the average daily net assets of the Fund, plus .55% of the average daily net assets of the Fund in excess of $300 million. Janus Federal Tax-Exempt Fund has agreed to compensate Janus Capital for its services by the monthly payment of a fee at the annual rate of .60% of the first $300 million of average daily net assets of the Fund and .55% of the average daily net assets in excess of $300 million. Janus Capital has agreed to waive the advisory fee payable by any of these Funds in an amount equal to the amount, if any, that such Fund's normal operating expenses chargeable to its income account in any fiscal year, including the investment advisory fee but excluding brokerage commissions, interest, taxes and extraordinary expenses, exceed 1% of the average daily net assets for a fiscal year for Janus Flexible Income Fund and Janus High-Yield Fund and .65% of the average daily net assets for a fiscal year for Janus Short-Term Bond Fund and Janus Federal Tax-Exempt Fund. The following table summarizes the advisory fees paid by the Funds and any advisory fee waivers for the last three fiscal periods of each Fund. The information below is for fiscal years ended October 31. 1996 [TO BE FILED BY AMENDMENT] 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Fund Name Advisory Fees Waiver Advisory Fees Waiver Advisory Fees Waiver - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $69,101,695 -- $61,177,249 -- Janus Enterprise Fund $3,078,635 -- $2,094,593 -- Janus Equity Income Fund (3) N/A N/A N/A N/A Janus Mercury Fund $7,719,633 -- $1,992,568 -- Janus Olympus Fund (4) N/A N/A N/A N/A Janus Overseas Fund $657,146 -- $169,279(1) -- Janus Twenty Fund $18,127,825 -- $20,307,767 -- Janus Worldwide Fund $11,013,534 -- $8,562,262 -- Janus Balanced Fund $879,437 -- $722,711 -- Janus Growth and Income Fund $3,703,827 -- $3,720,739 -- Janus Flexible Income Fund $2,775,005 -- $2,659,291 -- Janus High-Yield Fund (4) N/A N/A N/A N/A Janus Federal Tax-Exempt Fund $175,910(2) $175,910 $170,306(2) $170,306 Janus Short-Term Bond Fund $307,992 $268,791 $387,295 $300,929 - ------------------------------------------------------------------------------------------------------------------------------------
(1) May 2, 1994 (inception) to October 31, 1994. (2) Fee waiver by Janus Capital exceeded the advisory fee. (3) June 28, 1996 (inception) to October 31, 1996. (4) December 29, 1995 (inception) to October 31, 1996. 16 The Advisory Agreement for each of the Funds (except Janus Equity Income Fund) was restated on May 21, 1996. The Advisory Agreement for Janus Equity Income Fund became effective on March 12, 1996. Each Advisory Agreement will continue in effect until June 16, 1997, and thereafter from year to year so long as such continuance is approved annually by a majority of the Funds' Trustees who are not parties to the Advisory Agreements or interested persons of any such party, and by either a majority of the outstanding voting shares or the Trustees of the Funds. Each Advisory Agreement i) may be terminated without the payment of any penalty by any Fund or Janus Capital on 60 days' written notice; ii) terminates automatically in the event of its assignment; and iii) generally, may not be amended without the approval by vote of a majority of the Trustees of the affected Fund, including the Trustees who are not interested persons of that Fund or Janus Capital and, to the extent required by the 1940 Act, the vote of a majority of the outstanding voting securities of that Fund. Janus Capital also performs investment advisory services for other mutual funds, and for individual, charitable, corporate and retirement accounts. Investment decisions for each account managed by Janus Capital, including the Funds, are made independently from those for any other account that is or may in the future become managed by Janus Capital or its affiliates. If, however, a number of accounts managed by Janus Capital are contemporaneously engaged in the purchase or sale of the same security, the orders may be aggregated and/or the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by an account or the size of the position obtained or liquidated for an account. Pursuant to an exemptive order granted by the SEC, the Funds and other funds advised by Janus Capital may also transfer daily uninvested cash balances into one or more joint trading accounts. Assets in the joint trading accounts are invested in money market instruments and the proceeds are allocated to the participating funds on a pro rata basis. Each account managed by Janus Capital has its own investment objective and policies and is managed accordingly by a particular portfolio manager or team of portfolio managers. As a result, from time to time two or more different managed accounts may pursue divergent investment strategies with respect to investments or categories of investments. As indicated in the Prospectuses, Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy regarding personal investing by directors, officers and employees of Janus Capital and the Funds. The policy requires investment personnel and officers of Janus Capital, inside directors of Janus Capital and the Funds and other designated persons deemed to have access to current trading information to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for trading authority will be denied when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or to have been effected on behalf of any client account, including the Funds. In addition to the pre-clearance requirement described above, the policy subjects investment personnel, officers and directors/Trustees of Janus Capital and the Funds to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with Janus Capital's policy. Those persons also may be required under certain circumstances to forfeit their profits made from personal trading. The provisions of the policy are administered by and subject to exceptions authorized by Janus Capital. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS State Street Bank and Trust Company ("State Street"), P.O. Box 0351, Boston, Massachusetts 02117-0351 is the custodian of the domestic securities and cash of the Fund. State Street and the foreign subcustodians selected by it and approved by the Trustees, have custody of the assets of the Funds held outside the U.S. and cash incidental thereto. The custodian and subcustodians hold the Funds' assets in safekeeping and collect and remit the income thereon, subject to the instructions of each Fund. Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds' transfer agent. In addition, Janus Service provides certain other administrative, recordkeeping and shareholder relations services to the Funds. For transfer agency and other services, Janus Service receives a fee calculated at an annual rate of .16% of average net assets of each Fund and, in addition, $4 per open shareholder account for all of the Funds except Janus Fund. In addition, the Funds pay DST Systems, Inc. ("DST"), a subsidiary of KCSI, license fees at the rate of $2.56 per shareholder account for the growth and combination funds and $6.98 per shareholder account for the fixed-income funds for the use of DST's shareholder accounting system. The Funds pay DST for the use of their portfolio and fund accounting system a base fee paid monthly between $250 to $1,250 per month based on the number of Janus funds utilizing the system and an asset charge of $1 per million dollars of net assets (not to exceed $500 per month). In addition, the Funds pay DST postage and forms costs of a DST affiliate incurred in mailing Fund shareholder transaction confirmations. 17 The Trustees have authorized the Funds to use another affiliate of DST as introducing broker for certain Fund portfolio transactions as a means to reduce Fund expenses through a credit against the charges of DST and its affiliates with regard to commissions earned by such affiliate. See "Portfolio Transactions and Brokerage." Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Funds. Janus Distributors is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the National Association of Securities Dealers, Inc. Janus Distributors acts as the agent of the Funds in connection with the sale of their shares in all states in which the shares are registered and in which Janus Distributors is qualified as a broker-dealer. Under the Distribution Agreement, Janus Distributors continuously offers the Funds' shares and accepts orders at net asset value. No sales charges are paid by investors. Promotional expenses in connection with offers and sales of shares are paid by Janus Capital. PORTFOLIO TRANSACTIONS AND BROKERAGE Decisions as to the assignment of portfolio business for the Funds and negotiation of its commission rates are made by Janus Capital whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all portfolio transactions. The Funds may trade foreign securities in foreign countries because the best available market for these securities is often on foreign exchanges. In transactions on foreign stock exchanges, brokers' commissions are frequently fixed and are often higher than in the United States, where commissions are negotiated. 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 Fund or to a third party service provider to the Fund to pay Fund expenses; and research products or services provided. In recognition of the value of the foregoing factors, Janus Capital may place portfolio transactions with a broker or dealer with whom it has negotiated a commission that is in excess of the commission another broker or dealer would have charged for effecting that transaction if Janus Capital determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research provided by such broker or dealer viewed in terms of either that particular transaction or of the overall responsibilities of Janus Capital. Research may include furnishing advice, either directly or through publications or writings, as to the value of securities, the advisability of purchasing or selling specific securities and the availability of securities or purchasers or sellers of securities; furnishing seminars, information, analyses and reports concerning issuers, industries, securities, trading markets and methods, legislative developments, changes in accounting practices, economic factors and trends and portfolio strategy; access to research analysts, corporate management personnel, industry experts, economists and government officials; comparative performance evaluation and technical measurement services and quotation services, and products and other services (such as third party publications, reports and analyses, and computer and electronic access, equipment, software, information and accessories that deliver, process or otherwise utilize information, including the research described above) that assist Janus Capital in carrying out its responsibilities. Research received from brokers or dealers is supplemental to Janus Capital's own research efforts. Most brokers and dealers used by Janus Capital provide research and other services described above. For the year ended October 31, 1996, the total brokerage commissions paid by the Funds to brokers and dealers in transactions identified for execution primarily on the basis of research and other services provided to the Funds are summarized below: [TO BE FILED BY AMENDMENT] Fund Name Commissions Transactions % of Total Transactions - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $ $ % Janus Enterprise Fund $ $ % Janus Equity Income Fund $ $ % Janus Mercury Fund $ $ % Janus Olympus Fund $ $ % Janus Overseas Fund $ $ % Janus Twenty Fund $ $ % Janus Worldwide Fund $ $ % Janus Balanced Fund $ $ % Janus Growth and Income Fund $ $ % Janus Flexible Income Fund(1) $ $ % Janus High-Yield Fund(1) $ $ % - ------------------------------------------------------------------------------------------------------------------------------------
(1) Most of the securities transactions for this Fund involved dealers acting as principal. Note: Funds that are not included in the table did not pay any commissions related to research for the stated period. 18 Janus Capital may use research products and services in servicing other accounts in addition to the Funds. If Janus Capital determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, Janus Capital may allocate the costs of such service or product accordingly. Only that portion of the product or service that Janus Capital determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may create a conflict of interest for Janus Capital. Janus Capital does not enter into agreements with any brokers regarding the placement of securities transactions because of the research services they provide. It does, however, have an internal procedure for allocating transactions in a manner consistent with its execution policy to brokers that it has identified as providing superior executions and research, research-related products or services which benefit its advisory clients, including the Funds. Research products and services incidental to effecting securities transactions furnished by brokers or dealers may be used in servicing any or all of Janus Capital's clients and such research may not necessarily be used by Janus Capital in connection with the accounts which paid commissions to the broker-dealer providing such research products and services. Janus Capital may consider sales of Fund shares by a broker-dealer or the recommendation of a broker-dealer to its customers that they purchase Fund shares as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. In placing portfolio business with such broker-dealers, Janus Capital will seek the best execution of each transaction. When the Funds purchase or sell a security in the over-the-counter market, the transaction takes place directly with a principal market-maker, without the use of a broker, except in those circumstances where in the opinion of Janus Capital better prices and executions will be achieved through the use of a broker. The Funds' Trustees have authorized Janus Capital to place transactions with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of DST. Janus Capital may do so if it reasonably believes that the quality of the transaction and the associated commission are fair and reasonable and if, overall, the associated transaction costs, net of any credits described above under "Custodian, Transfer Agent and Certain Affiliations," are lower than those that would otherwise be incurred. The following table lists the total amount of brokerage commissions paid by each Fund for the fiscal periods ending on October 31st of each year: 1996 [TO BE FILED BY Fund Name AMENDMENT] 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $ $26,219,202 $18,108,124 Janus Enterprise Fund $ $ 2,084,312 $ 1,249,083 Janus Equity Income Fund $ (2) -- -- Janus Mercury Fund $ $ 5,712,916 $ 1,221,654 Janus Olympus Fund $ (3) -- -- Janus Overseas Fund $ $ 568,384 $ 27,846(1) Janus Twenty Fund $ $ 7,647,982 $ 5,747,164 Janus Worldwide Fund $ $ 7,493,192 $ 1,125,206 Janus Balanced Fund $ $ 305,855 $ 198,976 Janus Growth and Income Fund $ $ 1,498,178 $ 1,013,550 Janus Flexible Income Fund $ $ 35,138 $ 31,399 Janus High-Yield Fund $ (3) -- -- Janus Short-Term Bond Fund $ $ 6,548 -- - ------------------------------------------------------------------------------------------------------------------------------------
(1) May 2, 1994 (inception) to October 31, 1994. (2) June 28, 1996 (inception) to October 31, 1996. (3) December 29, 1995 (inception) to October 31, 1996. Note: Funds that are not included in the table did not pay brokerage commissions because securities transactions for such Funds involved dealers acting as principals. 19 Included in such brokerage commissions are the following amounts paid to DSTS, which served to reduce each Fund's out-of-pocket expenses as follows: Commission Paid through DSTS for the Period Ended Reduction % of Total % of Total Fund Name October 31, 1996* of Expenses* Commissions+ Transactions+ - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $ $ % % Janus Enterprise Fund $ (1) $ % % Janus Equity Income Fund $ $ % % Janus Mercury Fund $ $ % % Janus Olympus Fund $ (2) $ % % Janus Overseas Fund $ $ % % Janus Twenty Fund $ $ % % Janus Worldwide Fund $ $ % % Janus Balanced Fund $ $ % % Janus Growth and Income Fund $ $ % % Janus High-Yield Fund $ (2) $ % % - ------------------------------------------------------------------------------------------------------------------------------------
(1) June 28, 1996 (inception) to October 31, 1996. (2) December 29, 1995 (inception) to October 31, 1996. Commission Commission Paid through DSTS Paid through DSTS for the Period Ended Reduction for the Period Ended Reduction Fund Name October 31, 1995* of Expenses* October 31, 1994* of Expenses* - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund $1,125,368 $844,026 $1,067,073 $800,305 Janus Enterprise Fund $ 96,932 $ 72,699 $ 116,527 $ 87,395 Janus Equity Income Fund -- -- -- -- Janus Mercury Fund $ 171,777 $128,833 $ 30,019 $ 22,514 Janus Olympus Fund -- -- -- -- Janus Overseas Fund $ 2,783 $ 2,087 $ 1,800(1) $ 1,350(1) Janus Twenty Fund $ 378,575 $283,931 $ 510,874 $383,156 Janus Worldwide Fund $ 164,193 $123,145 $ 57,164 $ 42,873 Janus Balanced Fund $ 9,143 $ 6,857 $ 18,725 $ 14,043 Janus Growth and Income Fund $ 98,373 $ 73,780 $ 15,604 $ 11,703 Janus High-Yield Fund -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------
* The difference between commissions paid through DSTS and expenses reduced constitute commissions paid to an unaffiliated clearing broker. + Differences in the percentage of total commissions versus the percentage of total transactions is due, in part, to variations among share prices and number of shares traded, while average price per share commission rates were substantially the same. (1) May 2, 1994 (inception) to October 31, 1994. (2) June 28, 1996 (inception) to October 31, 1996. (3) December 29, 1995 (inception) to October 31, 1996. Note: Funds that did not execute trades with DSTS during the stated periods are not included in the table. As of October 31, 1996, certain Funds owned securities of their regular broker-dealers (or parents), as shown below: Fund Name Name of Broker-Dealer Value of Securities Owned - ------------------------------------------------------------------------------------------------------------------------------------ [TO BE FILED BY AMENDMENT]
OFFICERS AND TRUSTEES The following are the names of the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc. (both separate Maryland corporations) and the Janus Income Series (a Massachusetts business trust comprised of Janus Flexible Income Fund series) were reorganized into separate series of the Trust. In general, all references to Trust offices in this section include comparable offices with the respective predecessor funds, unless a Trust office was filled subsequent to the reorganization. 20 Thomas H. Bailey*# - Trustee, Chairman and President 100 Fillmore Street Denver, CO 80206-4928 Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief Executive Officer, Director and President of Janus Capital. Chairman and Director of IDEX Management, Inc., Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a group of mutual funds) ("IDEX"). James P. Craig, III*# - Trustee and Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Trustee and Executive Vice President of Janus Aspen Series. Chief Investment Officer, Vice President and Director of Janus Capital. Executive Vice President and Portfolio Manager of Janus Fund. Thomas F. Marsico* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Twenty Fund and Janus Growth and Income Fund. Vice President of Janus Capital. James P. Goff* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Enterprise Fund and Janus Venture Fund. Executive Vice President of Janus Aspen Series. Vice President of Janus Capital. Formerly, securities analyst at Janus Capital (1988 to 1992). Warren B. Lammert* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Mercury Fund. Vice President of Janus Capital. Formerly, Executive Vice President and Portfolio Manager of Janus Venture Fund (December 1993-December 1996) and Janus Balanced Fund (September 1992-December 1993). Formerly, securities analyst at Janus Capital (1990 to 1992). Ronald V. Speaker* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Co-Manager of Janus Flexible Income Fund and Janus High-Yield Fund. Executive Vice President of Janus Aspen Series. Vice President of Janus Capital. Formerly, Portfolio Manager of Janus Short-Term Bond Fund (September 1992-December 1995) and Janus Federal Tax-Exempt Fund (May 1993-December 1995). Formerly, securities analyst and research associate at Janus Capital (1986 to 1992). Helen Young Hayes* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Worldwide Fund and Janus Overseas Fund. Executive Vice President of Janus Aspen Series. Vice President of Janus Capital. Formerly securities analyst at Janus Capital (1987 to 1993). Blaine P. Rollins* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Balanced Fund and Janus Equity Income Fund. Assistant Portfolio Manager of Janus Fund. Executive Vice President of Janus Aspen Series. Formerly, fixed-income trader and equity securities analyst at Janus Capital (1990-1995). Sandy R. Rufenacht* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Short-Term Bond Fund and Executive Vice President and Co-Manager of Janus Flexible Income Fund and Janus High-Yield Fund. Executive Vice President of Janus Aspen Series. Formerly senior accountant, fixed-income trader and fixed-income research analyst at Janus Capital (1990-1995). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 21 Scott W. Schoelzel* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Olympus Fund. Vice President of Janus Capital. From 1991 to 1993, a Portfolio Manager with Founders Asset Management, Denver, Colorado. Darrell W. Watters* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Federal Tax-Exempt Fund. Executive Vice President of Janus Aspen Series. Formerly, municipal bond trader and research analyst at Janus Capital (1993-1995). David C. Tucker* - Vice President and General Counsel 100 Fillmore Street Denver, CO 80206-4928 Vice President and General Counsel of Janus Aspen Series. Vice President, Secretary and General Counsel of Janus Capital. Vice President, General Counsel and Director of Janus Service and Janus Distributors. Director, Vice President and Secretary of Janus Capital International Ltd. Steven R. Goodbarn* - Vice President and Chief Financial Officer 100 Fillmore Street Denver, CO 80206-4928 Vice President and Chief Financial Officer of Janus Aspen Series. Vice President of Finance, Treasurer and Chief Financial Officer of Janus Service, Janus Distributors and Janus Capital. Director of IDEX and Janus Distributors. Director, Treasurer and Vice President of Finance of Janus Capital International Ltd. Formerly (1979 to 1992), with the accounting firm of Price Waterhouse LLP, Denver, Colorado. Formerly (1992-1996), Treasurer of Janus Investment Fund and Janus Aspen Series. Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer 100 Fillmore Street Denver, CO 80206-4928 Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of Fund Accounting of Janus Capital. Kelley Abbott Howes* - Secretary 100 Fillmore Street Denver, CO 80206-4928 Secretary of Janus Aspen Series. Associate Counsel of Janus Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston, Massachusetts (mutual fund administration services). John W. Shepardson# - Trustee P.O. Box 9591 Denver, CO 80209 Trustee of Janus Aspen Series. Historian. William D. Stewart# - Trustee 5330 Sterling Drive Boulder, CO 80302 Trustee of Janus Aspen Series. President of HPS Corporation, Boulder, Colorado (manufacturer of vacuum fittings and valves). Gary O. Loo - Trustee 102 N. Cascade, Suite 500 Colorado Springs, CO 80903 Trustee of Janus Aspen Series. President and a Director of High Valley Group, Inc., Colorado Springs, Colorado (investments). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 22 Dennis B. Mullen - Trustee 1601 114th Avenue, SE Alderwood Building, Suite 130 Bellevue, WA 98004 Trustee of Janus Aspen Series. President and Chief Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona (restaurant chain). Martin H. Waldinger - Trustee 4940 Sandshore Court San Diego, CA 92130 Trustee of Janus Aspen Series. Private Consultant and Director of Run Technologies, Inc., a software development firm, San Carlos, California. Formerly (1989 to 1993), President and Chief Executive Officer of Bridgecliff Management Services, Campbell, California (a condominium association management company). The Trustees are responsible for major decisions relating to each Fund's objective, policies and techniques. The Trustees also supervise the operation of the Funds by their officers and review the investment decisions of the officers although they do not actively participate on a regular basis in making such decisions. The Executive Committee of the Trustees shall have and may exercise all the powers and authority of the Board except for matters requiring action by the whole Board pursuant to the Trust's Bylaws or Agreement and Declaration of Trust ("Declaration of Trust"), Massachusetts law or the 1940 Act. The following table shows the aggregate compensation paid to each Trustee by the Funds described in this SAI and all funds advised and sponsored by Janus Capital (collectively, the "Janus Funds") for the periods indicated. None of the Trustees receive any pension or retirement from the Funds or the Janus Funds. Aggregate Compensation from the Funds for fiscal year Total Compensation from the ended October 31, 1996 Janus Funds for calendar year Name of Person, Position [TO BE FILED BY AMENDMENT] ended December 31, 1996** - ------------------------------------------------------------------------------------------------------------------------------------ Thomas H. Bailey, Chairman* -- -- James P. Craig, III, Trustee* -- -- John W. Shepardson, Trustee $ $ William D. Stewart, Trustee $ $ Gary O. Loo, Trustee $ $ Dennis B. Mullen, Trustee $ $ Martin H. Waldinger, Trustee $ $ - ------------------------------------------------------------------------------------------------------------------------------------
* An interested person of the Funds and of Janus Capital. Compensated by Janus Capital and not the Funds. **As of December 31, 1996, Janus Funds consisted of two registered investment companies comprised of a total of 29 funds. PURCHASE OF SHARES As stated in the Prospectus, Janus Distributors is a distributor of the Funds' shares. Shares of the Funds are sold at the net asset value per share as determined at the close of the regular trading session of the New York Stock Exchange (the "NYSE") next occurring after a purchase order is received and accepted by a Fund. The Shareholder's Manual Section of the Prospectus contains detailed information about the purchase of shares. NET ASSET VALUE DETERMINATION As stated in the Prospectus, the net asset value ("NAV") of Fund shares is determined once each day on which the NYSE is open, at the close of its regular trading session (normally 4:00 p.m., New York time, Monday through Friday). The NAV of Fund shares is not determined on days the NYSE is closed (generally, New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas). The per share NAV of each Fund is determined by dividing the total value of a Fund's securities and other assets, less liabilities, by the total number of shares outstanding. In determining NAV, securities listed on an exchange, the NASDAQ National Market and foreign markets are valued at the closing prices on such markets, or if such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Municipal securities held by the Funds are traded primarily in the over-the-counter market. Valuations of such securities are furnished by one or more pricing services employed by the Funds and are based upon a computerized matrix system or appraisals obtained by a pricing service, in each case in reliance upon information concerning market transactions and quotations from recognized municipal securities dealers. Other securities that are traded on the over-the-counter market are valued at their closing bid prices. Foreign securities and currencies are converted to U.S. dollars using 23 the exchange rate in effect at the close of the NYSE. Each Fund will determine the market value of individual securities held by it, by using prices provided by one or more professional pricing services which may provide market prices to other funds, or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days are valued on the amortized cost basis. Securities for which quotations are not readily available, and other assets, are valued at fair values determined in good faith under procedures established by and under the supervision of the Trustees. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed well before the close of business on each business day in New York (i.e., a day on which the NYSE is open). In addition, European or Far Eastern securities trading generally or in a particular country or countries may not take place on all business days in New York. Furthermore, trading takes place in Japanese markets on certain Saturdays and in various foreign markets on days which are not business days in New York and on which a Fund's NAV is not calculated. A Fund calculates its NAV per share, and therefore effects sales, redemptions and repurchases of its shares, as of the close of the NYSE once on each day on which the NYSE is open. Such calculation may not take place contemporaneously with the determination of the prices of the foreign portfolio securities used in such calculation. REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS If investors do not elect in writing or by phone to receive their dividends and distributions in cash, all income dividends and capital gains distributions, if any, on a Fund's shares are reinvested automatically in additional shares of that Fund at the NAV determined on the first business day following the record date. Checks for cash dividends and distributions and confirmations of reinvestments are usually mailed to shareholders within ten days after the record date. Any election of the manner in which a shareholder wishes to receive dividends and distributions (which may be made on the New Account Application form or by phone) will apply to dividends and distributions the record dates of which fall on or after the date that a Fund receives such notice. Investors receiving cash distributions and dividends may elect in writing or by phone to change back to automatic reinvestment at any time. REDEMPTION OF SHARES Procedures for redemption of shares are set forth in the Shareholder's Manual section of the Prospectuses. Shares normally will be redeemed for cash, although each Fund retains the right to redeem its shares in kind under unusual circumstances, in order to protect the interests of remaining shareholders, by delivery of securities selected from its assets at its discretion. However, the Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of that Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, a Fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described under "Purchase of Shares - Net Asset Value Determination" and such valuation will be made as of the same time the redemption price is determined. The right to require the Funds to redeem its shares may be suspended, or the date of payment may be postponed, whenever (1) trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed except for holidays and weekends, (2) the SEC permits such suspension and so orders, or (3) an emergency exists as determined by the SEC so that disposal of securities or determination of NAV is not reasonably practicable. SHAREHOLDER ACCOUNTS Detailed information about the general procedures for shareholder accounts and specific types of accounts is set forth in the Prospectuses. Applications for specific types of accounts may be obtained by calling the Funds at 1-800-525-3713 or writing to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. TELEPHONE TRANSACTIONS As stated in the Prospectuses, shareholders may initiate a number of transactions by telephone. The Funds, their transfer agent and their distributor disclaim responsibility for the authenticity of instructions received by telephone. Such entities will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include, among others, requiring personal identification prior to acting upon telephone instructions, providing written confirmation of the transactions and tape recording telephone conversations. 24 SYSTEMATIC REDEMPTIONS As stated in the Shareholder's Manual section of the Prospectuses, if you have a regular account or are eligible for normal distributions from a retirement plan, you may establish a systematic redemption option. The payments will be made from the proceeds of periodic redemptions of shares in the account at the NAV. Depending on the size or frequency of the disbursements requested, and the fluctuation in value of a Fund's portfolio, redemptions for the purpose of making such disbursements may reduce or even exhaust the shareholder's account. Either an investor or their Fund, by written notice to the other, may terminate the investor's systematic redemption option without penalty at any time. Information about requirements to establish a systematic redemption option may be obtained by writing or calling the Funds at the address or phone number shown above. RETIREMENT PLANS The Funds offer several different types of tax-deferred retirement plans that an investor may establish to invest in Fund shares, depending on rules prescribed by the Code. The Individual Retirement Account ("IRA") may be used by most individuals who have taxable compensation. Simplified Employee Pensions ("SEPs") and Defined Contribution Plans (Profit Sharing or Money Purchase Pension Plans) may be used by most employers, including corporations, partnerships and sole proprietors, for the benefit of business owners and their employees. In addition, the Funds offer a Section 403(b)(7) Plan for employees of educational organizations and other qualifying tax-exempt organizations. Investors should consult their tax advisor or legal counsel before selecting a retirement plan. Contributions under IRAs, SEPs, Defined Contribution Plans and Section 403(b)(7) Plans are subject to specific contribution limitations. Generally, such contributions may be invested at the direction of the participant. The investment is then held by Investors Fiduciary Trust Company as custodian. Each participant's account is charged an annual fee of $12. There is a maximum annual fee of $24 per taxpayer identification number. Distributions from retirement plans generally are subject to ordinary income tax and may be subject to an additional 10% tax if withdrawn prior to age 591/2. Several exceptions to the general rule may apply. Additionally, shareholders generally must start withdrawing retirement plan assets no later than April 1 of the year after they reach age 701/2. Exceptions may apply so please consult your tax advisor. Several methods exist to determine the amount of the minimum annual distribution. Shareholders should consult with their tax advisor or legal counsel prior to receiving any distribution from any retirement plan, in order to determine the income tax impact of any such distribution. To receive additional information about IRAs, SEPs, Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary materials to establish an account, please call the Funds at 1-800-525-3713 or write to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. No contribution to an IRA, SEP, Defined Contribution Plan or Section 403(b)(7) Plan can be made until the appropriate forms to establish any such plan have been completed. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS It is a policy of the Funds to make distributions of substantially all of their investment income and any net realized capital gains. Janus Fund, Janus Enterprise Fund, Janus Mercury Fund, Janus Olympus Fund, Janus Overseas Fund, Janus Twenty Fund and Janus Worldwide Fund declare and make annual distributions of income (if any); Janus Equity Income Fund, Janus Balanced Fund and Janus Growth and Income Fund declare and make quarterly distributions of income and Janus Flexible Income Fund, Janus High-Yield Fund, Janus Federal Tax-Exempt Fund and Janus Short-Term Bond Fund declare dividends daily and make monthly distributions of income. If a month begins on a Saturday, Sunday or holiday, dividends for daily dividend Funds for those days are declared at the end of the preceding month. Janus Federal Tax-Exempt Fund will use the "average annual method" to determine the designated percentage of each distribution that is tax-exempt. Under this method, the percentage of income designated as tax-exempt is based on the percentage of tax-exempt income earned for each annual period, and may be substantially different from the Fund's income that was tax-exempt during any monthly period. Any capital gains realized during each fiscal year ended October 31, as defined by the Code, are normally declared and payable to shareholders in December. The Funds intend to qualify as regulated investment companies by satisfying certain requirements prescribed by Subchapter M of the Code. The Funds may purchase securities of certain foreign corporations considered to be passive foreign investment companies by the IRS. In order to avoid taxes and interest that must be paid by the Funds if these instruments are profitable, the Funds may make various elections permitted by the tax laws. However, these elections could require that the Funds recognize taxable income, which in turn must be distributed, before the securities are sold and before cash is received to pay the distributions. Some foreign securities purchased by the Funds may be subject to foreign taxes which could reduce the yield on such securities. The amount of such foreign taxes is expected to be insignificant. Accordingly, the Funds do not intend to make the election permitted under section 853 of the Code to pass through such taxes to shareholders as a foreign tax credit as this 25 would increase the taxable income reported to shareholders and require shareholders to take the credit on their tax returns, complicating the preparation of such returns. As a result, any foreign taxes paid or accrued will represent an expense to each Fund which will reduce its investment company taxable income. PRINCIPAL SHAREHOLDERS As of January 20, 1997, the officers and Trustees of the Funds as a group owned less than 1% of the outstanding shares of each of the Funds. In addition, as of January 20, 1997, Charles Schwab & Co., Inc. ("Schwab"), 101 Montgomery Street, San Francisco, CA 94104-4122, and National Financial Services Co., ("National Financial"), P.O. Box 3908, Church Street Station, New York, NY 10008-3908, owned of record 5% or more of the outstanding shares of the Funds, as shown below. [INFORMATION TO BE FILED BY AMENDMENT] Fund Name Held by Schwab Held by National Financial - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund % % Janus Enterprise Fund % % Janus Equity Income Fund % % Janus Mercury Fund % % Janus Olympus Fund % % Janus Overseas Fund % % Janus Twenty Fund % % Janus Worldwide Fund % % Janus Balanced Fund % % Janus Growth and Income Fund % % Janus Flexible Income Fund % % Janus High-Yield Fund % % Janus Federal Tax-Exempt Fund % % Janus Short-Term Bond Fund % % - ------------------------------------------------------------------------------------------------------------------------------------
According to information provided by Schwab, this ownership is by nominee only and does not represent beneficial ownership of such shares, because they have no investment discretion or voting power with respect to such shares. To the knowledge of the Funds, no other person owned more than 5% of the outstanding shares of any Fund as of the above date. MISCELLANEOUS INFORMATION Each Fund is a series of the Trust, a Massachusetts business trust that was created on February 11, 1986. The Trust is an open-end management investment company registered under the 1940 Act. As of the date of this SAI, the Trust offers 19 separate series, 5 of which are offered by other prospectuses. On June 16, 1986, the Trust assumed all the assets and liabilities of its predecessor corporation, Janus Fund, Inc., which was incorporated under the laws of Maryland on September 18, 1968. All references in this SAI to Janus Fund and all financial and other information about Janus Fund prior to June 16, 1986, are to the former Janus Fund, Inc.; all references after June 16, 1986 are to the Janus Fund series of the Trust. On August 7, 1992, in a tax-free reorganization, the Trust assumed all the assets and liabilities of i) the Janus Flexible Income Fund series of Janus Income Series, a separate Massachusetts business trust created on May 28, 1986; and ii) Janus Twenty Fund, Inc., a Maryland corporation originally incorporated as Janus Value Fund in 1984. Shareholders received shares of the series of the Trust equal both in number and net asset value to their shares of the respective predecessor entity. In connection with the reorganization, Janus Flexible Income Fund changed its fiscal year end from December 31 to October 31. All references in this SAI to Janus Flexible Income Fund and Janus Twenty Fund, and all financial and other information about such Funds prior to August 7, 1992, are to the respective predecessor entities; all references after August 7, 1992, are to the respective series of the Trust. Janus Worldwide Fund and Janus Growth and Income Fund were added to the Trust as separate series on April 29, 1991. Janus Enterprise Fund, Janus Balanced Fund and Janus Short-Term Bond Fund were added to the Trust as separate series on August 27, 1992. Janus Mercury Fund and Janus Federal Tax-Exempt Fund were added to the Trust as separate series on April 20, 1993. Janus Overseas Fund was added to the Trust as a separate series on April 14, 1994. Janus Olympus Fund and Janus High-Yield Fund were added to the Trust as separate series on November 28, 1995. Janus Equity Income Fund was added to the Trust as a separate series on May 29, 1996. Janus Capital reserves the right to the name "Janus." In the event that Janus Capital does not continue to provide investment advice to the Funds, the Funds must cease to use the name "Janus" as soon as reasonably practicable. 26 Under Massachusetts law, shareholders of the Funds could, under certain circumstances, be held liable for the obligations of their Fund. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Funds and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Funds or the Trustees. The Declaration of Trust also provides for indemnification from the assets of the Funds for all losses and expenses of any Fund shareholder held liable for the obligations of their Fund. Thus, the risk of a shareholder incurring a financial loss on account of its liability as a shareholder of one of the Funds is limited to circumstances in which their Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The Trustees intend to conduct the operations of the Funds to avoid, to the extent possible, liability of shareholders for liabilities of their Fund. SHARES OF THE TRUST The Trust is authorized to issue an unlimited number of shares of beneficial interest with a par value of one cent per share for each series of the Trust. Shares of each Fund are fully paid and nonassessable when issued. All shares of a Fund participate equally in dividends and other distributions by such Fund, and in residual assets of that Fund in the event of liquidation. Shares of each Fund have no preemptive, conversion or subscription rights. Shares of each Fund may be transferred by endorsement or stock power as is customary, but a Fund is not bound to recognize any transfer until it is recorded on its books. VOTING RIGHTS The present Trustees were elected at a meeting of shareholders held on July 10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in office until the termination of the Trust or his earlier death, retirement, resignation, bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote to elect or remove Trustees, to terminate or reorganize their Fund, to amend the Declaration of Trust, to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees. Each share of each series of the Trust has one vote (and fractional votes for fractional shares). Shares of all series of the Trust have noncumulative voting rights, which means that the holders of more than 50% of the shares of all series of the Trust voting for the election of Trustees can elect 100% of the Trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Trustees. Each series of the Trust will vote separately only with respect to those matters that affect only that series or if a portfolio's interest in the matter differs from the interests of other portfolios of the Trust. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado 80202, independent accountants for the Funds, audit the Funds' annual financial statements and prepare their tax returns. REGISTRATION STATEMENT The Trust has filed with the SEC, Washington, D.C., a Registration Statement under the Securities Act of 1933, as amended, with respect to the securities to which this SAI relates. If further information is desired with respect to the Funds or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. PERFORMANCE INFORMATION The Prospectus contains a brief description of how performance is calculated. Quotations of average annual total return for a Fund will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in such Fund over periods of 1, 5, and 10 years (up to the life of the Fund). These are the annual total rates of return that would equate the initial amount invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of Fund expenses on an annual basis, and assume that all dividends and distributions are reinvested when paid. 27 The average annual total return of each Fund, computed as of October 31, 1996, is shown in the table below: [TO BE FILED BY AMENDMENT] Date Number Average Annual Total Return - ------------------------------------------------------------------------------------------------------------------------------------ Available of Months One Five Ten Life of Fund Name for Sale in Lifetime Year Years Years Fund - ------------------------------------------------------------------------------------------------------------------------------------ Janus Fund 2/5/70 321 % % % % Janus Enterprise Fund 9/1/92 50 % N/A N/A % Janus Equity Income Fund 6/28/96 4 % N/A N/A % Janus Mercury Fund 5/3/93 42 % N/A N/A % Janus Olympus Fund 12/29/95 10 % N/A N/A % Janus Overseas Fund 5/2/94 30 % N/A N/A % Janus Twenty Fund 5/2/85 138 % % % % Janus Worldwide Fund 5/15/91 65.5 % % N/A % Janus Balanced Fund 9/1/92 50 % N/A N/A % Janus Growth and Income Fund 5/15/91 65.5 % % N/A % Janus Flexible Income Fund 7/2/87 112 % % N/A % Janus High-Yield Fund 12/29/95 10 % N/A N/A % Janus Federal Tax-Exempt Fund 5/3/93 42 % N/A N/A % Janus Short-Term Bond Fund 9/1/92 50 % N/A N/A % - ------------------------------------------------------------------------------------------------------------------------------------
Quotations of a Fund's yield are based on the investment income per share earned during a particular 30-day period (including dividends, if any, and interest), less expenses accrued during the period ("net investment income"), and are computed by dividing net investment income by the net asset value per share on the last day of the period, according to the following formula: YIELD = 2 [(a-b + 1)6 - 1] cd where a = dividend and interest income b = expenses accrued for the period c = average daily number of shares outstanding during the period that were entitled to receive dividends d = maximum net asset value per share on the last day of the period The tax-equivalent yield used for Janus Federal Tax-Exempt Fund is the rate that an investor would have to earn from a fully taxable investment after taxes to equal the Fund's tax-free yield. Tax-equivalent yields are calculated by dividing a Fund's yield by the result of one minus a stated federal or combined federal and state tax rate. If only a portion of a Funds' yield is tax-exempt, only that portion is adjusted in the calculation. Janus Federal Tax-Exempt Fund may invest a portion of its assets in obligations that are subject to federal income tax. When the Fund invests in these obligations, its tax-equivalent yield will be lower. The yield for the 30-day period ending October 31, 1996, for the Fixed-Income Funds is shown below: [TO BE FILED BY AMENDMENT] Janus Flexible Income Fund % Janus High-Yield Fund % Janus Federal Tax-Exempt Fund % Janus Short-Term Bond Fund % From time to time in advertisements or sales material, the Funds may discuss their performance ratings or other information as published by recognized mutual fund statistical rating services, including, but not limited to, Lipper Analytical Services, Inc., Ibbotson Associates, Micropal or Morningstar or by publications of general interest such as Forbes or Money. The Funds may also compare their performance to that of other selected mutual funds, mutual fund averages or recognized stock market indicators, including, but not limited to, the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400 Midcap Index, the Dow Jones Industrial Average, the Lehman Brothers Government/Corporate Bond Index, the Lehman Brothers Government/ Corporate 1-3 Year Bond Index, the Lehman Brothers Long Government/Corporate Bond Index, the Lehman Brothers Intermediate Government Bond Index, the Lehman Brothers Municipal Bond Index, the Russell 2000 Index and the NASDAQ composite. In addition, the Funds may compare their total return or yield to the yield on U.S. Treasury obligations and to the percentage change in the Consumer Price Index. Janus Worldwide Fund and Janus Overseas Fund may also compare their performance to the record of global market indicators, such as the Morgan Stanley International World Index or Morgan Stanley Capital International Europe, Australasia, Far East Index (EAFE Index). Such performance ratings or comparisons may be made with funds that may have different investment restrictions, objectives, policies or techniques than the Funds and such other funds or market indicators may be comprised of securities that differ significantly from the Funds' investments. 28 FINANCIAL STATEMENTS The following audited financial statements for the period ended October 31, 1996 are hereby incorporated into this SAI by reference to the Funds' Annual Reports dated October 31, 1996. Copies of such reports accompany this SAI. DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS: Schedules of Investments as of October 31, 1996 Statements of Operations for the period ended October 31, 1996 Statements of Assets and Liabilities as of October 31, 1996 Statements of Changes in Net Assets for the periods ended October 31, 1996 and 1995 Financial Highlights for each of the periods indicated Notes to Financial Statements Report of Independent Accountants The portions of such Annual Reports that are not specifically listed above are not incorporated by reference into this SAI and are not part of the Registration Statement. 29 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 the adviser considers security ratings when making investment decisions, it also performs its own investment analysis and does not rely solely on the ratings assigned by credit agencies. STANDARD & POOR'S RATINGS SERVICES Bond Rating Explanation - -------------------------------------------------------------------------------- Investment Grade AAA Highest rating; extremely strong capacity to pay principal and interest. AA High quality; very strong capacity to pay principal and interest. A Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changing circumstances and economic conditions. BBB Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances more likely to lead to a weakened capacity to pay principal and interest than for higher rated bonds. Non-Investment Grade BB, B, Predominantly speculative with respect to the CCC, CC, C issuer's capacity to meet required interest and principal payments. BB - lowest degree of speculation; C - the highest degree of speculation. Quality and protective characteristics outweighed by large uncertainties or major risk exposure to adverse conditions. D In default. - -------------------------------------------------------------------------------- MOODY'S INVESTORS SERVICE, INC. Investment Grade Aaa Highest quality, smallest degree of investment risk. Aa High quality; together with Aaa bonds, they compose the high-grade bond group. A Upper-medium grade obligations; many favorable investment attributes. Baa Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be unreliable over any great length of time. Non-Investment Grade Ba More uncertain, with speculative elements. Protection of interest and principal payments not well safeguarded during good and bad times. B Lack characteristics of desirable investment; potentially low assurance of timely interest and principal payments or maintenance of other contract terms over time. Caa Poor standing, may be in default; elements of danger with respect to principal or interest payments. Ca Speculative in a high degree; could be in default or have other marked shortcomings. C Lowest-rated; extremely poor prospects of ever attaining investment standing. - -------------------------------------------------------------------------------- Unrated securities will be treated as noninvestment grade securities unless the portfolio manager determines that such securities are the equivalent of investment grade securities. Securities that have received different ratings from more than one agency are considered investment grade if at least one agency has rated the security investment grade. 30 This page intentionally left blank. This page intentionally left blank. [LOGO] JANUS INVESTMENT FUND 100 Fillmore Street Denver, CO 80206-4928 (800) 525-3713 - -------------------------------------------------------------------------------- Statement of Additional Information February 17, 1997 - -------------------------------------------------------------------------------- Janus Money Market Fund Janus Government Money Market Fund Janus Tax-Exempt Money Market Fund Investor Shares This Statement of Additional Information ("SAI") expands upon and supplements the information contained in the current Prospectus for the Investor Shares (the "Shares") of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds"). The Funds are each a separate series of Janus Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund represents shares of beneficial interest in a separate portfolio of securities and other assets with its own objective and policies, and is managed separately by Janus Capital Corporation ("Janus Capital"). This SAI is not a Prospectus and should be read in conjunction with the Prospectus dated February 17, 1997, which is incorporated by reference into this SAI and may be obtained from the Trust at the above phone number or address. This SAI contains additional and more detailed information about the Funds' operations and activities than the Prospectus. 1 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page - -------------------------------------------------------------------------------- Investment Policies and Restrictions .............................. 3 Types of Securities and Investment Techniques ..................... 4 Performance Data .................................................. 7 Determination of Net Asset Value .................................. 8 Investment Adviser and Administrator .............................. 8 Custodian, Transfer Agent and Certain Affiliations ................ 9 Portfolio Transactions and Brokerage .............................. 10 Officers and Trustees ............................................. 10 Purchase of Shares ................................................ 12 Redemption of Shares .............................................. 13 Shareholder Accounts .............................................. 13 Retirement Plans .................................................. 13 Dividends and Tax Status .......................................... 14 Principal Shareholders ............................................ 14 Miscellaneous Information ......................................... 14 Shares of the Trust ............................................ 15 Voting Rights .................................................. 15 Independent Accountants ........................................ 15 Registration Statement ......................................... 15 Financial Statements .............................................. 16 Appendix A - Description of Securities Ratings .................... 17 Appendix B - Description of Municipal Securities .................. 19 - ------------------------------------------------------------------------------- 2 INVESTMENT POLICIES AND RESTRICTIONS INVESTMENT OBJECTIVES As discussed in the Prospectus, the investment objective of each of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or maintain a stable net asset value of $1.00 per share. The investment objectives of the Funds are not fundamental and may be changed by the Trustees of the Trust (the "Trustees") without shareholder approval. INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS As indicated in the Prospectus, each Fund has adopted certain fundamental investment restrictions that cannot be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or a particular Fund or particular class of Shares if a matter affects just that Fund or that class of Shares), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or a particular Fund or class of Shares) are present or represented by proxy. As used in the restrictions set forth below and as used elsewhere in this SAI, the term "U.S. Government Securities" shall have the meaning set forth in the 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 collaterized and municipal securities escrowed with or refunded with escrowed U.S. government securities. The Funds have adopted the following fundamental policies: (1) With respect to 75% of its assets, a Fund may not purchase a security other than a U.S. Government Security, if, as a result, more than 5% of the Fund's total assets would be invested in the securities of a single issuer or the Fund would own more than 10% of the outstanding voting securities of any single issuer. (As noted in the Prospectus, the Funds are also currently subject to the greater diversification standards of Rule 2a-7, which are not fundamental.) (2) A Fund may not purchase securities if 25% or more of the value of a Fund's total assets would be invested in the securities of issuers conducting their principal business activities in the same industry; provided that: (i) there is no limit on investments in U.S. Government Securities or in obligations of domestic commercial banks (including U.S. branches of foreign banks subject to regulations under U.S. laws applicable to domestic banks and, to the extent that its parent is unconditionally liable for the obligation, foreign branches of U.S. banks); (ii) this limitation shall not apply to a Fund's investments in municipal securities; (iii) there is no limit on investments in issuers domiciled in a single country; (iv) financial service companies are classified according to the end users of their services (for example, automobile finance, bank finance and diversified finance are each considered to be a separate industry); and (v) utility companies are classified according to their services (for example, gas, gas transmission, electric, and telephone are each considered to be a separate industry). (3) A Fund may not act as an underwriter of securities issued by others, except to the extent that a Fund may be deemed an underwriter in connection with the disposition of portfolio securities of such Fund. (4) A Fund may not lend any security or make any other loan if, as a result, more than 25% of a Fund's total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements). (5) A Fund may not purchase or sell real estate or any interest therein, except that the Fund may invest in debt obligations secured by real estate or interests therein or securities issued by companies that invest in real estate or interests therein. (6) A Fund may borrow money for temporary or emergency purposes (not for leveraging) in an amount not exceeding 25% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 25% of the value of a Fund's total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three business days to the extent necessary to comply with the 25% limitation. Reverse repurchase agreements or the segregation of assets in connection with such agreements shall not be considered borrowing for the purposes of this limit. (7) Each Fund may, notwithstanding any other investment policy or restriction (whether or not fundamental), invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as that Fund. 3 Each Fund has adopted the following nonfundamental investment restrictions that may be changed by the Trustees without shareholder approval: (1) A Fund may not invest in securities or enter into repurchase agreements with respect to any securities if, as a result, more than 10% of the Fund's net assets would be invested in repurchase agreements not entitling the holder to payment of principal within seven days and in other securities that are not readily marketable ("illiquid securities"). The Trustees, or the Fund's investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for certain securities such as securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. (2) A Fund may not purchase securities on margin, or make short sales of securities, except for short sales against the box and the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities. (3) A Fund may not pledge, mortgage, hypothecate or encumber any of its assets except to secure permitted borrowings or in connection with permitted short sales. (4) A Fund may not invest in companies for the purpose of exercising control of management. For purposes of the Funds' restriction on investing in a particular industry, the Funds will rely primarily on industry classifications as published by Bloomberg L.P. To the extent that such classifications are so broad that the primary economic characteristics in a single class are materially different, the Funds may further classify issuers in accordance with industry classifications as published by the Securities and Exchange Commission. TYPES OF SECURITIES AND INVESTMENT TECHNIQUES Each of the Funds may invest only in "eligible securities" as defined in Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a security that (i) is denominated in U.S. dollars and has a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is issued by an issuer with short-term debt outstanding that is rated, in one of the two highest rating categories by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a rated security, as determined by Janus Capital; and (iii) has been determined by Janus Capital to present minimal credit risks pursuant to procedures approved by the Trustees. In addition, the Funds will maintain a dollar-weighted average portfolio maturity of 90 days or less. A description of the ratings of some NRSROs appears in Appendix A. Under Rule 2a-7, a Fund may not invest more than five percent of its total assets in the securities of any one issuer other than U.S. Government Securities, provided that in certain cases a Fund may invest more than 5% of its assets in a single issuer for a period of up to three business days. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to the foregoing limitations. Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market Fund) will invest at least 95% of its total assets in "first-tier" securities. First-tier securities are eligible securities that are rated, or are issued by an issuer with short-term debt outstanding that is rated, in the highest rating category by the Requisite NRSROs or are unrated and of comparable quality to a rated security. In addition, a Fund may invest in "second-tier" securities which are eligible securities that are not first-tier securities. However, a Fund (except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest in a second-tier security if immediately after the acquisition thereof the Fund would have invested more than (i) the greater of one percent of its total assets or one million dollars in second-tier securities issued by that issuer, or (ii) five percent of its total assets in second-tier securities. The following discussion of types of securities in which the Funds may invest supplements and should be read in conjunction with the Prospectus. PARTICIPATION INTERESTS Each Fund may purchase participation interests in loans or securities in which the Funds may invest directly. Participation interests are generally sponsored or issued by banks or other financial institutions. A participation interest gives a Fund an undivided interest in the underlying loans or securities in the proportion that the Fund's interest bears to the total principal amount of the underlying loans or securities. Participation interests, which may have fixed, floating or variable rates, may carry a demand feature backed by a letter of credit or guarantee of a bank or institution permitting the holder to tender them back to the bank or other institution. For certain participation interests, a Fund will have the right to demand payment, on not more than seven days' notice, for all or a part of the Fund's participation interest. The Funds intend to exercise any demand rights they may have upon default under the terms of the loan or security, to provide liquidity or to maintain or improve the quality of the Funds' investment portfolio. A Fund will only purchase participation interests that Janus Capital determines present minimal credit risks. 4 VARIABLE AND FLOATING RATE NOTES Janus Money Market Fund also may purchase variable and floating rate demand notes of corporations and other entities, which are unsecured obligations redeemable upon not more than 30 days' notice. These obligations include master demand notes that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements with the issuer of the instrument. The issuer of these obligations often has the right, after a given period, to prepay the outstanding principal amount of the obligations upon a specified number of days' notice. These obligations generally are not traded, nor generally is there an established secondary market for these obligations. To the extent a demand note does not have a seven day or shorter demand feature and there is no readily available market for the obligation, it is treated as an illiquid investment. MORTGAGE- AND ASSET-BACKED SECURITIES The Funds may invest in mortgage-backed securities, which represent an interest in a pool of mortgages made by lenders such as commercial banks, savings and loan institutions, mortgage bankers, mortgage brokers and savings banks. Mortgage-backed securities may be issued by governmental or government-related entities or by non-governmental entities such as banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers. Interests in pools of mortgage-backed securities differ from other forms of debt securities which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. In contrast, mortgage-backed securities provide periodic payments which consist of interest and, in most cases, principal. In effect, these payments are a "pass-through" of the periodic payments and optional prepayments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments to holders of mortgage-backed securities are caused by prepayments resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs which may be incurred. As prepayment rates of individual pools of mortgage loans vary widely, it is not possible to predict accurately the average life of a particular security. Although mortgage-backed securities are issued with stated maturities of up to forty years, unscheduled or early payments of principal and interest on the underlying mortgages may shorten considerably the effective maturities. Mortgage-backed securities may have varying assumptions for average life. The volume of prepayments of principal on a pool of mortgages underlying a particular security will influence the yield of that security, and the principal returned to a Fund may be reinvested in instruments whose yield may be higher or lower than that which might have been obtained had the prepayments not occurred. When interest rates are declining, prepayments usually increase, with the result that reinvestment of principal prepayments will be at a lower rate than the rate applicable to the original mortgage-backed security. The Funds may invest in mortgage-backed securities that are issued by agencies or instrumentalities of the U.S. government. The Government National Mortgage Association ("GNMA") is the principal federal government guarantor of mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation within the Department of Housing and Urban Development. GNMA Certificates are debt securities which represent an interest in one mortgage or a pool of mortgages which are insured by the Federal Housing Administration or the Farmers Home Administration or are guaranteed by the Veterans Administration. The Funds may also invest in pools of conventional mortgages which are issued or guaranteed by agencies of the U.S. government. GNMA pass-through securities are considered to be riskless with respect to default in that (i) the underlying mortgage loan portfolio is comprised entirely of government-backed loans and (ii) the timely payment of both principal and interest on the securities is guaranteed by the full faith and credit of the U.S. government, regardless of whether or not payments have been made on the underlying mortgages. GNMA pass-through securities are, however, subject to the same market risk as comparable debt securities. Therefore, the market value of a Fund's GNMA securities can be expected to fluctuate in response to changes in prevailing interest rate levels. Residential mortgage loans are pooled also by the Federal Home Loan Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered agency created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC issues participation certificates ("PCs") which represent interests in mortgages from FHLMC's national portfolio. The mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the loans are either uninsured with loan-to-value ratios of 80% or less, or privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the timely payment of interest and ultimate collection of principal on FHLMC PCs; the U.S. government does not guarantee any aspect of FHLMC PCs. The Federal National Mortgage Association ("FNMA") is a government-sponsored corporation owned entirely by private shareholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases residential mortgages from a list of approved seller/servicers which include savings and loan associations, savings banks, commercial banks, credit unions and mortgage bankers. FNMA guarantees the timely payment of principal and interest on the pass-through securities issued by FNMA; the U.S. government does not guarantee any aspect of the FNMA pass-through securities. 5 The Funds may also invest in privately-issued mortgage-backed securities to the extent permitted by their investment restrictions. Mortgage-backed securities offered by private issuers include pass-through securities comprised of pools of conventional residential mortgage loans; mortgage-backed bonds which are considered to be debt obligations of the institution issuing the bonds and which are collateralized by mortgage loans; and collateralized mortgage obligations ("CMOs") which are collateralized by mortgage-backed securities issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages. Asset-backed securities represent direct or indirect participations in, or are secured by and payable from, assets other than mortgage-backed assets such as motor vehicle installment sales contracts, installment loan contracts, leases of various types of real and personal property and receivables from revolving credit agreements (credit cards). Asset-backed securities have yield characteristics similar to those of mortgage-backed securities and, accordingly, are subject to many of the same risks. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements are transactions in which a Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. The resale price in a reverse repurchase agreement reflects a market rate of interest that is not related to the coupon rate or maturity of the sold security. For certain demand agreements, there is no agreed upon repurchase date and interest payments are calculated daily, often based upon the prevailing overnight repurchase rate. The Funds will use the proceeds of reverse repurchase agreements only to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities or to earn additional income on portfolio securities. Generally, a reverse repurchase agreement enables the Fund to recover for the term of the reverse repurchase agreement all or most of the cash invested in the portfolio securities sold and to keep the interest income associated with those portfolio securities. Such transactions are only advantageous if the interest cost to the Fund of the reverse repurchase transaction is less than the cost of obtaining the cash otherwise. In addition, interest costs on the money received in a reverse repurchase agreement may exceed the return received on the investments made by a Fund with those monies. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES Each Fund may purchase securities on a when-issued or delayed delivery basis. A Fund will enter into such transactions only when it has the intention of actually acquiring the securities. To facilitate such acquisitions, the Funds' custodian will segregate cash or high quality liquid assets in an amount at least equal to such commitments. On delivery dates for such transactions, the Fund will meet its obligations from maturities, sales of the segregated securities or from other available sources of cash. If a Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. At the time a Fund makes the commitment to purchase securities on a when-issued or delayed delivery basis, it will record the transaction as a purchase and thereafter reflect the value of such securities in determining its net asset value. INVESTMENT COMPANY SECURITIES From time to time, the Funds may invest in securities of other investment companies. The Funds are subject to the provisions of Section 12(d)(1) of the 1940 Act, which currently limits each Fund's investment in other investment companies to no more than 10% of the investing Fund's assets. MUNICIPAL LEASES Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest in municipal leases. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sales contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. 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 under "Taxable Investments". In evaluating municipal lease obligations, Janus Capital will consider such factors as it deems appropriate, including: (a) whether the lease can be canceled; (b) the ability of the lease obligee to direct the sale of the underlying assets; (c) the general creditworthiness of the lease obligor; (d) the likelihood that the municipality will discontinue appropriating funding for the leased property in the event such property is no longer considered essential by the municipality; (e) the legal recourse of the lease obligee in the event of such a failure to appropriate funding; (f) whether the security is backed by a credit enhancement 6 such as insurance; and (g) any limitations which are imposed on the lease obligor's ability to utilize substitute property or services other than those covered by the lease obligation. If a lease is backed by an unconditional letter of credit or other unconditional credit enhancement, then Janus Capital may determine that a lease is an eligible security solely on the basis of its evaluation of the credit enhancement. Municipal leases, like other municipal debt obligations, are subject to the risk of non-payment. The ability of issuers of municipal leases to make timely lease payments may be adversely impacted in general economic downturns and as relative governmental cost burdens are allocated and reallocated among federal, state and local governmental units. Such non-payment would result in a reduction of income to the Fund, and could result in a reduction in the value of the municipal lease experiencing non-payment and a potential decrease in the net asset value of the Fund. PERFORMANCE DATA A Fund may provide current annualized and effective annualized yield quotations based on its daily dividends. These quotations may from time to time be used in advertisements, shareholder reports or other communications to shareholders. All performance information supplied by the Funds in advertising is historical and is not intended to indicate future returns. In performance advertising, the Funds may compare their Shares' performance information with data published by independent evaluators such as Morningstar, Inc., Lipper Analytical Services, Inc., CDC/Wiesenberger, IBC/Donoghue's Money Fund Report or other companies which track the investment performance of investment companies ("Fund Tracking Companies"). The Funds may also compare their Shares' performance information with the performance of recognized stock, bond and other indices, including but not limited to the Municipal Bond Buyers Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S. Treasury bonds, bills or notes and changes in the Consumer Price Index as published by the U.S. Department of Commerce. The Funds may refer to general market performance over past time periods such as those published by Ibbotson Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook"). The Funds may also refer in such materials to mutual fund performance rankings and other data published by Fund Tracking Companies. Performance advertising may also refer to discussions of the Funds and comparative mutual fund data and ratings reported in independent periodicals, such as newspapers and financial magazines. The Funds may also compare the Shares' yield to those of certain U.S. Treasury obligations or other money market instruments. Any current yield quotation of the Shares which is used in such a manner as to be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as amended, shall consist of an annualized historical yield, carried at least to the nearest hundredth of one percent, based on a specific seven calendar day period. The Fund's current yield shall be calculated by (a) determining the net change during a seven calendar day period in the value of a hypothetical account having a balance of one share at the beginning of the period, (b) dividing the net change by the value of the account at the beginning of the period to obtain a base period return, and (c) multiplying the quotient by 365/7 (i.e., annualizing). For this purpose, the net change in account value would reflect the value of additional Shares purchased with dividends declared on the original Share and dividends declared on both the original Share and any such additional Shares, but would not reflect any realized gains or losses from the sale of securities or any unrealized appreciation or depreciation on portfolio securities. In addition, the Shares may advertise effective yield quotations. Effective yield quotations are calculated by adding 1 to the base period return, raising the sum to a power equal to 365/7, and subtracting 1 from the result (i.e., compounding). Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an investor would have to earn from a fully taxable investment in order to equal such Shares' yield after taxes. Tax equivalent yields are calculated by dividing Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or combined federal and state tax rate. If only a portion of the Shares' yield is tax-exempt, only that portion is adjusted in the calculation. The Shares' current yield and effective yield for the seven day period ended October 31, 1996 is shown below: [TO BE FILED BY AMENDMENT] Seven-day Effective Fund Name Yield Seven-day Yield - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund-Investor Shares % % Janus Government Money Market Fund-Investor Shares % % Janus Tax-Exempt Money Market Fund-Investor Shares* % % - ------------------------------------------------------------------------------------------------------------------------------------
*Janus Tax-Exempt Money Market Fund Investor Shares' tax equivalent yield for the seven day period ended October 31, 1996 was ___%. Although published yield information is useful to investors in reviewing a Fund's performance, investors should be aware that the Fund's yield fluctuates from day to day and that the Fund's yield for any given period is not an indication or representation by the Fund of future yields or rates of return on the Shares. Also, Processing Organizations may charge their customers direct fees in connection with an investment in a Fund, which will have the effect of reducing the Fund's net yield to those shareholders. The yield on a class of Shares is not fixed or guaranteed, and an investment in the Shares is not insured. Accordingly, 7 yield information may not necessarily be used to compare Shares with investment alternatives which, like money market instruments or bank accounts, may provide a fixed rate of interest. In addition, because investments in the Funds are not insured or guaranteed, yield on the Shares may not necessarily be used to compare the Shares with investment alternatives which are insured or guaranteed. DETERMINATION OF NET ASSET VALUE Pursuant to the rules of the Securities and Exchange Commission, the Trustees have established procedures to stabilize each Fund's net asset value at $1.00 per Share. These procedures include a review of the extent of any deviation of net asset value per Share as a result of fluctuating interest rates, based on available market rates, from the Fund's $1.00 amortized cost price per Share. Should that deviation exceed 1/2 of 1%, the Trustees will consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redemption of Shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per Share as determined by using available market quotations. Each Fund i) will maintain a dollar-weighted average portfolio maturity of 90 days or less; ii) will not purchase any instrument with a remaining maturity greater than 397 days or subject to a repurchase agreement having a duration of greater than 397 days; iii) will limit portfolio investments, including repurchase agreements, to those U.S. dollar-denominated instruments that Janus Capital has determined present minimal credit risks pursuant to procedures established by the Trustees; and iv) will comply with certain reporting and recordkeeping procedures. The Trust has also established procedures to ensure that portfolio securities meet the Funds' high quality criteria. INVESTMENT ADVISER AND ADMINISTRATOR As stated in the Prospectus, each Fund has an Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each Advisory Agreement provides that Janus Capital will furnish continuous advice and recommendations concerning the Funds' investments. The Funds have each agreed to compensate Janus Capital for its advisory services by the monthly payment of an advisory fee at the annual rate of .20% of the average daily net assets of each Fund. However, Janus Capital has agreed to waive .10% of the value of each Fund's average daily net assets of the advisory fee. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads and other expenses in connection with the execution of portfolio transactions. On behalf of the Shares, each of the Funds has also entered into an Administration Agreement with Janus Capital. Under the terms of the Administration Agreements, each of the Funds has agreed to compensate Janus Capital for administrative services at the annual rate of .50% of the value of the average daily net assets of the Shares for certain services, including custody, transfer agent fees and expenses, legal fees not related to litigation, accounting expenses, net asset value determination and Fund accounting, recordkeeping, and blue sky registration and monitoring services, registration fees, expenses of shareholders' meetings and reports to shareholders, costs of preparing, printing and mailing the Shares' Prospectuses and Statements of Additional Information to current shareholders, and other costs of complying with applicable laws regulating the sale of Shares. Each Fund will pay those expenses not assumed by Janus Capital, including interest and taxes, fees and expenses of Trustees who are not affiliated with Janus Capital, audit fees and expenses, and extraordinary costs. The following table summarizes the advisory fees paid by the Funds for the fiscal years ended October 31: 1996 1995 [TO BE FILED BY AMENDMENT] Advisory Advisory Advisory Advisory Fees Prior Fees After Fees Prior Fees After Fund Name to Waiver Waiver to Waiver Waiver - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $ $ Janus Government Money Market Fund $ $ Janus Tax-Exempt Money Market Fund $ $ - ------------------------------------------------------------------------------------------------------------------------------------
The following table summarizes the administration fees paid by the Shares for the fiscal years ended October 31: 1996 1995(1) [TO BE FILED BY AMENDMENT] Administration Administration Administration Administration Fees Prior Fees After Fees Prior Fees After Fund Name to Waiver Waiver to Waiver Waiver - --------------------------------------------------------------------------------------------------------------------------- Janus Money Market Fund - Investor Shares $164,715 $54,905 Janus Government Money Market Fund - Investor Shares $ 20,138 $ 6,712 Janus Tax-Exempt Money Market Fund - Investor Shares $ 907 $ 302 - ---------------------------------------------------------------------------------------------------------------------------
(1)February 15, 1995 (inception) to October 31, 1995. 8 The Advisory Agreements for each Fund became effective on December 9, 1994 and will continue in effect until June 16, 1997, and thereafter from year to year so long as such continuance is approved annually by a majority of the Trustees who are not parties to the Advisory Agreements or interested persons of any such party, and by either a majority of the outstanding voting shares or the Trustees of the Funds. Each Advisory Agreement i) may be terminated without the payment of any penalty by any Fund or Janus Capital on 60 days' written notice; ii) terminates automatically in the event of its assignment; and iii) generally, may not be amended without the approval of a majority of the Trustees of the affected Fund, including the Trustees who are not interested persons of that Fund or Janus Capital and, to the extent required by the 1940 Act, the vote of a majority of the outstanding voting securities of that Fund. Janus Capital also performs investment advisory services for other mutual funds, and for individual, charitable, corporate and retirement accounts. Investment decisions for each account managed by Janus Capital, including the Funds, are made independently from those for any other account that is or may in the future become managed by Janus Capital or its affiliates. If, however, a number of accounts managed by Janus Capital are contemporaneously engaged in the purchase or sale of the same security, the orders may be aggregated and/or the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by an account or the size of the position obtained or liquidated for an account. Pursuant to an exemptive order granted by the SEC, the Funds and other funds advised by Janus Capital may also transfer daily uninvested cash balances into one or more joint trading accounts. Assets in the joint trading accounts are invested in money market instruments and the proceeds are allocated to the participating funds on a pro rata basis. Each account managed by Janus Capital has its own investment objective and is managed in accordance with that objective by a particular portfolio manager or team of portfolio managers. As a result, from time to time two or more different managed accounts may pursue divergent investment strategies with respect to investments or categories of investments. As indicated in the Prospectus, Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy regarding personal investing by directors, officers and employees of Janus Capital and the Funds. The policy requires investment personnel and officers of Janus Capital, inside directors of Janus Capital and the Funds and other designated persons deemed to have access to current trading information to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for trading authority will be denied when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or to have been effected on behalf of any client account, including the Funds. In addition to the pre-clearance requirement described above, the policy subjects investment personnel, officers and directors/ Trustees of Janus Capital and the Funds to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with Janus Capital's policy. Those persons also may be required under certain circumstances to forfeit their profits made from personal trading. The provisions of the policy are administered by and subject to exceptions authorized by Janus Capital. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the Funds' custodian. The custodian holds the Funds' assets in safekeeping and collects and remits the income thereon, subject to the instructions of each Fund. Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds' transfer agent. In addition, Janus Service provides certain other administrative, recordkeeping and shareholder relations services to the Funds. The Funds do not pay Janus Service a fee. Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Funds. Janus Distributors is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the National Association of Securities Dealers, Inc. Janus Distributors acts as the agent of the Funds in connection with the sale of their shares in all states in which the shares are registered and in which Janus Distributors is qualified as a broker-dealer. Under the Distribution Agreement, Janus Distributors continuously offers the Funds' shares and accepts orders at net asset value. No sales charges are paid by investors. Promotional expenses in connection with offers and sales of shares are paid by Janus Capital. Janus Capital also may make payments to selected broker-dealer firms or institutions which were instrumental in the acquisition of shareholders for the Funds or which performed services with respect to shareholder accounts. The minimum aggregate size required for eligibility for such payments, and the factors in selecting the broker-dealer firms and institutions to which they will be made, are determined from time to time by Janus Capital. 9 PORTFOLIO TRANSACTIONS AND BROKERAGE Decisions as to the assignment of portfolio business for the Funds and negotiation of its commission rates are made by Janus Capital whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all portfolio transactions. 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 October 31, 1996 and October 31, 1995, the total brokerage commissions paid by the Funds are summarized below: 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $ $ Janus Government Money Market Fund $ $ Janus Tax-Exempt Money Market Fund $ $ - ------------------------------------------------------------------------------------------------------------------------------------
The Funds buy and sell securities in principal and agency transactions. The Funds pay no commissions on principal transactions. The Funds engage in agency transactions and pay commissions only when Janus Capital believes that the net result of the transaction to the respective Fund will be no less favorable than that of contemporaneously available principal transactions. Janus Capital may use research products and services in servicing other accounts in addition to the Funds. If Janus Capital determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, Janus Capital may allocate the costs of such service or product accordingly. Only that portion of the product or service that Janus Capital determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may create a conflict of interest for Janus Capital. Janus Capital may consider sales of Shares by a broker-dealer or the recommendation of a broker-dealer to its customers that they purchase Shares as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. In placing portfolio business with such broker-dealers, Janus Capital will seek the best execution of each transaction. When the Funds purchase or sell a security in the over-the-counter market, the transaction takes place directly with a principal market-maker, without the use of a broker, except in those circumstances where in the opinion of Janus Capital better prices and executions will be achieved through the use of a broker. OFFICERS AND TRUSTEES The following are the names of the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years. Thomas H. Bailey*# - Trustee, Chairman and President 100 Fillmore Street Denver, CO 80206-4928 Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief Executive Officer, Director and President of Janus Capital. Chairman and Director of IDEX Management, Inc., Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a group of mutual funds) ("IDEX"). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 10 James P. Craig, III*# - Trustee and Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Trustee and Executive Vice President of Janus Aspen Series. Chief Investment Officer, Vice President and Director of Janus Capital. Executive Vice President and Portfolio Manager of Janus Fund. Sharon S. Pichler* - Executive Vice President and Portfolio Manager 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President of Janus Money Market Fund, Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund. Vice President of Janus Capital. Formerly, Assistant Vice President and Portfolio Manager at USAA Investment Management Co. (1990-1994). David C. Tucker* - Vice President and General Counsel 100 Fillmore Street Denver, CO 80206-4928 Vice President and General Counsel of Janus Aspen Series. Vice President, Secretary and General Counsel of Janus Capital. Vice President, General Counsel and Director of Janus Service and Janus Distributors. Director, Vice President and Secretary of Janus Capital International Ltd. Steven R. Goodbarn* - Vice President and Chief Financial Officer 100 Fillmore Street Denver, CO 80206-4928 Vice President and Chief Financial Officer of Janus Aspen Series. Vice President of Finance, Treasurer and Chief Financial Officer of Janus Service, Janus Distributors and Janus Capital. Director of IDEX and Janus Distributors. Director, Treasurer and Vice President of Finance of Janus Capital International Ltd. Formerly (1979 to 1992), with the accounting firm of Price Waterhouse LLP, Denver, Colorado. Formerly (1992-1996), Treasurer of Janus Investment Fund and Janus Aspen Series. Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer 100 Fillmore Street Denver, CO 80206-4928 Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of Fund Accounting of Janus Capital. Kelley Abbott Howes* - Secretary 100 Fillmore Street Denver, CO 80206-4928 Secretary of Janus Aspen Series. Associate Counsel of Janus Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston Massachusetts (mutual fund administration services). John W. Shepardson# - Trustee P.O. Box 9591 Denver, CO 80209 Trustee of Janus Aspen Series. Historian. William D. Stewart# - Trustee 5330 Sterling Drive Boulder, CO 80302 Trustee of Janus Aspen Series. President of HPS Corporation, Boulder, Colorado (manufacturer of vacuum fittings and valves). Gary O. Loo - Trustee 102 N. Cascade Avenue, Suite 500 Colorado Springs, CO 80903 Trustee of Janus Aspen Series. President and a Director of High Valley Group, Inc., Colorado Springs, Colorado (investments). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 11 Dennis B. Mullen - Trustee 1601 114th Avenue, SE Alderwood Building, Suite 130 Bellevue, WA 98004 Trustee of Janus Aspen Series. President and Chief Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona (restaurant chain). Martin H. Waldinger - Trustee 4940 Sandshore Court San Diego, CA 92130 Trustee of Janus Aspen Series. Private Consultant and Director of Run Technologies, Inc., a software development firm, San Carlos, California. Formerly (1989 to 1993), President and Chief Executive Officer of Bridgecliff Management Services, Campbell, California (a condominium association management company). The Trustees are responsible for major decisions relating to each Fund's objective, policies and techniques. The Trustees also supervise the operation of the Funds by their officers and review the investment decisions of the officers although they do not actively participate on a regular basis in making such decisions. The Executive Committee of the Trustees shall have and may exercise all the powers and authority of the Board except for matters requiring action by the whole Board pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts Law or the 1940 Act. The Money Market Funds Committee, consisting of Messrs. Craig, Shepardson, Loo and Waldinger, monitors the compliance with policies and procedures adopted particularly for money market funds. The following table shows the aggregate compensation paid to each Trustee by the Funds described in this SAI and all funds advised and sponsored by Janus Capital (collectively, the "Janus Funds") for the periods indicated. None of the Trustees receive any pension or retirement benefits from the Funds or the Janus Funds. [TO BE FILED BY AMENDMENT] Aggregate Compensation Total Compensation from the from the Funds for fiscal year Janus Funds for calendar year Name of Person, Position ended October 31, 1996 ended December 31, 1996** - ------------------------------------------------------------------------------------------------------------------------------------ Thomas H. Bailey, Chairman* $ $ James P. Craig, III, Trustee* $ $ John W. Shepardson, Trustee $ $ William D. Stewart, Trustee $ $ Gary O. Loo, Trustee $ $ Dennis B. Mullen, Trustee $ $ Martin H. Waldinger, Trustee $ $ - ------------------------------------------------------------------------------------------------------------------------------------
*An interested person of the Funds and of Janus Capital. Compensated by Janus Capital and not the Funds. **As of December 31, 1996, Janus Funds consisted of two registered investment companies comprised of a total of 29 funds. PURCHASE OF SHARES As stated in the Prospectus, Janus Distributors is a distributor of the Funds' shares. Shares are sold at the net asset value per share as determined at the close of the regular trading session of the New York Stock Exchange (the "NYSE" or the "Exchange") next occurring after a purchase order is received and accepted by a Fund. A Fund's net asset value is calculated each day that both the NYSE and the New York Federal Reserve Bank are open. As stated in the Prospectus, the Funds each seek to maintain a stable net asset value per share of $1.00. The Shareholder's Manual Section of the Prospectus contains detailed information about the purchase of Shares. REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS If investors do not elect in writing or by phone to receive their dividends and distributions in cash, all income dividends and capital gains distributions, if any, on Shares are reinvested automatically in additional Shares of that Fund at the NAV determined on the first business day following the record date. Checks for cash dividends and distributions and confirmations of reinvestments are usually mailed to shareholders within ten days after the record date. Any election (which may be made on the New Account Application form or by phone) will apply to dividends and distributions the record dates of which fall on or after the date that a Fund receives such notice. Investors receiving cash distributions and dividends may elect in writing or by phone to change back to automatic reinvestment at any time. 12 REDEMPTION OF SHARES Procedures for redemption of Shares are set forth in the Shareholder's Manual section of the Prospectus. Shares normally will be redeemed for cash, although each Fund retains the right to redeem Shares in kind under unusual circumstances, in order to protect the interests of remaining shareholders, by delivery of securities selected from its assets at its discretion. However, the Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to redeem Shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of that Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, their Fund will have the option of redeeming the excess in cash or in kind. If Shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described under "Determination of Net Asset Value" and such valuation will be made as of the same time the redemption price is determined. The right to require the Funds to redeem Shares may be suspended, or the date of payment may be postponed, whenever (1) trading on the NYSE is restricted, as determined by the Securities and Exchange Commission, or the NYSE is closed except for holidays and weekends, (2) the Securities and Exchange Commission permits such suspension and so orders, or (3) an emergency exists as determined by the Securities and Exchange Commission so that disposal of securities or determination of NAV is not reasonably practicable. SHAREHOLDER ACCOUNTS Detailed information about the general procedures for shareholder accounts and specific types of accounts is set forth in the Prospectus. Applications for specific types of accounts may be obtained by calling the Funds at 1-800-525-3713 or writing to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. SYSTEMATIC REDEMPTIONS As stated in the Shareholder's Manual section of the Prospectus, if you have a regular account or are eligible for normal distributions from a retirement plan, you may establish a systematic redemption option. The payments will be made from the proceeds of periodic redemptions of Shares in the account at the net asset value. Depending on the size or frequency of the disbursements requested, and the fluctuation in value of the Shares in the Fund's portfolio, redemptions for the purpose of making such disbursements may reduce or even exhaust the shareholder's account. Either an investor or their Fund, by written notice to the other, may terminate the investor's systematic redemption option without penalty at any time. Information about requirements to establish a systematic redemption option may be obtained by writing or calling the Funds at the address or phone number shown above. RETIREMENT PLANS The Funds offer several different types of tax-deferred retirement plans that an investor may establish to invest in Shares, depending on rules prescribed by the Internal Revenue Code of 1986 and the regulations thereunder (the "Code"). The Individual Retirement Account ("IRA") may be used by most individuals who have taxable compensation. The Simplified Employee Pensions ("SEPs") and the Defined Contribution Plans may be used by most employers, including corporations, partnerships and sole proprietors, for the benefit of business owners and their employees. In addition, the Funds offer a Section 403(b)(7) Plan for employees of educational organizations and other qualifying tax-exempt organizations. Investors should consult their tax advisor or legal counsel before selecting a retirement plan. Contributions under IRAs, SEPs, Defined Contribution Plans (Profit Sharing or Money Purchase Pension Plans) and Section 403(b)(7) Plans are subject to specific contribution limitations. Generally, such contributions may be invested at the direction of the participant. The investment is then held by Investors Fiduciary Trust Company as custodian. Each participant's account is charged an annual fee of $12. There is a maximum annual fee of $24 per taxpayer identification number. Distributions from retirement plans generally are subject to ordinary income tax and may be subject to an additional 10% tax if withdrawn prior to age 591/2. Several exceptions to the general rule may apply. Additionally, shareholders generally must start withdrawing retirement plan assets no later than April 1 of the year after they reach age 701/2. Exceptions may apply so please consult your tax advisor. Several methods exist to determine the amount of the minimum annual distribution. Shareholders should consult with their tax advisor or legal counsel prior to receiving any distribution from any retirement plan, in order to determine the income tax impact of any such distribution. To receive additional information about IRAs, SEPs, Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary materials to establish an account, please call the Funds at 1-800-525-3713 or write to the Funds at P.O. Box 173375, Denver, Colorado 80217-3375. No contribution to an IRA, SEP, Defined Contribution Plan or Section 403(b)(7) Plan can be made until the appropriate forms to establish any such plan have been completed. 13 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. A shareholder may receive dividends in cash or may choose to have dividends automatically reinvested in a Fund's Shares. As described in the Prospectus, Shares purchased by wire on a bank business day will receive that day's dividend if the purchase is effected at or prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund. Otherwise, such Shares will begin to accrue dividends on the following day. Orders for purchase accompanied by a check or other negotiable bank draft will be accepted and effected as of 4:00 p.m. (New York time) on the day of receipt and such Shares will begin to accrue dividends on the first bank business day following receipt of the order. Requests for redemption of Shares of a Fund will be redeemed at the next determined net asset value. If processed by 4:00 p.m. (New York time) such redemption will generally include dividends declared through the day of redemption. However, redemption requests made by wire that are received prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that day and no dividend will be accrued for such day. Proceeds of such a redemption will normally be sent to the predesignated bank account on that day, but that day's dividend will not be received. If shares of a Fund were originally purchased by check or through an Automated Clearing House transaction, the Fund may delay transmittal of redemption proceeds up to 15 days in order to ensure that purchase funds have been collected. Closing times for purchase and redemption of Shares may be changed for days in which the bond market or the New York Stock Exchange close early. Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund) are taxable income and are subject to federal income tax (except for shareholders exempt from income tax), whether such distributions are received in cash or are reinvested in additional Shares. Full information regarding the tax status of income dividends and any capital gains distributions will be mailed to shareholders for tax purposes on or before January 31st of each year. As described in detail in the Prospectus, Janus Tax-Exempt Money Market Fund anticipates that substantially all income dividends it pays will be exempt from federal income tax, although dividends attributable to interest on taxable investments, together with distributions from any net realized short- or long-term capital gains, are taxable. The Funds intend to qualify as regulated investment companies by satisfying certain requirements prescribed by Subchapter M of the Code. Some money market securities employ a trust or other similar structure to modify the maturity, price characteristics, or quality of financial assets. For example, put features can be used to modify the maturity of a security, or interest rate adjustment features can be used to enhance price stability. If the structure does not perform as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service nor any other regulatory authority has ruled definitively on certain legal issues presented by structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by a portfolio. PRINCIPAL SHAREHOLDERS TO BE CONFIRMED [As of January 20, 1997, the officers and Trustees of the Funds as a group owned less than 1% of the outstanding shares of each of the Funds. To the knowledge of the Funds, no other person owned more than 5% of the outstanding Shares of any Fund as of the above date.] MISCELLANEOUS INFORMATION Each Fund is a series of the Trust, a Massachusetts business trust that was created on February 11, 1986. The Trust is an open-end management investment company registered under the 1940 Act. As of the date of this SAI, the Trust consists of 19 separate series, three of which currently offer three classes of shares. The Funds were added to the Trust as separate series on December 9, 1994. Janus Capital reserves the right to the name "Janus." In the event that Janus Capital does not continue to provide investment advice to the Funds, the Funds must cease to use the name "Janus" as soon as reasonably practicable. Under Massachusetts law, shareholders of the Funds could, under certain circumstances, be held liable for the obligations of their Fund. However, the Agreement and Declaration of Trust (the "Declaration of Trust") disclaims shareholder liability for acts or obligations of the Funds and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Funds or the Trustees. The Declaration of Trust also provides for indemnification from the assets 14 of the Funds for all losses and expenses of any Fund shareholder held liable for the obligations of their Fund. Thus, the risk of a shareholder incurring a financial loss on account of its liability as a shareholder of one of the Funds is limited to circumstances in which their Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The Trustees intend to conduct the operations of the Funds to avoid, to the extent possible, liability of shareholders for liabilities of their Fund. SHARES OF THE TRUST The Trust is authorized to issue an unlimited number of shares of beneficial interest with a par value of one cent per share for each series of the Trust. Shares of each Fund are fully paid and nonassessable when issued. All shares of a Fund participate equally in dividends and other distributions by such Fund, and in residual assets of that Fund in the event of liquidation. Shares of each Fund have no preemptive, conversion or subscription rights. The Trust is authorized to issue multiple classes of shares for each Fund. Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund each offer three classes of shares by separate prospectuses. The Shares discussed in this SAI are offered to the general public. A second class of shares, Service Shares, is offered through Financial Institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs. A third class of shares, Institutional Shares, is offered only to clients meeting certain minimum investment criteria. VOTING RIGHTS The present Trustees were elected at a meeting of shareholders held on July 10, 1992 with the exception of Mr. Craig who was appointed by the Trustees as of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in office until the termination of the Trust or his earlier death, retirement, resignation, bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote to elect or remove Trustees, to terminate or reorganize their Fund, to amend the Declaration of Trust, to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees. Each share of each series of the Trust has one vote (and fractional votes for fractional shares). Shares of all series of the Trust have noncumulative voting rights, which means that the holders of more than 50% of the shares of all series of the Trust voting for the election of Trustees can elect 100% of the Trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Trustees. Each series or class of the Trust will vote separately only with respect to those matters that affect only that series or class or if the interest of the series or class in the matter differs from the interests of other series or classes of the Trust. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado 80202, independent accountants for the Funds, audit the Funds' annual financial statements and prepare their tax returns. REGISTRATION STATEMENT The Trust has filed with the 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 Funds or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. 15 FINANCIAL STATEMENTS The following audited financial statements of the Funds for the period ended October 31, 1996 are hereby incorporated into this SAI by reference to the Funds' Annual Report dated October 31, 1996. A copy of such report accompanies this SAI. [TO BE FILED BY AMENDMENT] DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT Schedules of Investments as of October 31, 1996 Statements of Operations for the period ended October 31, 1996 Statements of Assets and Liabilities as of October 31, 1996 Statements of Changes in Net Assets for the periods ended October 31, 1996 and 1995* Financial Highlights for each of the periods indicated Notes to Financial Statements Report of Independent Accountants The portions of such Annual Report that are not specifically listed above are not incorporated by reference into this SAI and are not part of the Registration Statement. - -------------------------------------------------------------------------------- *Transactions in fund shares for the period February 15, 1995 to October 31, 1995. 16 APPENDIX A DESCRIPTION OF SECURITIES RATINGS MOODY'S AND STANDARD AND POOR'S MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS The two highest ratings of Standard & Poor's Ratings Services ("S&P") for municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest rating assigned by S&P to a debt obligation. Capacity to pay interest and repay principal is extremely strong. Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree. The AA rating may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within that rating category. The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. Moody's states that Aa bonds are rated lower than the best bonds because margins of protection or other elements make long-term risks appear somewhat larger than Aaa securities. The generic rating Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1 indicates that the security ranks in the higher end of the Aa rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of such rating category. SHORT-TERM MUNICIPAL LOANS S&P's highest rating for short-term municipal loans is SP-1. S&P states that short-term municipal securities bearing the SP-1 designation have a strong capacity to pay principal and interest. Those issues rated SP-1 which are determined to possess a very strong capacity to pay debt service will be given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay principal and interest with some vulnerability to adverse financial and economic changes over the term of the notes. Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1. Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of the best quality, enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are of high quality, with margins of protection ample although not so large as in the MIG-1/VMIG-1 group. OTHER SHORT-TERM DEBT SECURITIES Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for other short-term debt securities and commercial paper, and A-1 and A-2 are the two highest ratings for commercial paper assigned by S&P. Moody's uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of A. Issuers rated Prime-1 by Moody's have a superior ability for repayment of senior short-term debt obligations and have many of the following characteristics: leading market positions in well-established industries, high rates of return on funds employed, conservative capitalization structure with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior short-term debt obligations and display many of the same characteristics displayed by issuers rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P carry a strong degree of safety regarding timely repayment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus (+) designation. Issuers rated A-2 by S&P carry a satisfactory degree of safety regarding timely repayment. FITCH F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1 Very strong credit quality. Issues assigned this rating reflect an assurance for timely payment only slightly less in degree than issues rated F-1+. F-2 Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payments, but the margin of safety is not as great as the F-1+ and F-1 ratings. 17 DUFF & PHELPS INC. Duff 1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or ready access to alternative sources of funds, is clearly outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1 Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1- High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2 Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. THOMSON BANKWATCH, INC. TBW-1 The highest category; indicates a very high degree of likelihood that principal and interest will be paid on a timely basis. TBW-2 The second highest category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated TBW-1. TBW-3 The lowest investment grade category; indicates that while more susceptible to adverse developments (both internal and external) than obligations with higher ratings, capacity to service principal and interest in a timely fashion is considered adequate. TBW-4 The lowest rating category; this rating is regarded as non-investment grade and therefore speculative. IBCA, INC. A1+ Obligations supported by the highest capacity for timely repayment. Where issues possess a particularly strong credit feature, a rating of A1+ is assigned. A2 Obligations supported by a good capacity for timely repayment. A3 Obligations supported by a satisfactory capacity for timely repayment. B Obligations for which there is an uncertainty as to the capacity to ensure timely repayment. C Obligations for which there is a high risk of default or which are currently in default. 18 APPENDIX B DESCRIPTION OF MUNICIPAL SECURITIES Municipal Notes generally are used to provide for short-term capital needs and usually have maturities of one year or less. They include the following: 1. Project Notes, which carry a U.S. government guarantee, are issued by public bodies (called "local issuing agencies") created under the laws of a state, territory, or U.S. possession. They have maturities that range up to one year from the date of issuance. Project Notes are backed by an agreement between the local issuing agency and the Federal Department of Housing and Urban Development. These Notes provide financing for a wide range of financial assistance programs for housing, redevelopment, and related needs (such as low-income housing programs and renewal programs). 2. Tax Anticipation Notes are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenues, such as income, sales, use and business taxes, and are payable from these specific future taxes. 3. Revenue Anticipation Notes are issued in expectation of receipt of other types of revenues, such as Federal revenues available under the Federal Revenue Sharing Programs. 4. Bond Anticipation Notes are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the Notes. 5. Construction Loan Notes are sold to provide construction financing. After successful completion and acceptance, many projects receive permanent financing through the Federal Housing Administration under the Federal National Mortgage Association ("Fannie Mae") or the Government National Mortgage Association ("Ginnie Mae"). 6. Tax-Exempt Commercial Paper is a short-term obligation with a stated maturity of 365 days or less. It is issued by agencies of state and local governments to finance seasonal working capital needs or as short-term financing in anticipation of longer term financing. Municipal Bonds, which meet longer term capital needs and generally have maturities of more than one year when issued, have three principal classifications: 1. General Obligation Bonds are issued by such entities as states, counties, cities, towns and regional districts. The proceeds of these obligations are used to fund a wide range of public projects, including construction or improvement of schools, highways and roads, and water and sewer systems. The basic security behind General Obligation Bonds is the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to the rate or amount of special assessments. 2. Revenue Bonds in recent years have come to include an increasingly wide variety of types of municipal obligations. As with other kinds of municipal obligations, the issuers of revenue bonds may consist of virtually any form of state or local governmental entity, including states, state agencies, cities, counties, authorities of various kinds, such as public housing or redevelopment authorities, and special districts, such as water, sewer or sanitary districts. Generally, revenue bonds are secured by the revenues or net revenues derived from a particular facility, group of facilities, or, in some cases, the proceeds of a special excise or other specific revenue source. Revenue bonds are issued to finance a wide variety of capital projects including electric, gas, water and sewer systems; highways, bridges, and tunnels; port and airport facilities; colleges and universities; and hospitals. Many of these bonds provide additional security in the form of a debt service reserve fund to be used to make principal and interest payments. Various forms of credit enhancement, such as a bank letter of credit or municipal bond insurance, may also be employed in revenue bond issues. Housing authorities have a wide range of security, including partially or fully insured mortgages, rent subsidized and/or collateralized mortgages, and/or the net revenues from housing or other public projects. Some authorities provide further security in the form of a state's ability (without obligation) to make up deficiencies in the debt service reserve fund. In recent years, revenue bonds have been issued in large volumes for projects that are privately owned and operated (see 3 below). 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 19 Code, tax-exempt financing remains available, under prescribed conditions, for certain privately owned and operated rental multi-family housing facilities, nonprofit hospital and nursing home projects, airports, docks and wharves, mass commuting facilities and solid waste disposal projects, among others, and for the refunding (that is, the tax-exempt refinancing) of various kinds of other private commercial projects originally financed with tax-exempt bonds. In future years, the types of projects qualifying under the Code for tax-exempt financing are expected to become increasingly limited. Because of terminology formerly used in the Internal Revenue Code, virtually any form of private activity bond may still be referred to as an "industrial development bond," but more and more frequently revenue bonds have become classified according to the particular type of facility being financed, such as hospital revenue bonds, nursing home revenue bonds, multi-family housing revenues bonds, single family housing revenue bonds, industrial development revenue bonds, solid waste resource recovery revenue bonds, and so on. Other Municipal Obligations, incurred for a variety of financing purposes, include: municipal leases, which may take the form of a lease or an installment purchase or conditional sale contract, are issued by state and local governments and authorities to acquire a wide variety of equipment and facilities such as fire and sanitation vehicles, telecommunications equipment and other capital assets. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. To reduce this risk, the Fund will only purchase municipal leases subject to a non-appropriation clause when the payment of principal and accrued interest is backed by an unconditional irrevocable letter of credit, or guarantee of a bank or other entity that meets the criteria described in the Prospectus. Tax-exempt bonds are also categorized according to whether the interest is or is not includible in the calculation of alternative minimum taxes imposed on individuals, according to whether the costs of acquiring or carrying the bonds are or are not deductible in part by banks and other financial institutions, and according to other criteria relevant for Federal income tax purposes. Due to the increasing complexity of Internal Revenue Code and related requirements governing the issuance of tax-exempt bonds, industry practice has uniformly required, as a condition to the issuance of such bonds, but particularly for revenue bonds, an opinion of nationally recognized bond counsel as to the tax-exempt status of interest on the bonds. 20 [LOGO] JANUS VENTURE FUND 100 Fillmore Street Denver, CO 80206-4928 (800) 525-3713 - -------------------------------------------------------------------------------- Statement of Additional Information February 17, 1997 - -------------------------------------------------------------------------------- Janus Venture Fund (the "Fund") is a no-load mutual fund that seeks capital appreciation. The Fund normally invests at least 50% of its equity assets in securities issued by small-sized companies. Small-sized companies are those who have market capitalizations of less than $1 billion or annual gross revenues of less than $500 million. Subject to this policy, the Fund may also invest in larger issuers. Depending upon its portfolio manager's opinion of prevailing market, financial and economic conditions, the Fund may at times hold substantial positions in cash or interest-bearing securities. The Fund is a separate series of Janus Investment Fund, a Massachusetts business trust (the "Trust"). Each series of the Trust represents shares of beneficial interest in a separate portfolio of securities and other assets with its own objective and policies. The Fund is managed by Janus Capital Corporation ("Janus Capital"). THE FUND HAS DISCONTINUED PUBLIC SALES OF ITS SHARES TO NEW INVESTORS. HOWEVER, SHAREHOLDERS WHO MAINTAIN OPEN FUND ACCOUNTS ARE PERMITTED TO CONTINUE TO PURCHASE SHARES OF THE FUND AND TO REINVEST ANY DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN SHARES OF THE FUND. ONCE A SHAREHOLDER'S FUND ACCOUNT IS CLOSED, IT MAY NOT BE POSSIBLE FOR THAT SHAREHOLDER TO PURCHASE ADDITIONAL FUND SHARES. See the "Shareholder's Manual" section of the Prospectus for more details. The Fund may resume sales of its shares at some future date, although it has no present intention of doing so. This Statement of Additional Information ("SAI") is not a Prospectus and should be read in conjunction with the Fund's Prospectus dated February 17, 1997, which is incorporated by reference into this SAI and may be obtained from the Trust at the above phone number or address. This SAI contains additional and more detailed information about the Fund's operations and activities than the Prospectus. 1 JANUS VENTURE FUND STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page - -------------------------------------------------------------------------------- Investment Policies, Restrictions and Techniques .................. 3 Investment Objective ........................................... 3 Portfolio Policies ............................................. 3 Investment Restrictions ........................................ 3 Types of Securities and Investment Techniques .................. 4 Illiquid Securities .......................................... 4 Zero Coupon, Pay-In-Kind and Step Coupon Securities .......... 4 Pass-Through Securities ...................................... 5 Investment Company Securities ................................ 6 Depositary Receipts .......................................... 6 Municipal Obligations ........................................ 6 Other Income-Producing Securities ............................ 6 High-Yield/High-Risk Securities .............................. 6 Repurchase and Reverse Repurchase Agreements ................. 7 Futures, Options and Other Derivative Instruments ............ 7 Investment Adviser ................................................ 14 Custodian, Transfer Agent and Certain Affiliations ................ 15 Portfolio Transactions and Brokerage .............................. 16 Officers and Trustees ............................................. 17 Purchase of Shares ................................................ 19 Net Asset Value Determination .................................. 19 Reinvestment of Dividends and Distributions .................... 19 Redemption of Shares .............................................. 20 Shareholder Accounts .............................................. 20 Telephone Transactions ......................................... 20 Systematic Redemptions ......................................... 20 Retirement Plans .................................................. 20 Income Dividends, Capital Gains Distributions and Tax Status ...... 21 Principal Shareholders ............................................ 21 Miscellaneous Information ......................................... 21 Shares of the Trust ............................................ 22 Voting Rights .................................................. 22 Independent Accountants ........................................ 22 Registration Statement ......................................... 22 Performance Information ........................................... 22 Financial Statements .............................................. 23 Appendix A ........................................................ 24 Explanation of Rating Categories ............................... 24 - -------------------------------------------------------------------------------- 2 INVESTMENT POLICIES, RESTRICTIONS AND TECHNIQUES INVESTMENT OBJECTIVE As stated in the Prospectus, the Fund's investment objective is capital appreciation. Realization of income is not a significant investment consideration and any income realized on the Fund's investments therefore will be incidental to the Fund's objective. There can be no assurance that the Fund will, in fact, achieve its objective. The investment objective of the Fund is not fundamental and may be changed by the Trustees without shareholder approval. PORTFOLIO POLICIES The Prospectus discusses the types of securities in which the Fund will invest, portfolio policies of the Fund and the investment techniques of the Fund. The Prospectus includes a discussion of portfolio turnover policies. The Fund's portfolio turnover rates (total purchases or sales, whichever is less, compared to average monthly value of portfolio securities) for the fiscal years ended October 31, 1996 and October 31, 1995, were ___% and 113%, respectively. INVESTMENT RESTRICTIONS As indicated in the Prospectus, the Fund is subject to certain fundamental policies and restrictions that may not be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or the Fund if a matter affects just the Fund), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or the Fund) are present or represented by proxy. As fundamental policies, the Fund may not: (1) Own more than 10% of the outstanding voting securities of any one issuer and, as to seventy-five percent (75%) of the value of its total assets, purchase the securities of any one issuer (except cash items and "government securities" as defined under the Investment Company Act of 1940, as amended (the "1940 Act")), if immediately after and as a result of such purchase, the value of the holdings of the Fund in the securities of such issuer exceeds 5% of the value of the Fund's total assets. (2) Invest 25% or more of the value of its total assets in any particular industry (other than U.S. government securities). (3) Invest directly in real estate or interests in real estate; however, the Fund may own debt or equity securities issued by companies engaged in those businesses. (4) Purchase or sell physical commodities other than foreign currencies unless acquired as a result of ownership of securities (but this limitation shall not prevent the Fund from purchasing or selling options, futures, swaps and forward contracts or from investing in securities or other instruments backed by physical commodities). (5) Lend any security or make any other loan if, as a result, more than 25% of its total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements). (6) Act as an underwriter of securities issued by others, except to the extent that the Fund may be deemed an underwriter in connection with the disposition of portfolio securities of the Fund. As a fundamental policy, the Fund may, notwithstanding any other investment policy or limitation (whether or not fundamental), invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies and limitations as the Fund. The Trustees have adopted additional investment restrictions for the Fund. These restrictions are operating policies of the Fund and may be changed by the Trustees without shareholder approval. The additional investment restrictions adopted by the Trustees to date include the following: (a) The Fund will not (i) enter into any futures contracts and related options for purposes other than bona fide hedging transactions within the meaning of Commodity Futures Trading Commission ("CFTC") regulations if the aggregate initial margin and premiums required to establish positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions will exceed 5% of the fair market value of the Fund's net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; and (ii) enter into any futures contracts if the aggregate amount of the Fund's commitments under outstanding futures contracts positions would exceed the market value of its total assets. (b) The Fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short without the payment of any additional consideration therefor, and provided that transactions in futures, options, swaps and forward contracts are not deemed to constitute selling securities short. (c) The Fund does not currently intend to purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments and other deposits in connection 3 with transactions in futures, options, swaps and forward contracts shall not be deemed to constitute purchasing securities on margin. (d) The Fund may not mortgage or pledge any securities owned or held by the Fund in amounts that exceed, in the aggregate, 15% of the Fund's net asset value, provided that this limitation does not apply to reverse repurchase agreements, deposits of assets to margin, guarantee positions in futures, options, swaps or forward contracts, or the segregation of assets in connection with such contracts. (e) The Fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 25% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 25% of the value of the Fund's total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three business days to the extent necessary to comply with the 25% limitation. This policy shall not prohibit reverse repurchase agreements, deposits of assets to margin or guarantee positions in futures, options, swaps or forward contracts, or the segregation of assets in connection with such contracts. (f) The Fund does not currently intend to purchase any security or enter into a repurchase agreement if, as a result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. The Trustees, or the Fund's investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"), or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. (g) The Fund may not invest in companies for the purpose of exercising control of management. For purposes of the Fund's restriction on investing in a particular industry, the Fund 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 Fund may further classify issuers in accordance with industry classifications as published by the Securities and Exchange Commission ("SEC"). TYPES OF SECURITIES AND INVESTMENT TECHNIQUES ILLIQUID INVESTMENTS The Fund may invest up to 15% of its net assets in illiquid investments (i.e., securities that are not readily marketable). The Trustees of the Fund have authorized Janus Capital to make liquidity determinations with respect to its securities, including Rule 144A Securities, commercial paper and municipal lease obligations. Under the guidelines established by the Trustees, Janus Capital will consider the following factors: 1) the frequency of trades and quoted prices for the obligation; 2) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; 3) the willingness of dealers to undertake to make a market in the security; and 4) the nature of the security and the nature of 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. ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES The Fund may invest up to 10% of its assets in zero coupon, pay-in-kind and step coupon securities. Zero coupon bonds are issued and traded at a discount from their face value. They do not entitle the holder to any periodic payment of interest prior to maturity. Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. Current federal income tax law requires holders of zero coupon 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"), the Fund must distribute its investment company taxable income, including the original issue discount accrued on zero coupon or step coupon bonds. Because the Fund will not receive 4 cash payments on a current basis in respect of accrued original-issue discount on zero coupon bonds or step coupon bonds during the period before interest payments begin, in some years the Fund may have to distribute cash obtained from other sources in order to satisfy the distribution requirements under the Code. The Fund might obtain such cash from selling other portfolio holdings which might cause the Fund to incur capital gains or losses on the sale. Additionally, these actions are likely to reduce the assets to which Fund expenses could be allocated and to reduce the rate of return for the Fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for the Fund to sell the securities at the time. 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 Fund may invest in various types of pass-through securities, such as mortgage-backed securities, asset-backed securities and participation interests. A pass-through security is a share or certificate of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser of a pass-through security receives an undivided interest in the underlying pool of securities. The issuers of the underlying securities make interest and principal payments to the intermediary which are passed through to purchasers, such as the Fund. The most common type of pass-through securities are mortgage-backed securities. Government National Mortgage Association ("GNMA") Certificates are mortgage-backed securities that evidence an undivided interest in a pool of mortgage loans. GNMA Certificates differ from bonds in that principal is paid back monthly by the borrowers over the term of the loan rather than returned in a lump sum at maturity. The Fund will generally purchase "modified pass-through" GNMA Certificates, which entitle the holder to receive a share of all interest and principal payments paid and owned on the mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor actually makes the payment. GNMA Certificates are backed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. 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 Fund), like the payments on the underlying loans, represent both principal and interest. Although the underlying mortgage loans are for specified periods of time, such as 20 or 30 years, the borrowers can, and typically do, pay them off sooner. Thus, the security holders frequently receive prepayments of principal in addition to the principal that is part of the regular monthly payments. The Fund's portfolio manager will consider estimated prepayment rates in calculating the average weighted maturity of the Fund. A borrower is more likely to prepay a mortgage that bears a relatively high rate of interest. This means that in times of declining interest rates, higher yielding mortgage-backed securities held by the Fund might be converted to cash and the Fund will be forced to accept lower interest rates when that cash is used to purchase additional securities in the mortgage-backed securities sector or in other investment sectors. Additionally, prepayments during such periods will limit the Fund's ability to participate in as large a market gain as may be experienced with a comparable security not subject to prepayment. Asset-backed securities represent interests in pools of consumer loans and are backed by paper or accounts receivables originated by banks, credit card companies or other providers of credit. Generally, the originating bank or credit provider is neither the obligor or 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. 5 INVESTMENT COMPANY SECURITIES From time to time, the Fund may invest in securities of other investment companies, including money market funds managed by Janus Capital. The Fund's investments in such money market funds are subject to the terms of an exemptive order obtained by the Janus funds which currently provides that the Fund will limit its aggregate investment in a Janus money market fund to the greater of (i) 5% of its total assets or (ii) $2.5 million. The Fund is subject to the provisions of Section 12(d)(1) of the 1940 Act, which currently limits the Fund's investment in other investment companies to no more than 10% of its assets. DEPOSITARY RECEIPTS The Fund may invest in sponsored and unsponsored American Depositary Receipts ("ADRs"), which are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. The Fund may also invest in European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in other similar instruments representing securities of foreign companies. EDRs are receipts issued by a European financial institution evidencing an arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use in European securities markets. MUNICIPAL OBLIGATIONS The Fund may invest in municipal obligations issued by states, territories and possessions of the United States and the District of Columbia. The value of municipal obligations can be affected by changes in their actual or perceived credit quality. The credit quality of municipal obligations can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the region where the security is issued, and the liquidity of the security. Because municipal securities are generally traded over-the-counter, the liquidity of a particular issue often depends on the willingness of dealers to make a market in the security. The liquidity of some municipal obligations may be enhanced by demand features, which would enable the Fund to demand payment on short notice from the issuer or a financial intermediary. OTHER INCOME-PRODUCING SECURITIES Other types of income producing securities that the Fund may purchase include, but are not limited to, the following types of securities: Variable and floating rate obligations. These types of securities have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. Variable and floating rate securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate (the "underlying index"). See also "Inverse Floaters." Standby commitments. These instruments, which are similar to a put, give the Fund the option to obligate a broker, dealer or bank to repurchase a security held by the Fund at a specified price. Tender option bonds. Tender option bonds are generally long-term securities that are coupled with the option to tender the securities to a bank, broker-dealer or other financial institution at periodic intervals and receive the face value of the bond. This type of security is commonly used as a means of enhancing the security's liquidity. Inverse floaters. Inverse floaters are debt instruments whose interest bears an inverse relationship to the interest rate on another security. Certain inverse floaters may have an interest rate reset mechanism that multiplies the effects of change in the underlying index. Such mechanism may increase the volatility of the security's market value. Certain variable rate securities (including certain mortgage-backed securities) pay interest at a rate that varies inversely to prevailing short-term interest rates (sometimes referred to as inverse floaters). For example, upon reset the interest rate payable on a security may go down when the underlying index has risen. The Fund will not invest more than 5% of its assets in inverse floaters. The Fund will purchase standby commitments, tender option bonds and instruments with demand features primarily for the purpose of increasing the liquidity of its portfolio. HIGH-YIELD/HIGH-RISK SECURITIES The Fund intends to invest less than 35% of its net assets in debt securities that are rated below investment grade (e.g., securities rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's") or Ba or lower by Moody's Investors Service, Inc. ("Moody's")). Lower rated bonds involve a higher degree of credit risk, which is the risk that the issuer will not 6 make interest or principal payments when due. In the event of an unanticipated default, the Fund would experience a reduction in its income, and could expect a decline in the market value of the securities so affected. The Fund may also invest in unrated debt securities of foreign and domestic issuers. Unrated debt, while not necessarily of lower quality than rated securities, may not have as broad a market. Sovereign debt of foreign governments is generally rated by country. Because these ratings do not take into account individual factors relevant to each issue and may not be updated regularly, Janus Capital may treat such securities as unrated debt. Because of the size and perceived demand of the issue, among other factors, certain municipalities may not incur the costs of obtaining a rating. The Fund's portfolio managers will analyze the credit- worthiness of the issuer, as well as any financial institution or other party responsible for payments on the security, in determining whether to purchase unrated municipal bonds. Unrated debt securities will be included in the 35% limit unless the portfolio manager deems such securities to be the equivalent of investment grade securities. Subject to the above limits, the Fund may purchase defaulted securities only when its portfolio manager believes, based upon his analysis of the financial condition, results of operations and economic outlook of an issuer, that there is potential for resumption of income payments and that the securities offer an unusual opportunity for capital appreciation. Notwithstanding the portfolio manager's belief as to the resumption of income, however, the purchase of any security on which payment of interest or dividends is suspended involves a high degree of risk. Such risk includes, among other things, the following: 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 the Fund generally will purchase securities for which its portfolio manager expects an active market to be maintained, defaulted securities may be less actively traded than other securities and it may be difficult to dispose of substantial holdings of such securities at prevailing market prices. The Fund will limit holdings of any such securities to amounts that the portfolio manager believes could be readily sold, and holdings of such securities would, in any event, be limited so as not to limit the Fund's ability to readily dispose of securities to meet redemptions. Other. Defaulted securities require active monitoring and may, at times, require participation in bankruptcy or receivership proceedings on behalf of the Fund. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS In a repurchase agreement, the Fund purchases a security and simultaneously commits to resell that security to the seller at an agreed upon price on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon incremental amount that is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value (at least equal to the amount of the agreed upon resale price and marked-to-market daily) of the underlying security or "collateral." The Fund may engage in a repurchase agreement with respect to any security in which it is authorized to invest. A risk associated with repurchase agreements is the failure of the seller to repurchase the securities as agreed, which may cause the Fund to suffer a loss if the market value of such securities declines before they can be liquidated on the open market. In the event of bankruptcy or insolvency of the seller, the Fund may encounter delays and incur costs in liquidating the underlying security. Repurchase agreements that mature in more than seven days will be subject to the 15% limit on illiquid investments. While it is possible to eliminate all risks from these transactions, it is the policy of the Fund to limit repurchase agreements to those parties whose creditworthiness has been reviewed and found satisfactory by Janus Capital. The Fund may use reverse repurchase agreements to provide cash to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities. In a reverse repurchase agreement, the Fund sells a portfolio security to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase the instrument at a particular price and time. While a reverse repurchase agreement is outstanding, the Fund will maintain cash and appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. The Fund will enter into reverse repurchase agreements only with parties that Janus Capital deems creditworthy. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS Futures Contracts. The Fund may enter into contracts for the purchase or sale for future delivery of fixed-income securities, foreign currencies or contracts based on financial indices, including indices of U.S. government securities, foreign government securities, equity or fixed-income securities. U.S. futures contracts are traded on exchanges which have been designated "contract markets" by the CFTC and must be executed through a futures commission merchant ("FCM"), or brokerage 7 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 Fund's custodian for the benefit of the FCM. Initial margin payments are similar to good faith deposits or performance bonds. Unlike margin extended by a securities broker, initial margin payments do not constitute purchasing securities on margin for purposes of the Fund's investment limitations. If the value of either party's position declines, that party will be required to make additional "variation margin" payments for the benefit of the FCM to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. In the event of the bankruptcy of the FCM that holds margin on behalf of the Fund, the Fund may be entitled to a return of margin owed to the Fund only in proportion to the amount received by the FCM's other customers. Janus Capital will attempt to minimize the risk by careful monitoring of the creditworthiness of the FCMs with which the Fund does business and by depositing margin payments in a segregated account with the Fund's custodian. The Fund intends to comply with guidelines of eligibility for exclusion from the definition of the term "commodity pool operator" adopted by the CFTC and the National Futures Association, which regulate trading in the futures markets. The Fund will use futures contracts and related options primarily for bona fide hedging purposes within the meaning of CFTC regulations. To the extent that the Fund holds positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions, the aggregate initial margin and premiums required to establish such positions will not exceed 5% of the fair market value of the Fund's net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. Although the Fund will segregate cash and liquid assets in an amount sufficient to cover its open futures obligations, the segregated assets would be available to the Fund immediately upon closing out the futures position, while settlement of securities transactions could take several days. However, because the Fund's cash that may otherwise be invested would be held uninvested or invested in other liquid assets so long as the futures position remains open, the Fund's return could be diminished due to the opportunity losses of foregoing other potential investments. The Fund's primary purpose in entering into futures contracts is to protect the Fund from fluctuations in the value of securities or interest rates without actually buying or selling the underlying debt or equity security. For example, if the Fund anticipates an increase in the price of stocks, and it intends to purchase stocks at a later time, the Fund could enter into a futures contract to purchase a stock index as a temporary substitute for stock purchases. If an increase in the market occurs that influences the stock index as anticipated, the value of the futures contracts will increase, thereby serving as a hedge against the Fund not participating in a market advance. This technique is sometimes known as an anticipatory hedge. To the extent the Fund enters into futures contracts for this purpose, the segregated assets maintained to cover the Fund's obligations with respect to the futures contracts will consist of other liquid assets from its portfolio in an amount equal to the difference between the contract price and the aggregate value of the initial and variation margin payments made by the Fund with respect to the futures contracts. Conversely, if the Fund holds stocks and seeks to protect itself from a decrease in stock prices, the Fund might sell stock index futures contracts, thereby hoping to offset the potential decline in the value of its portfolio securities by a corresponding increase in the value of the futures contract position. The Fund could protect against a decline in stock prices by selling portfolio securities and investing in money market instruments, but the use of futures contracts enables it to maintain a defensive position without having to sell portfolio securities. If the Fund owns Treasury bonds and the portfolio manager expects interest rates to increase, the Fund may take a short position in interest rate futures contracts. Taking such a position would have much the same effect as the Fund selling Treasury bonds in its portfolio. If interest rates increase as anticipated, the value of the Treasury bonds would decline, but the value of the Fund's interest rate futures contract will increase, thereby keeping the net asset value of the Fund from declining as much as it may have otherwise. If, on the other hand, the portfolio manager expects interest rates to decline, the Fund may take a long position in interest rate futures contracts in anticipation of later closing out the futures position and purchasing bonds. Although the Fund can accomplish similar results by buying securities with long maturities and selling securities with short maturities, given the greater liquidity of the futures market than the cash market, it may be possible to accomplish the same result more easily and more quickly by using futures contracts as an investment tool to reduce risk. 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 8 in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of the foregoing distortions, a correct forecast of general price trends by the portfolio manager still may not result in a successful use of futures. Futures contracts entail risks. Although the Fund believes that use of such contracts will benefit the Fund, the Fund's overall performance could be worse than if the Fund had not entered into futures contracts if the portfolio manager's investment judgement proves incorrect. For example, if the Fund has hedged against the effects of a possible decrease in prices of securities held in its portfolio and prices increase instead, the Fund will lose part or all of the benefit of the increased value of these securities because of offsetting losses in its futures positions. In addition, if the Fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements. Those sales may be, but will not necessarily be, at increased prices which reflect the rising market and may occur at a time when the sales are disadvantageous to the Fund. The prices of futures contracts depend primarily on the value of their underlying instruments. Because there are a limited number of types of futures contracts, it is possible that the standardized futures contracts available to the Fund will not match exactly the Fund's current or potential investments. The Fund may buy and sell futures contracts based on underlying instruments with different characteristics from the securities in which it typically invests - 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 the Fund's investments. Futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments closely correlate with the Fund's investments. Futures prices are affected by factors such as current and anticipated short-term interest rates, changes in volatility of the underlying instruments and the time remaining until expiration of the contract. Those factors may affect securities prices differently from futures prices. Imperfect correlations between the Fund's investments and its futures positions also may result from differing levels of demand in the futures markets and the securities markets, from structural differences in how futures and securities are traded, and from imposition of daily price fluctuation limits for futures contracts. The Fund may buy or sell futures contracts with a greater or lesser value than the securities it wishes to hedge or is considering purchasing in order to attempt to compensate for differences in historical volatility between the futures contract and the securities, although this may not be successful in all cases. If price changes in the Fund's futures positions are poorly correlated with its other investments, its futures positions may fail to produce desired gains or result in losses that are not offset by the gains in the Fund's other investments. Because futures contracts are generally settled within a day from the date they are closed out, compared with a settlement period of three days for some types of securities, the futures markets can provide superior liquidity to the securities markets. Nevertheless, there is no assurance that a liquid secondary market will exist for any particular futures contract at any particular time. In addition, futures exchanges may establish daily price fluctuation limits for futures contracts and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit is reached, it may be impossible for the Fund to enter into new positions or close out existing positions. If the secondary market for a futures contract is not liquid because of price fluctuation limits or otherwise, the Fund may not be able to promptly liquidate unfavorable futures positions and potentially could be required to continue to hold a futures position until the delivery date, regardless of changes in its value. As a result, the Fund's access to other assets held to cover its futures positions also could be impaired. Options on Futures Contracts. The Fund may buy and write put and call options on futures contracts. An option on a future gives the Fund the right (but not the obligation) to buy or sell a futures contract at a specified price on or before a specified date. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or the price of the underlying instrument, ownership of the option may or may not be less risky than ownership of the futures contract or the underlying instrument. As with the purchase of futures contracts, when the Fund is not fully invested it may buy a call option on a futures contract to hedge against a market advance. The writing of a call option on a futures contract constitutes a partial hedge against declining prices of the security or foreign currency which is deliverable under, or of the index comprising, the futures contract. If the future's price at the expiration of the option is below the exercise price, the Fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the Fund's portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the security or foreign currency which is deliverable under, or of the index comprising, the futures contract. If the futures' price at expiration of the option is higher than the exercise price, the Fund will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which the Fund is considering buying. If a call or put option the Fund has written is exercised, the Fund will incur a loss which will be reduced by the amount of the premium it received. Depending on the degree of correlation between the change in the value of its portfolio securities and changes in the value of the futures positions, the Fund's losses from existing options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. 9 The purchase of a put option on a futures contract is similar in some respects to the purchase of protective put options on portfolio securities. For example, the Fund may buy a put option on a futures contract to hedge its portfolio against the risk of falling prices or rising interest rates. The amount of risk the Fund assumes when it buys an option on a futures contract is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the options bought. Forward Contracts. A forward contract is an agreement between two parties in which one party is obligated to deliver a stated amount of a stated asset at a specified time in the future and the other party is obligated to pay a specified amount for the assets at the time of delivery. The Fund may enter into forward contracts to purchase and sell government securities, equity or income securities, foreign currencies or other financial instruments. Forward contracts generally are traded in an interbank market conducted directly between traders (usually large commercial banks) and their customers. Unlike futures contracts, which are standardized contracts, forward contracts can be specifically drawn to meet the needs of the parties that enter into them. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated exchange. The following discussion summarizes the Fund's principal uses of forward foreign currency exchange contracts ("forward currency contracts"). The Fund may enter into forward currency contracts with stated contract values of up to the value of the Fund's assets. A forward currency contract is an obligation to buy or sell an amount of a specified currency for an agreed price (which may be in U.S. dollars or a foreign currency). The Fund will exchange foreign currencies for U.S. dollars and for other foreign currencies in the normal course of business and may buy and sell currencies through forward currency contracts in order to fix a price for securities it has agreed to buy or sell ("transaction hedge"). The Fund also may hedge some or all of its investments denominated in a foreign currency or exposed to foreign currency fluctuations against a decline in the value of that currency relative to the U.S. dollar by entering into forward currency contracts to sell an amount of that currency (or a proxy currency whose performance is expected to replicate or exceed the performance of that currency relative to the U.S. dollar) approximating the value of some or all of its portfolio securities denominated in that currency ("position hedge") or by participating in options or futures contracts with respect to the currency. The Fund also may enter into a forward currency contract with respect to a currency where the Fund is considering the purchase or sale of investments denominated in that currency but has not yet selected the specific investments ("anticipatory hedge"). In any of these circumstances the Fund may, alternatively, enter into a forward currency contract to purchase or sell one foreign currency for a second currency that is expected to perform more favorably relative to the U.S. dollar if the portfolio 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 the Fund's foreign currency denominated portfolio securities. The matching of the increase in value of a forward contract and the decline in the U.S. dollar equivalent value of the foreign currency denominated asset that is the subject of the hedge generally will not be precise. Shifting the Fund's currency exposure from one foreign currency to another removes the Fund's opportunity to profit from increases in the value of the original currency and involves a risk of increased losses to the Fund if its portfolio 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 the Fund than if it had not entered into such contracts. The Fund will cover outstanding forward currency contracts by maintaining liquid portfolio securities denominated in or whose value its tied to, the currency underlying the forward contract or the currency being hedged. To the extent that the Fund is not able to cover its forward currency positions with underlying portfolio securities, the Fund's custodian will segregate cash or other liquid assets having a value equal to the aggregate amount of the Fund's commitments under forward contracts entered into with respect to position hedges, cross-hedges and anticipatory hedges. If the value of the securities used to cover a position or the value of segregated assets declines, the Fund will find alternative cover or segregate additional cash or liquid assets on a daily basis so that the value of the covered and segregated assets will be equal to the amount of the Fund's commitments with respect to such contracts. As an alternative to segregating assets, the Fund may buy call options permitting the Fund to buy the amount of foreign currency being hedged by a forward sale contract or the Fund may buy put options permitting it to sell the amount of foreign currency subject to a forward buy contract. While forward contracts are not currently regulated by the CFTC, the CFTC may in the future assert authority to regulate forward contacts. In such event, the Fund's ability to utilize forward contracts may be restricted. In addition, the Fund may not always be able to enter into forward contracts at attractive prices and may be limited in its ability to use these contracts to hedge Fund assets. Options on Foreign Currencies. The Fund may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. For example, a decline in the U.S. dollar value of a 10 foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Fund may buy put options on the foreign currency. If the value of the currency declines, the Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio. Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, the Fund could sustain losses on transactions in foreign currency options that would require the Fund to forego a portion or all of the benefits of advantageous changes in those rates. The Fund may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, the Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the decline in value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Fund to hedge the increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may lose all or a portion of the benefits which might otherwise have been obtained from favorable movements in exchange rates. The Fund may write covered call options on foreign currencies. A call option written on a foreign currency by the Fund is "covered" if the Fund owns the foreign currency underlying the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currencies held in its portfolio. A call option is also covered if the Fund has a call on the same foreign currency in the same principal amount as the call written if the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written, if the difference is maintained by the Fund in cash or other liquid assets in a segregated account with the Fund's custodian. The Fund also may write call options on foreign currencies for cross-hedging purposes. A call option on a foreign currency is for cross-hedging purposes if it is designed to provide a hedge against a decline due to an adverse change in the exchange rate in the U.S. dollar value of a security which the Fund owns or has the right to acquire and which is denominated in the currency underlying the option. Call options on foreign currencies which are entered into for cross-hedging purposes are not covered. However, in such circumstances, the Fund will collateralize the option by segregating cash or other liquid assets in an amount not less than the value of the underlying foreign currency in U.S. dollars marked-to-market daily. Options on Securities. In an effort to increase current income and to reduce fluctuations in net asset value, the Fund may write covered put and call options and buy put and call options on securities that are traded on United States and foreign securities exchanges and over-the-counter. The Fund may write and buy options on the same types of securities that the Fund may purchase directly. A put option written by the Fund is "covered" if the Fund (i) segregates cash not available for investment or other liquid assets with a value equal to the exercise price of the put with the Fund's custodian or (ii) holds a put on the same security and in the same principal amount as the put written and the exercise price of the put held is equal to or greater than the exercise price of the put written. The premium paid by the buyer of an option will reflect, among other things, the relationship of the exercise price to the market price and the volatility of the underlying security, the remaining term of the option, supply and demand and interest rates. A call option written by the Fund is "covered" if the Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by the Fund's custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also deemed to be covered if the Fund holds a call on the same security and in the same principal amount as the call written and the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the difference is maintained by the Fund in cash and other liquid assets in a segregated account with its custodian. 11 The Fund also may write call options that are not covered for cross-hedging purposes. The Fund collateralizes its obligation under a written call option for cross-hedging purposes by segregating cash or other liquid assets in an amount not less than the market value of the underlying security, marked-to-market daily. The Fund would write a call option for cross-hedging purposes, instead of writing a covered call option, when the premium to be received from the cross-hedge transaction would exceed that which would be received from writing a 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 the Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. In the case of a written put option, such transaction will permit the Fund to write another put option to the extent that the exercise price is secured by other liquid assets. Effecting a closing transaction also will permit the Fund to use the cash or proceeds from the concurrent sale of any securities subject to the option for other investments. If the Fund desires to sell a particular security from its portfolio on which it has written a call option, the Fund will effect a closing transaction prior to or concurrent with the sale of the security. The Fund will realize a profit from a closing transaction if the price of the purchase transaction is less than the premium received from writing the option or the price received from a sale transaction is more than the premium paid to buy the option. The Fund will realize a loss from a closing transaction if the price of the purchase transaction is more than the premium received from writing the option or the price received from a sale transaction is less than the premium paid to buy the option. Because increases in the market of a call option generally will reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by the Fund. An option position may be closed out only where a secondary market for an option of the same series exists. If a secondary market does not exist, the Fund may not be able to effect closing transactions in particular options and the Fund would have to exercise the options in order to realize any profit. If the Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise. The absence of a liquid secondary market may be due to the following: (i) insufficient trading interest in certain options, (ii) restrictions imposed by a national securities exchange ("Exchange") on which the option is traded on opening or closing transactions or both, (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities, (iv) unusual or unforeseen circumstances that interrupt normal operations on an Exchange, (v) the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may not at all times be adequate to handle current trading volume, or (vi) one or more Exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that Exchange (or in that class or series of options) would cease to exist, although outstanding options on that Exchange that had been issued by the OCC as a result of trades on that Exchange would continue to be exercisable in accordance with their terms. The Fund may write options in connection with buy-and-write transactions. In other words, the Fund may buy a security and then write a call option against that security. The exercise price of such call will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below ("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time the option is written. Buy-and-write transactions using in-the-money call options may be used when it is expected that the price of the underlying security will remain flat or decline moderately during the option period. Buy-and-write transactions using at-the-money call options may be used when it is expected that the price of the underlying security will remain fixed or advance moderately during the option period. Buy-and-write transactions using out-of-the-money call options may be used when it is expected that the premiums received from writing the call option plus the appreciation in the market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the underlying security alone. If the call options are exercised in such transactions, the Fund's maximum gain will be the premium received by it for writing the option, adjusted upwards or downwards by the difference 12 between the Fund's purchase price of the security and the exercise price. If the options are not exercised and the price of the underlying security declines, the amount of such decline will be offset by the amount of premium received. The writing of covered put options is similar in terms of risk and return characteristics to buy-and-write transactions. If the market price of the underlying security rises or otherwise is above the exercise price, the put option will expire worthless and the Fund's gain will be limited to the premium received. If the market price of the underlying security declines or otherwise is below the exercise price, the Fund may elect to close the position or take delivery of the security at the exercise price and the Fund's return will be the premium received from the put options minus the amount by which the market price of the security is below the exercise price. The Fund may buy put options to hedge against a decline in the value of its portfolio. By using put options in this way, the Fund will reduce any profit it might otherwise have realized in the underlying security by the amount of the premium paid for the put option and by transaction costs. The Fund may buy call options to hedge against an increase in the price of securities that it may buy in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire worthless to the Fund. Eurodollar Instruments. The Fund may make investments in Eurodollar instruments. Eurodollar instruments are U.S. dollar-denominated futures contracts or options thereon which are linked to the London Interbank Offered Rate ("LIBOR"), although foreign currency-denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income instruments are linked. Swaps and Swap-Related Products. The Fund may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending upon whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Fund's obligations over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Fund's custodian. If the Fund enters into an interest rate swap on other than a net basis, it would maintain a segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one NRSRO at the time of entering into such transaction. Janus Capital will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. Janus Capital has determined that, as a result, the swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. To the extent the Fund sells (i.e., writes) caps and floors, it will segregate cash or other liquid assets having an aggregate net asset value at least equal to the full amount, accrued on a daily basis, of its obligations with respect to any caps or floors. There is no limit on the amount of interest rate swap transactions that may be entered into by the Fund. These transactions may in some instances involve the delivery of securities or other underlying assets by the Fund or its counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of loss with respect to interest rate swaps is limited to the net amount of the payments that the Fund is contractually obligated to make. If the other party to an interest rate swap that is not collateralized defaults, the Fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. The Fund may buy and sell (i.e., write) caps and floors without limitation, subject to the segregation requirement described above. Additional Risks of Options on Foreign Currencies, Forward Contracts and Foreign Instruments. Unlike transactions entered into by the Fund in futures contracts, options on foreign currencies and forward contracts are not traded on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) by the SEC. To the contrary, such instruments are traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain Exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on currencies may be traded over-the-counter. In an over-the-counter trading environment, many of the protections afforded to Exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the buyer of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, an option writer and a buyer or seller of futures or forward contracts could lose amounts substantially in excess of any premium 13 received or initial margin or collateral posted due to the potential additional margin and collateral requirements associated with such positions. Options on foreign currencies traded on Exchanges are within the jurisdiction of the SEC, as are other securities traded on Exchanges. As a result, many of the protections provided to traders on organized Exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on an Exchange are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on an Exchange may be more readily available than in the over-the-counter market, potentially permitting the Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. 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 the Fund's ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) low trading volume. INVESTMENT ADVISER As stated in the Prospectus, the Fund has an Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. The Advisory Agreement provides that Janus Capital will furnish continuous advice and recommendations concerning the Fund's investments, provide office space for the Fund, and pay the salaries, fees and expenses of all Fund officers and of those Trustees who are affiliated with Janus Capital. Janus Capital also may make payments to selected broker-dealer firms or institutions which perform recordkeeping or other services with respect to shareholder accounts. The minimum aggregate size required for eligibility for such payments, and the factors in selecting the broker-dealer firms and institutions to which they will be made, are determined from time to time by Janus Capital. Janus Capital is also authorized to perform the management and administrative services necessary for the operation of the Fund. The Fund pays custodian and transfer agent fees and expenses, brokerage commissions and dealer spreads and other expenses in connection with the execution of portfolio transactions, legal and accounting expenses, interest and taxes, registration fees, expenses of shareholders' meetings and reports to shareholders, fees and expenses of Trustees who are not affiliated with Janus Capital, costs of preparing, printing and mailing the Fund's Prospectus and SAI to current shareholders, and other costs of complying with applicable laws regulating the sale of Fund shares. Pursuant to the Advisory Agreement, Janus Capital furnishes certain other services, including net asset value determination and Fund accounting, recordkeeping, and blue sky registration and monitoring services, for which the Fund may reimburse Janus Capital for its costs. The Fund has agreed to compensate Janus Capital for its services by the monthly payment of a fee at the annual rate of 1% of the first $30 million of the Fund's average daily net assets, 0.75% of the next $270 million of the Fund's average daily net assets, 0.70% of the next $200 million of the Fund's average daily net assets, and 0.65% of the average daily net assets of the Fund in excess of $500 million. For the fiscal year ended October 31, 1996, the investment advisory fee was $___ [TO BE FILED BY AMENDMENT]. For the fiscal years ended October 31, 1995 and October 31, 1994, the Fund incurred investment advisory fees of $10,947,796 and $10,631,388, respectively. Janus Capital did not waive any portion of its fee in any of these years. The Advisory Agreement was restated on May 21, 1996, and it will continue in effect until June 16, 1997, and thereafter from year to year so long as such continuance is approved annually by a majority of the Fund's Trustees who are not parties to the Advisory Agreement or interested persons of any such party, and by either a majority of the outstanding voting shares or the Trustees of the Fund. The Advisory Agreement i) may be terminated without the payment of any penalty by the Fund or Janus Capital on 60 days' written notice; ii) terminates automatically in the event of its assignment; and iii) generally, may not be amended without the approval by vote of a majority of the Trustees of the Fund, including the Trustees who are not interested 14 persons of the Fund or Janus Capital and, to the extent required by the 1940 Act, the vote of a majority of the outstanding voting securities of the Fund. Janus Capital also performs investment advisory services for other mutual funds, and for individual, charitable, corporate and retirement accounts. Investment decisions for each account managed by Janus Capital, including the Fund, are made independently from those for any other account that is or may in the future become managed by Janus Capital or its affiliates. If, however, a number of accounts managed by Janus Capital are contemporaneously engaged in the purchase or sale of the same security, the orders may be aggregated and/or the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by an account or the size of the position obtained or liquidated for an account. Pursuant to an exemptive order granted by the SEC, the Fund and other funds advised by Janus Capital may also transfer daily uninvested cash balances into one or more joint trading accounts. Assets in the joint trading accounts are invested in money market instruments and the proceeds are allocated to the participating Funds on a pro rata basis. Each account managed by Janus Capital has its own investment objective and policies and is managed accordingly by a particular portfolio manager or team of portfolio managers. As a result, from time to time two or more different managed accounts may pursue divergent investment strategies with respect to investments or categories of investments. As indicated in the Prospectus, Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy regarding personal investing by directors, officers and employees of Janus Capital and the Fund. The policy requires investment personnel and officers of Janus Capital, inside directors of Janus Capital and the Fund and other designated persons deemed to have access to current trading information to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for trading authority will be denied when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction known to be under consideration for or to have been effected on behalf of any client account, including the Fund. In addition to the pre-clearance requirement described above, the policy subjects investment personnel, officers and directors/ Trustees of Janus Capital and the Fund to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with Janus Capital's policy. Those persons also may be required under certain circumstances to forfeit their profits made from personal trading. The provisions of the policy are administered by and subject to exceptions authorized by Janus Capital. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS State Street Bank and Trust Company ("State Street"), P.O. Box 0351, Boston, Massachusetts 02117-0351 is the custodian of the domestic securities and cash of the Fund. State Street and the foreign subcustodians selected by it and approved by the Trustees, have custody of the assets of the Fund held outside the U.S. and cash incidental thereto. The custodian and subcustodians hold the Fund's assets in safekeeping and collect and remit the income thereon, subject to the instructions of the Fund. Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Fund's transfer agent. In addition, Janus Service provides certain other administrative, recordkeeping and shareholder relations services to the Fund. For transfer agency and other services, Janus Service receives a fee calculated at an annual rate of .16% of average net assets of the Fund. In addition, the Fund pays DST Systems, Inc. ("DST"), a subsidiary of KCSI, license fees at the rate of $2.56 per shareholder account for the use of DST's shareholder accounting system. The Fund pays DST for the use of their portfolio and fund accounting system a base fee paid monthly between $250 to $1,250 based on the number of Janus funds utilizing the system and an asset charge of $1 per million dollars of net assets (not to exceed $500 per month). In addition, the Fund pays DST postage and forms costs of a DST affiliate incurred in mailing Fund shareholder transaction confirmations. The Trustees have authorized the Fund to use another affiliate of DST as introducing broker for certain Fund portfolio transactions as a means to reduce Fund expenses through a credit against the charges of DST and its affiliates with regard to commissions earned by such affiliate. See "Portfolio Transactions and Brokerage." Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Fund. Janus Distributors is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the National Association of Securities Dealers, Inc. Janus Distributors acts as the agent of the Fund in connection with the sale of its shares in all states in which the shares are registered and in which Janus Distributors is qualified as a broker-dealer. Under the Distribution Agreement, Janus Distributors continuously offers the 15 Fund's shares and accepts orders at net asset value. No sales charges are paid by investors. Promotional expenses in connection with offers and sales of shares are paid by Janus Capital. PORTFOLIO TRANSACTIONS AND BROKERAGE Decisions as to the assignment of portfolio business for the Fund and negotiation of its commission rates are made by Janus Capital whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all portfolio transactions. The Fund may trade foreign securities in foreign countries because the best available market for these securities is often on foreign exchanges. In transactions on foreign stock exchanges, brokers' commissions are frequently fixed and are often higher than in the United States, where commissions are negotiated. In selecting brokers and dealers and in negotiating commissions, Janus Capital considers a number of factors, including but not limited to: Janus Capital's knowledge of currently available negotiated commission rates or prices of securities currently available and other current transaction costs; the nature of the security being traded; the size and type of the transaction; the nature and character of the markets for the security to be purchased or sold; the desired timing of the trade; the activity existing and expected in the market for the particular security; confidentiality; the quality of the execution, clearance and settlement services; financial stability of the broker or dealer; the existence of actual or apparent operational problems of any broker or dealer; rebates of commissions by a broker to the Fund or to a third party service provider to the Fund to pay Fund expenses; and research products or services provided. In recognition of the value of the foregoing factors, Janus Capital may place portfolio transactions with a broker or dealer with whom it has negotiated a commission that is in excess of the commission another broker or dealer would have charged for effecting that transaction if Janus Capital determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research provided by such broker or dealer viewed in terms of either that particular transaction or of the overall responsibilities of Janus Capital. Research may include furnishing advice, either directly or through publications or writings, as to the value of securities, the advisability of purchasing or selling specific securities and the availability of securities or purchasers or sellers of securities; furnishing seminars, information, analyses and reports concerning issuers, industries, securities, trading markets and methods, legislative developments, changes in accounting practices, economic factors and trends and portfolio strategy; access to research analysts, corporate management personnel, industry experts, economists and government officials; comparative performance evaluation and technical measurement services and quotation services, and products and other services (such as third party publications, reports and analyses, and computer and electronic access, equipment, software, information and accessories that deliver, process or otherwise utilize information, including the research described above) that assist Janus Capital in carrying out its responsibilities. Most brokers and dealers used by Janus Capital provide research and other services described above. For the year ended October 31, 1996, the Fund paid $______ of its total brokerage commissions to brokers and dealers in transactions identified for execution primarily on the basis of research and other services provided to the Fund on transactions of $______, which represents ___% of all transactions. Research received from brokers or dealers is supplemental to Janus Capital's own research efforts. Janus Capital may use research products and services in servicing other accounts in addition to the Fund. If Janus Capital determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, Janus Capital may allocate the costs of such service or product accordingly. Only that portion of the product or service that Janus Capital determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may create a conflict of interest for Janus Capital. Janus Capital does not enter into agreements with any brokers regarding the placement of securities transactions because of the research services they provide. It does, however, have an internal procedure for allocating transactions in a manner consistent with its execution policy to brokers that it has identified as providing superior executions and research, research-related products or services which benefit its advisory clients, including the Fund. Research products and services incidental to effecting securities transactions furnished by brokers or dealers may be used in servicing any or all of Janus Capital's clients and such research may not necessarily be used by Janus Capital in connection with the accounts which paid commissions to the broker-dealer providing such research products and services. Janus Capital may consider sales of Fund shares by a broker-dealer or the recommendation of a broker-dealer to its customers that they purchase Fund shares as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Janus Capital may also consider payments made by brokers effecting transactions for the Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. In placing portfolio business with such broker-dealers, Janus Capital will seek the best execution of each transaction. When the Fund purchases or sells a security in the over-the-counter market, the transaction takes place directly with a principal market-maker, without the use of a broker, except in those circumstances where in the opinion of Janus Capital better prices and executions will be achieved through the use of a broker. 16 The Fund's Trustees have authorized Janus Capital to place transactions with DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of DST. Janus Capital may do so if it reasonably believes that the quality of the transaction and the associated commission are fair and reasonable and if, overall, the associated transaction costs, net of any credits described above under "Custodian, Transfer Agent and Certain Affiliations," are lower than those that would otherwise be incurred. The total amount of brokerage commissions paid by the Fund during the fiscal year ended October 31, 1996, was $______. For the fiscal years ended October 31, 1995 and October 31, 1994, the Fund paid brokerage commissions of $3,920,258 and $3,243,457, respectively. Included in the brokerage commissions paid for the fiscal year ended October 31, 1996, was $______ paid through DSTS, which served to reduce by $______ certain out-of-pocket expenses paid by the Fund. Included in brokerage commissions paid for the fiscal years ended October 31, 1995 and October 31, 1994, was $143,719 and $116,255, respectively, paid through DSTS which served to reduce by $107,789 and $87,191, respectively, certain out-of-pocket expenses. Brokerage commissions paid through DSTS for the 1996 fiscal year represented ___% of the Fund's aggregate brokerage commissions for such fiscal year, while ___% of the aggregate dollar amount of the Fund's portfolio transactions involving a commission payment were executed through DSTS. The difference between commissions paid through DSTS and expenses reduced constitute commissions paid to an unaffiliated clearing broker. Differences in the percentage of total commissions versus the percentage of total transactions is due, in part, to variations among share prices and number of shares traded, while average price per share commission rates were substantially the same. OFFICERS AND TRUSTEES The following are the names of the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years. In August 1992, Janus Venture Fund, Inc. and Janus Twenty Fund, Inc. (both separate Maryland corporations) and the Janus Income Series (a Massachusetts business trust comprised of Janus Flexible Income Fund series) were reorganized into separate series of the Trust. In general, all references to Trust offices in this section include comparable offices with the respective predecessor funds, unless a Trust office was filled subsequent to the reorganization. Thomas H. Bailey*# - Trustee, Chairman and President 100 Fillmore Street Denver, CO 80206-4928 Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief Executive Officer, Director and President of Janus Capital. Chairman and Director of IDEX Management, Inc., Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a group of mutual funds) ("IDEX"). James P. Craig, III*# - Trustee and Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Trustee and Executive Vice President of Janus Aspen Series. Chief Investment Officer, Vice President and Director of Janus Capital. Executive Vice President and Portfolio Manager of Janus Fund. James P. Goff* - Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President and Portfolio Manager of Janus Enterprise Fund and Janus Venture Fund. Executive Vice President of Janus Aspen Series. Vice President of Janus Capital. Formerly, securities analyst at Janus Capital (1988 to 1992). David C. Tucker* - Vice President and General Counsel 100 Fillmore Street Denver, CO 80206-4928 Vice President and General Counsel of Janus Aspen Series. Vice President, Secretary and General Counsel of Janus Capital. Vice President, General Counsel and Director of Janus Service and Janus Distributors. Director, Vice President and Secretary of Janus Capital International Ltd. Steven R. Goodbarn* - Vice President and Chief Financial Officer 100 Fillmore Street Denver, CO 80206-4928 Vice President and Chief Financial Officer of Janus Aspen Series. Vice President of Finance, Treasurer and Chief Financial Officer of Janus Service, Janus Distributors and Janus Capital. Director of IDEX and Janus Distributors. Director, Treasurer and Vice President of Finance of Janus Capital International Ltd. Formerly (1979 to 1992), with the accounting firm of Price Waterhouse LLP, Denver, Colorado. Formerly (1992-1996), Treasurer of Janus Investment Fund and Janus Aspen Series. - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 17 Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer 100 Fillmore Street Denver, CO 80206-4928 Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of Fund Accounting of Janus Capital. Kelley Abbot Howes* - Secretary 100 Fillmore Street Denver, CO 80206-4928 Secretary of Janus Aspen Series. Associate Counsel of Janus Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston, Massachusetts (mutual fund administration services). John W. Shepardson# - Trustee P.O. Box 9591 Denver, CO 80209 Trustee of Janus Aspen Series. Historian. William D. Stewart# - Trustee 5330 Sterling Drive Boulder, CO 80302 Trustee of Janus Aspen Series. President of HPS Corporation, Boulder, Colorado (manufacturer of vacuum fittings and valves). Gary O. Loo - Trustee 102 N. Cascade, Suite 500 Colorado Springs, CO 80903 Trustee of Janus Aspen Series. President and a Director of High Valley Group, Inc., Colorado Springs, Colorado (investments). Dennis B. Mullen - Trustee 1601 114th Avenue, SE Alderwood Building, Suite 130 Bellevue, WA 98004 Trustee of Janus Aspen Series. President and Chief Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona (restaurant chain). Martin H. Waldinger - Trustee 4940 Sandshore Court San Diego, CA 92130 Trustee of Janus Aspen Series. Private Consultant and Director of Run Technologies, Inc., a software development firm, San Carlos, California. Formerly (1989 to 1993), President and Chief Executive Officer of Bridgecliff Management Services, Campbell, California (a condominium association management company). The Trustees are responsible for major decisions relating to the Fund's objective, policies and techniques. The Trustees also supervise the operation of the Fund by its officers and review the investment decisions of the officers although they do not actively participate on a regular basis in making such decisions. The Executive Committee of the Trustees shall have and may exercise all the powers and authority of the Board except for matters requiring action by the whole Board pursuant to the Trust's Bylaws or Agreement and Declaration of Trust ("Declaration of Trust"), Massachusetts law or the 1940 Act. - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 18 The following table shows the aggregate compensation paid to each Trustee by the Fund described in this SAI and all funds advised and sponsored by Janus Capital (collectively, the "Janus Funds") for the periods indicated. None of the Trustees receive any pension or retirement from the Fund or the Janus Funds. Aggregate Compensation from the Fund for fiscal year Total Compensation from the ended October 31,1996 Janus Funds for calendar year Name of Person, Position [TO BE FILED BY AMENDMENT] ended December 31, 1996** - ------------------------------------------------------------------------------------------------------------------------------------ Thomas H. Bailey, Chairman* $ $ James P. Craig, III, Trustee* $ $ John W. Shepardson, Trustee $ $ William D. Stewart, Trustee $ $ Gary O. Loo, Trustee $ $ Dennis B. Mullen, Trustee $ $ Martin H. Waldinger, Trustee $ $ - ------------------------------------------------------------------------------------------------------------------------------------
*An interested person of the Fund and of Janus Capital. Compensated by Janus Capital and not the Fund. **As of December 31, 1996, Janus Funds consisted of two registered investment companies comprised of a total of 29 funds. PURCHASE OF SHARES The Fund has discontinued public sales of its shares to new investors. Only shareholders who maintain open accounts are permitted to continue to make investments in the Fund and to reinvest any dividends and capital gains distributions. Once a Fund account is closed, additional investments in the Fund may not be possible. The Shareholder's Manual section of the Prospectus contains detailed information about the purchase of shares. NET ASSET VALUE DETERMINATION As stated in the Prospectus, the net asset value ("NAV") of Fund shares is determined once each day on which the New York Stock Exchange ("NYSE") is open, at the close of its regular trading session (normally 4:00 p.m., New York time, Monday through Friday). The NAV of Fund shares is not determined on days the NYSE is closed (generally, New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas). The per share NAV of the Fund is determined by dividing the total value of the Fund's securities and other assets, less liabilities, by the total number of shares outstanding. In determining NAV, securities listed on an exchange, the NASDAQ National Market and foreign markets are valued at the closing prices on such markets, or if such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Municipal securities held by the Fund are traded primarily in the over-the-counter market. Valuations of such securities are furnished by one or more pricing services employed by the Fund and are based upon a computerized matrix system or appraisals obtained by a pricing service, in each case in reliance upon information concerning market transactions and quotations from recognized municipal securities dealers. Other securities that are traded on the over-the-counter market are valued at their closing bid prices. Foreign securities and currencies are converted to U.S. dollars using the exchange rate in effect at the close of the NYSE. The Fund will determine the market value of individual securities held by it, by using prices provided by one or more professional pricing services which may provide market prices to other funds, or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days are valued on the amortized cost basis. Securities for which quotations are not readily available, and other assets, are valued at fair values determined in good faith under procedures established by and under the supervision of the Trustees. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed well before the close of business on each business day in New York (i.e., a day on which the NYSE is open). In addition, European or Far Eastern securities trading generally or in a particular country or countries may not take place on all business days in New York. Furthermore, trading takes place in Japanese markets on certain Saturdays and in various foreign markets on days which are not business days in New York and on which the Fund's NAV is not calculated. The Fund calculates its NAV per share, and therefore effects sales, redemptions and repurchases of its shares, as of the close of the NYSE once on each day on which the NYSE is open. Such calculation may not take place contemporaneously with the determination of the prices of the foreign portfolio securities used in such calculation. REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS If investors do not elect in writing or by phone to receive their dividends and distributions in cash, all income dividends and capital gains distributions, if any, on the Fund's shares are reinvested automatically in additional shares of the Fund at the NAV determined on the first business day following the record date. Checks for cash dividends and distributions and confirmations of reinvestments are usually mailed to shareholders within ten days after the record date. Any election of the manner in which a 19 shareholder wishes to receive dividends and distributions (which may be made on the New Account Application form or by phone) will apply to dividends and distributions the record dates of which fall on or after the date that the Fund receives such notice. Investors receiving cash distributions and dividends may elect in writing or by phone to change back to automatic reinvestment at any time. REDEMPTION OF SHARES Procedures for redemption of shares are set forth in the Shareholder's Manual section of the Prospectus. Shares normally will be redeemed for cash, although the Fund retains the right to redeem its shares in kind under unusual circumstances, in order to protect the interests of remaining shareholders, by delivery of securities selected from its assets at its discretion. However, the Fund is governed by Rule 18f-1 under the 1940 Act, which requires the Fund to redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, the Fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described under "Purchase of Shares - Net Asset Value Determination" and such valuation will be made as of the same time the redemption price is determined. The right to require the Fund to redeem its shares may be suspended, or the date of payment may be postponed, whenever (1) trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed except for holidays and weekends, (2) the SEC permits such suspension and so orders, or (3) an emergency exists as determined by the SEC so that disposal of securities or determination of NAV is not reasonably practicable. SHAREHOLDER ACCOUNTS Detailed information about the general procedures for shareholder accounts and specific types of accounts is set forth in the Prospectus. Applications for specific types of accounts may be obtained by calling the Fund at 1-800-525-3713 or writing to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375. TELEPHONE TRANSACTIONS As stated in the Prospectus, shareholders may initiate a number of transactions by telephone. The Fund, its transfer agent and its distributor disclaim responsibility for the authenticity of instructions received by telephone. Such entities will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include, among others, requiring personal identification prior to acting upon telephone instructions, providing written confirmation of the transactions and tape recording telephone conversations. SYSTEMATIC REDEMPTIONS As stated in the Shareholder's Manual section of the Prospectus, if you have a regular account or are eligible for normal distributions from a retirement plan, you may establish a systematic redemption option. The payments will be made from the proceeds of periodic redemptions of shares in the account at the NAV. Depending on the size or frequency of the disbursements requested, and the fluctuation in value of the Fund's portfolio, redemptions for the purpose of making such disbursements may reduce or even exhaust the shareholder's account. Either an investor or the Fund, by written notice to the other, may terminate the investor's systematic redemption option without penalty at any time. Information about requirements to establish a systematic redemption option may be obtained by writing or calling the Fund at the address or phone number shown above. RETIREMENT PLANS The Fund offers several different types of tax-deferred retirement plans that an investor may establish to invest in Fund shares, depending on rules prescribed by the Code. The Individual Retirement Account ("IRA") may be used by most individuals who have taxable compensation. Simplified Employee Pensions ("SEPs") and Defined Contribution Plans (Profit Sharing or Money Purchase Pension Plans) may be used by most employers, including corporations, partnerships and sole proprietors, for the benefit of business owners and their employees. In addition, the Fund offers a Section 403(b)(7) Plan for employees of educational organizations and other qualifying tax-exempt organizations. Investors should consult their tax advisor or legal counsel before selecting a retirement plan. Contributions under IRAs, SEPs, Defined Contribution Plans and Section 403(b)(7) Plans are subject to specific contribution limitations. Generally, such contributions may be invested at the direction of the participant. The investment is then held by Investors Fiduciary Trust Company as custodian. Each participant's account is charged an annual fee of $12. There is a maximum annual fee of $24 per taxpayer identification number. 20 Distributions from retirement plans generally are subject to ordinary income tax and may be subject to an additional 10% tax if withdrawn prior to age 591/2. Several exceptions to the general rule may apply. Additionally, shareholders generally must start withdrawing retirement plan assets no later than April 1 of the year after they reach age 701/2. Exceptions may apply so please consult your tax advisor. Several methods exist to determine the amount of the minimum annual distribution. Shareholders should consult with their tax advisor or legal counsel prior to receiving any distribution from any retirement plan, in order to determine the income tax impact of any such distribution. To receive additional information about IRAs, SEPs, Defined Contribution Plans and Section 403(b)(7) Plans along with the necessary materials to establish an account, please call the Fund at 1-800-525-3713 or write to the Fund at P.O. Box 173375, Denver, Colorado 80217-3375. No contribution to an IRA, SEP, Defined Contribution Plan or Section 403(b)(7) Plan can be made until the appropriate forms to establish any such plan have been completed. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS It is a policy of the Fund to make distributions of substantially all of its investment income and any net realized capital gains. Any capital gains realized during each fiscal year of the Fund ended October 31, as defined by the Code, are normally declared and payable to shareholders in December. The Fund intends to qualify as a regulated investment company by satisfying certain requirements prescribed by Subchapter M of the Code. The Fund may purchase securities of certain foreign corporations considered to be passive foreign investment companies by the IRS. In order to avoid taxes and interest that must be paid by the Fund, if these instruments are profitable, the Fund may make various elections permitted by the tax laws. However, these elections could require that the Fund recognize taxable income, which in turn must be distributed. Some foreign securities purchased by the Fund may be subject to foreign taxes which could reduce the yield on such securities. The amount of such foreign taxes is expected to be insignificant. Accordingly, the Fund does not intend to make the election permitted under section 853 of the Code to pass through such taxes to shareholders as a foreign tax credit as this would increase the taxable income reported to shareholders and require shareholders to take the credit on their tax returns, complicating the preparation of such returns. As a result, any foreign taxes paid or accrued will represent an expense to the Fund which will reduce its investment company taxable income. PRINCIPAL SHAREHOLDERS [INFORMATION TO BE FILED BY AMENDMENT] As of January 20, 1997, the officers and Trustees of the Fund as a group owned less than 1% of the outstanding shares of the Fund. In addition, as of January 20, 1997, Charles Schwab & Co., Inc. ("Schwab"), 101 Montgomery Street, San Francisco, CA 94104-4122, and National Financial Services Co., ("National Financial"), P.O. Box 3908, Church Street Station, New York, NY 10008-3908, owned of record ___% and ___%, respectively, of the Fund's outstanding shares. According to information provided by Schwab, this ownership is by nominee only and does not represent beneficial ownership of such shares, because they have no investment discretion or voting power with respect to such shares. To the knowledge of the Fund, no other person owned more than 5% of the outstanding shares of the Fund as of the above date. MISCELLANEOUS INFORMATION The Fund was originally organized in 1984 as a Maryland corporation. On August 7, 1992, the Fund was reorganized from a Maryland corporation into Janus Venture Fund, a separate series of the Trust. Pursuant to this reorganization, the Trust assumed all the assets and liabilities of Janus Venture Fund, Inc., and shareholders received shares of Janus Venture Fund series of the Trust equal both in number and net asset value to their shares of Janus Venture Fund, Inc. All references in this SAI to the Fund and all financial and other information about the Fund prior to August 7, 1992 are to the former Janus Venture Fund, Inc.; all references after August 7, 1992, are to the Janus Venture Fund series of the Trust. As the result of the reorganization, the fiscal year end of the Fund changed from July 31 to October 31. As of the date of this SAI, the Trust consists of 18 other series, which are offered by separate prospectuses. Janus Capital reserves the right to the name "Janus." In the event that Janus Capital does not continue to provide investment advice to the Fund, the Fund must cease to use the name "Janus" as soon as reasonably practicable. Under Massachusetts law, shareholders of the Fund could, under certain circumstances, be held liable for the obligations of the Fund. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or the Trustees. The Declaration of Trust also provides for indemnification from the assets of the Fund for all losses and expenses of any Fund 21 shareholder held liable for the obligations of the Fund. Thus, the risk of a shareholder incurring a financial loss on account of its liability as a shareholder of the Fund is limited to circumstances in which the Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The Trustees intend to conduct the operations of the Fund to avoid, to the extent possible, liability of shareholders for liabilities of the Fund. SHARES OF THE TRUST The Trust is authorized to issue an unlimited number of shares of beneficial interest with a par value of one cent per share for each series of the Trust. Shares of the Fund are fully paid and nonassessable when issued. All shares of the Fund participate equally in dividends and other distributions by the Fund, and in residual assets of the Fund in the event of liquidation. Shares of the Fund have no preemptive, conversion or subscription rights. Shares of the Fund may be transferred by endorsement or stock power as is customary, but the Fund is not bound to recognize any transfer until it is recorded on its books. VOTING RIGHTS The present Trustees were elected at a meeting of shareholders held on July 10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in office until the termination of the Trust or his earlier death, retirement, resignation, bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote to elect or remove Trustees, to terminate or reorganize the Fund, to amend the Declaration of Trust, to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees. Each share of the Fund and of each other series of the Trust has one vote (and fractional votes for fractional shares). Shares of all series of the Trust have noncumulative voting rights, which means that the holders of more than 50% of the shares of all series of the Trust voting for the election of Trustees can elect 100% of the Trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Trustees. The Fund and each other series of the Trust will vote separately only with respect to those matters that affect only that series or if a portfolio's interest in a matter differs from the interests of other portfolios of the Trust. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado 80202, independent accountants for the Fund, audit the Fund's annual financial statements and prepare its 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 Fund or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. PERFORMANCE INFORMATION The Prospectus contains a brief description of how performance is calculated. Quotations of average annual total return for the Fund will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in the Fund over periods of 1, 5, and 10 years (up to the life of the Fund). These are the annual total rates of return that would equate the initial amount invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of Fund expenses on an annual basis, and assume that all dividends and distributions are reinvested when paid. The Fund was made available for public sale on May 2, 1985. The one year, five year, ten year and lifetime average annual total returns, computed as of October 31, 1996, for each of those periods, are ___%, ___%, ___% and ___%, respectively. [TO BE FILED BY AMENDMENT] From time to time in advertisements or sales material, the Fund may discuss its performance ratings or other information as published by recognized mutual fund statistical rating services, including, but not limited to, Lipper Analytical Services, Inc., Ibbotson Associates, Micropal or Morningstar or by publications of general interest such as Forbes or Money. The Fund may also compare its performance to that of other selected mutual funds, mutual fund averages or recognized stock market indicators, 22 including, but not limited to, the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400 Midcap Index, the Dow Jones Industrial Average, the Russell 2000 Index and the NASDAQ composite. In addition, the Fund may compare its total return to the yield on U.S. Treasury obligations and to the percentage change in the Consumer Price Index. Such performance ratings or comparisons may be made with funds that may have different investment restrictions, objectives, policies or techniques than the Fund and such other funds or market indicators may be comprised of securities that differ significantly from the Fund's investments. FINANCIAL STATEMENTS The following audited financial statements for the period ended October 31, 1996 are hereby incorporated into this SAI by reference to the Fund's Annual Report dated October 31, 1996. A copy of such report accompanies this SAI. DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT: Schedule of Investments as of October 31, 1996 Statement of Operations for the period ended October 31, 1996 Statement of Assets and Liabilities as of October 31, 1996 Statements of Changes in Net Assets for the periods ended October 31, 1996 and 1995 Financial Highlights for each of the periods indicated Notes to Financial Statements Report of Independent Accountants The portions of such Annual Report that are not specifically listed above are not incorporated by reference into this SAI and are not part of the Registration Statement. 23 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 the adviser considers security ratings when making investment decisions, it also performs its own investment analysis and does not rely solely on the ratings assigned by credit agencies. STANDARD & POOR'S RATINGS SERVICES Bond Rating Explanation - -------------------------------------------------------------------------------- Investment Grade AAA Highest rating; extremely strong capacity to pay principal and interest. AA High quality; very strong capacity to pay principal and interest. A Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changing circumstances and economic conditions. BBB Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances more likely to lead to a weakened capacity to pay principal and interest than for higher rated bonds. Non-Investment Grade BB, B, Predominantly speculative with respect to the CCC, CC, C issuer's capacity to meet required interest and principal payments. BB - lowest degree of speculation; C - the highest degree of speculation. Quality and protective characteristics outweighed by large uncertainties or major risk exposure to adverse conditions. D In default. - -------------------------------------------------------------------------------- MOODY'S INVESTORS SERVICE, INC. Investment Grade Aaa Highest quality, smallest degree of investment risk. Aa High quality; together with Aaa bonds, they compose the high-grade bond group. A Upper-medium grade obligations; many favorable investment attributes. Baa Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be unreliable over any great length of time. Non-Investment Grade Ba More uncertain, with speculative elements. Protection of interest and principal payments not well safeguarded during good and bad times. B Lack characteristics of desirable investment; potentially low assurance of timely interest and principal payments or maintenance of other contract terms over time. Caa Poor standing, may be in default; elements of danger with respect to principal or interest payments. Ca Speculative in a high degree; could be in default or have other marked shortcomings. C Lowest-rated; extremely poor prospects of ever attaining investment standing. - -------------------------------------------------------------------------------- Unrated securities will be treated as noninvestment grade securities unless the portfolio manager determines that such securities are the equivalent of investment grade securities. Securities that have received ratings from more than one agency are considered investment grade if at least one agency has rated the security investment grade. 24 [LOGO] JANUS INVESTMENT FUND 100 Fillmore Street Denver, CO 80206-4928 (800) 29JANUS - -------------------------------------------------------------------------------- Statement of Additional Information February 17, 1997 - -------------------------------------------------------------------------------- Janus Money Market Fund Janus Government Money Market Fund Janus Tax-Exempt Money Market Fund Institutional Shares This Statement of Additional Information ("SAI") expands upon and supplements the information contained in the current Prospectus for the Institutional Shares (the "Shares") of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds"). The Funds are each a separate series of Janus Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund represents shares of beneficial interest in a separate portfolio of securities and other assets with its own objective and policies, and is managed separately by Janus Capital Corporation ("Janus Capital"). This SAI is not a Prospectus and should be read in conjunction with the Prospectus dated February 17, 1997, which is incorporated by reference into this SAI and may be obtained from the Trust at the above phone number or address. This SAI contains additional and more detailed information about the Funds' operations and activities than the Prospectus. 1 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page - -------------------------------------------------------------------------------- Investment Policies and Restrictions .............................. 3 Types of Securities and Investment Techniques ..................... 4 Performance Data .................................................. 7 Determination of Net Asset Value .................................. 8 Investment Adviser and Administrator .............................. 8 Custodian, Transfer Agent and Certain Affiliations ................ 9 Portfolio Transactions and Brokerage .............................. 10 Officers and Trustees ............................................. 11 Purchase of Shares ................................................ 13 Redemption of Shares .............................................. 13 Retirement Plans .................................................. 13 Shareholder Accounts .............................................. 13 Dividends and Tax Status .......................................... 14 Principal Shareholders ............................................ 14 Miscellaneous Information ......................................... 14 Shares of the Trust ............................................ 15 Voting Rights .................................................. 15 Independent Accountants ........................................ 15 Registration Statement ......................................... 15 Financial Statements .............................................. 15 Appendix A - Description of Securities Ratings .................... 17 Appendix B - Description of Municipal Securities .................. 19 - -------------------------------------------------------------------------------- 2 INVESTMENT POLICIES AND RESTRICTIONS INVESTMENT OBJECTIVES As discussed in the Prospectus, the investment objective of each of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or maintain a stable net asset value of $1.00 per share. The investment objectives of the Funds are not fundamental and may be changed by the Trustees of the Trust (the "Trustees") without shareholder approval. INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS As indicated in the Prospectus, each Fund has adopted certain fundamental investment restrictions that cannot be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or a particular Fund or particular class of Shares if a matter affects just that Fund or that class of Shares), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or a particular Fund or class of Shares) are present or represented by proxy. As used in the restrictions set forth below and as used elsewhere in this SAI, the term "U.S. Government Securities" shall have the meaning set forth in the 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 Funds have adopted the following fundamental policies: (1) With respect to 75% of its assets, a Fund may not purchase a security other than a U.S. Government Security, if, as a result, more than 5% of the Fund's total assets would be invested in the securities of a single issuer or the Fund would own more than 10% of the outstanding voting securities of any single issuer. (As noted in the Prospectus, the Funds are also currently subject to the greater diversification standards of Rule 2a-7, which are not fundamental.) (2) A Fund may not purchase securities if 25% or more of the value of a Fund's total assets would be invested in the securities of issuers conducting their principal business activities in the same industry; provided that: (i) there is no limit on investments in U.S. Government Securities or in obligations of domestic commercial banks (including U.S. branches of foreign banks subject to regulations under U.S. laws applicable to domestic banks and, to the extent that its parent is unconditionally liable for the obligation, foreign branches of U.S. banks); (ii) this limitation shall not apply to a Fund's investments in municipal securities; (iii) there is no limit on investments in issuers domiciled in a single country; (iv) financial service companies are classified according to the end users of their services (for example, automobile finance, bank finance and diversified finance are each considered to be a separate industry); and (v) utility companies are classified according to their services (for example, gas, gas transmission, electric, and telephone are each considered to be a separate industry). (3) A Fund may not act as an underwriter of securities issued by others, except to the extent that a Fund may be deemed an underwriter in connection with the disposition of portfolio securities of such Fund. (4) A Fund may not lend any security or make any other loan if, as a result, more than 25% of a Fund's total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements). (5) A Fund may not purchase or sell real estate or any interest therein, except that the Fund may invest in debt obligations secured by real estate or interests therein or securities issued by companies that invest in real estate or interests therein. (6) A Fund may borrow money for temporary or emergency purposes (not for leveraging) in an amount not exceeding 25% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 25% of the value of a Fund's total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three business days to the extent necessary to comply with the 25% limitation. Reverse repurchase agreements or the segregation of assets in connection with such agreements shall not be considered borrowing for the purposes of this limit. (7) Each Fund may, notwithstanding any other investment policy or restriction (whether or not fundamental), invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as that Fund. 3 Each Fund has adopted the following nonfundamental investment restrictions that may be changed by the Trustees without shareholder approval: (1) A Fund may not invest in securities or enter into repurchase agreements with respect to any securities if, as a result, more than 10% of the Fund's net assets would be invested in repurchase agreements not entitling the holder to payment of principal within seven days and in other securities that are not readily marketable ("illiquid investments"). The Trustees, or the Fund's investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for certain securities such as securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. (2) A Fund may not purchase securities on margin, or make short sales of securities, except for short sales against the box and the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities. (3) A Fund may not pledge, mortgage, hypothecate or encumber any of its assets except to secure permitted borrowings or in connection with permitted short sales. (4) A Fund may not invest in companies for the purpose of exercising control of management. For purposes of the Funds' restriction on investing in a particular industry, the Funds will rely primarily on industry classifications as published by Bloomberg L.P. To the extent that such classifications are so broad that the primary economic characteristics in a single class are materially different, the Funds may further classify issuers in accordance with industry classifications as published by the Securities and Exchange Commission. TYPES OF SECURITIES AND INVESTMENT TECHNIQUES Each of the Funds may invest only in "eligible securities" as defined in Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a security that (i) is denominated in U.S. dollars and has a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is issued by an issuer with short-term debt outstanding that is rated, in one of the two highest rating categories by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a rated security, as determined by Janus Capital; and (iii) has been determined by Janus Capital to present minimal credit risks pursuant to procedures approved by the Trustees. In addition, the Funds will maintain a dollar-weighted average portfolio maturity of 90 days or less. A description of the ratings of some NRSROs appears in Appendix A. Under Rule 2a-7, a Fund may not invest more than five percent of its total assets in the securities of any one issuer other than U.S. Government Securities, provided that in certain cases a Fund may invest more than 5% of its assets in a single issuer for a period of up to three business days. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to the foregoing limitations. Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market Fund) will invest at least 95% of its total assets in "first-tier" securities. First-tier securities are eligible securities that are rated, or are issued by an issuer with short-term debt outstanding that is rated, in the highest rating category by the Requisite NRSROs or are unrated and of comparable quality to a rated security. In addition, a Fund may invest in "second-tier" securities which are eligible securities that are not first-tier securities. However, a Fund (except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest in a second-tier security if immediately after the acquisition thereof the Fund would have invested more than (i) the greater of one percent of its total assets or one million dollars in second-tier securities issued by that issuer, or (ii) five percent of its total assets in second-tier securities. The following discussion of types of securities in which the Funds may invest supplements and should be read in conjunction with the Prospectus. PARTICIPATION INTERESTS Each Fund may purchase participation interests in loans or securities in which the Funds may invest directly. Participation interests are generally sponsored or issued by banks or other financial institutions. A participation interest gives a Fund an undivided interest in the underlying loans or securities in the proportion that the Fund's interest bears to the total principal amount of the underlying loans or securities. Participation interests, which may have fixed, floating or variable rates, may carry a demand feature backed by a letter of credit or guarantee of a bank or institution permitting the holder to tender them back to the bank or other institution. For certain participation interests, a Fund will have the right to demand payment, on not more than seven days' notice, for all or a part of the Fund's participation interest. The Funds intend to exercise any demand rights they may have upon default under the terms of the loan or security, to provide liquidity or to maintain or improve the quality of the Funds' investment portfolio. A Fund will only purchase participation interests that Janus Capital determines present minimal credit risks. 4 VARIABLE AND FLOATING RATE NOTES Janus Money Market Fund also may purchase variable and floating rate demand notes of corporations and other entities, which are unsecured obligations redeemable upon not more than 30 days' notice. These obligations include master demand notes that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements with the issuer of the instrument. The issuer of these obligations often has the right, after a given period, to prepay the outstanding principal amount of the obligations upon a specified number of days' notice. These obligations generally are not traded, nor generally is there an established secondary market for these obligations. To the extent a demand note does not have a seven day or shorter demand feature and there is no readily available market for the obligation, it is treated as an illiquid investment. MORTGAGE- AND ASSET-BACKED SECURITIES The Funds may invest in mortgage-backed securities, which represent an interest in a pool of mortgages made by lenders such as commercial banks, savings and loan institutions, mortgage bankers, mortgage brokers and savings banks. Mortgage-backed securities may be issued by governmental or government-related entities or by non-governmental entities such as banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers. Interests in pools of mortgage-backed securities differ from other forms of debt securities which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. In contrast, mortgage-backed securities provide periodic payments which consist of interest and, in most cases, principal. In effect, these payments are a "pass-through" of the periodic payments and optional prepayments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments to holders of mortgage-backed securities are caused by prepayments resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs which may be incurred. As prepayment rates of individual pools of mortgage loans vary widely, it is not possible to predict accurately the average life of a particular security. Although mortgage-backed securities are issued with stated maturities of up to forty years, unscheduled or early payments of principal and interest on the underlying mortgages may shorten considerably the effective maturities. Mortgage-backed securities may have varying assumptions for average life. The volume of prepayments of principal on a pool of mortgages underlying a particular security will influence the yield of that security, and the principal returned to a Fund may be reinvested in instruments whose yield may be higher or lower than that which might have been obtained had the prepayments not occurred. When interest rates are declining, prepayments usually increase, with the result that reinvestment of principal prepayments will be at a lower rate than the rate applicable to the original mortgage-backed security. The Funds may invest in mortgage-backed securities that are issued by agencies or instrumentalities of the U.S. government. The Government National Mortgage Association ("GNMA") is the principal federal government guarantor of mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation within the Department of Housing and Urban Development. GNMA Certificates are debt securities which represent an interest in one mortgage or a pool of mortgages which are insured by the Federal Housing Administration or the Farmers Home Administration or are guaranteed by the Veterans Administration. The Funds may also invest in pools of conventional mortgages which are issued or guaranteed by agencies of the U.S. government. GNMA pass-through securities are considered to be riskless with respect to default in that (i) the underlying mortgage loan portfolio is comprised entirely of government-backed loans and (ii) the timely payment of both principal and interest on the securities is guaranteed by the full faith and credit of the U.S. government, regardless of whether or not payments have been made on the underlying mortgages. GNMA pass-through securities are, however, subject to the same market risk as comparable debt securities. Therefore, the market value of a Fund's GNMA securities can be expected to fluctuate in response to changes in prevailing interest rate levels. Residential mortgage loans are pooled also by the Federal Home Loan Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered agency created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC issues participation certificates ("PCs") which represent interests in mortgages from FHLMC's national portfolio. The mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the loans are either uninsured with loan-to-value ratios of 80% or less, or privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the timely payment of interest and ultimate collection of principal on FHLMC PCs; the U.S. government does not guarantee any aspect of FHLMC PCs. The Federal National Mortgage Association ("FNMA") is a government-sponsored corporation owned entirely by private shareholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases residential mortgages from a list of approved seller/servicers which include savings and loan associations, savings banks, commercial banks, credit unions and mortgage bankers. FNMA guarantees the timely payment of principal and interest on the pass-through securities issued by FNMA; the U.S. government does not guarantee any aspect of the FNMA pass-through securities. 5 The Funds may also invest in privately-issued mortgage-backed securities to the extent permitted by their investment restrictions. Mortgage-backed securities offered by private issuers include pass-through securities comprised of pools of conventional residential mortgage loans; mortgage-backed bonds which are considered to be debt obligations of the institution issuing the bonds and which are collateralized by mortgage loans; and collateralized mortgage obligations ("CMOs") which are collateralized by mortgage-backed securities issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages. Asset-backed securities represent direct or indirect participations in, or are secured by and payable from, assets other than mortgage-backed assets such as motor vehicle installment sales contracts, installment loan contracts, leases of various types of real and personal property and receivables from revolving credit agreements (credit cards). Asset-backed securities have yield characteristics similar to those of mortgage-backed securities and, accordingly, are subject to many of the same risks. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements are transactions in which a Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. The resale price in a reverse repurchase agreement reflects a market rate of interest that is not related to the coupon rate or maturity of the sold security. For certain demand agreements, there is no agreed upon repurchase date and interest payments are calculated daily, often based upon the prevailing overnight repurchase rate. The Funds will use the proceeds of reverse repurchase agreements only to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities or to earn additional income on portfolio securities. Generally, a reverse repurchase agreement enables the Fund to recover for the term of the reverse repurchase agreement all or most of the cash invested in the portfolio securities sold and to keep the interest income associated with those portfolio securities. Such transactions are only advantageous if the interest cost to the Fund of the reverse repurchase transaction is less than the cost of obtaining the cash otherwise. In addition, interest costs on the money received in a reverse repurchase agreement may exceed the return received on the investments made by a Fund with those monies. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES Each Fund may purchase securities on a when-issued or delayed delivery basis. A Fund will enter into such transactions only when it has the intention of actually acquiring the securities. To facilitate such acquisitions, the Funds' custodian will segregate cash or high quality liquid assets in an amount at least equal to such commitments. On delivery dates for such transactions, the Fund will meet its obligations from maturities, sales of the segregated securities or from other available sources of cash. If a Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. At the time a Fund makes the commitment to purchase securities on a when-issued or delayed delivery basis, it will record the transaction as a purchase and thereafter reflect the value of such securities in determining its net asset value. INVESTMENT COMPANY SECURITIES From time to time, the Funds may invest in securities of other investment companies. The Funds are subject to the provisions of Section 12(d)(1) of the 1940 Act, which currently limits each Fund's investment in other investment companies to no more than 10% of the investing Fund's assets. MUNICIPAL LEASES Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest in municipal leases. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. A 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 under "Taxable Investments." In evaluating municipal lease obligations, Janus Capital will consider such factors as it deems appropriate, including: (a) whether the lease can be canceled; (b) the ability of the lease obligee to direct the sale of the underlying assets; (c) the general creditworthiness of the lease obligor; (d) the likelihood that the municipality will discontinue appropriating funding for the leased property in the event such property is no longer considered essential by the municipality; (e) the legal recourse of the 6 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 Funds, 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 a Fund. PERFORMANCE DATA A Fund may provide current annualized and effective annualized yield quotations based on its daily dividends. These quotations may from time to time be used in advertisements, shareholder reports or other communications to shareholders. All performance information supplied by the Funds in advertising is historical and is not intended to indicate future returns. In performance advertising, the Funds may compare their Shares' performance information with data published by independent evaluators such as Morningstar, Inc., Lipper Analytical Services, Inc., or CDC/Wiesenberger, IBC/Donoghue's Money Fund Report or other companies which track the investment performance of investment companies ("Fund Tracking Companies"). The Funds may also compare their Shares' performance information with the performance of recognized stock, bond and other indices, including but not limited to the Municipal Bond Buyers Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S. Treasury bonds, bills or notes and changes in the Consumer Price Index as published by the U.S. Department of Commerce. The Funds may refer to general market performance over past time periods such as those published by Ibbotson Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook"). The Funds may also refer in such materials to mutual fund performance rankings and other data published by Fund Tracking Companies. Performance advertising may also refer to discussions of the Funds and comparative mutual fund data and ratings reported in independent periodicals, such as newspapers and financial magazines. The Funds may also compare the Shares' yield to those of certain U.S. Treasury obligations or other money market instruments. Any current yield quotation of the Shares which is used in such a manner as to be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as amended, shall consist of an annualized historical yield, carried at least to the nearest hundredth of one percent, based on a specific seven calendar day period. Current yield shall be calculated by (a) determining the net change during a seven calendar day period in the value of a hypothetical account having a balance of one Share at the beginning of the period, (b) dividing the net change by the value of the account at the beginning of the period to obtain a base period return, and (c) multiplying the quotient by 365/7 (i.e., annualizing). For this purpose, the net change in account value will reflect the value of additional Shares purchased with dividends declared on the original Share and dividends declared on both the original Share and any 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 Shares may advertise effective yield quotations. Effective yield quotations are calculated by adding 1 to the base period return, raising the sum to a power equal to 365/7, and subtracting 1 from the result (i.e., compounding). Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an investor would have to earn from a fully taxable investment in order to equal such Shares' yield after taxes. Tax equivalent yields are calculated by dividing Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or combined federal and state tax rate. If only a portion of the Shares' yield is tax-exempt, only that portion is adjusted in the calculation. The Shares' current yield and effective yield for the seven-day period ended October 31, 1996 is shown below: [TO BE FILED BY AMENDMENT] Seven-day Effective Fund Name Yield Seven-day Yield - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Institutional Shares % % Janus Government Money Market Fund - Institutional Shares % % Janus Tax-Exempt Money Market Fund - Institutional Shares* % % - ------------------------------------------------------------------------------------------------------------------------------------
*Janus Tax-Exempt Money Market Fund Institutional Shares' tax-equivalent yield for the seven-day period ended October 31, 1996 was ___%. Although published yield information is useful to investors in reviewing a Fund's performance, investors should be aware that the Fund's yield fluctuates from day to day and that the Fund's yield for any given period is not an indication or representation by the Fund of future yields or rates of return on the Shares. Also, processing organizations or other institutions may charge their customers direct fees in connection with an investment in a Fund, which will have the effect of reducing the Fund's net yield 7 to those shareholders. The yield on a class of Shares is not fixed or guaranteed, and an investment in the Shares is not insured. Accordingly, yield information may not necessarily be used to compare Shares with investment alternatives which, like money market instruments or bank accounts, may provide a fixed rate of interest. In addition, because investments in the Funds are not insured or guaranteed, yield on the Shares may not necessarily be used to compare the Shares with investment alternatives which are insured or guaranteed. DETERMINATION OF NET ASSET VALUE Pursuant to the rules of the Securities and Exchange Commission, the Trustees have established procedures to stabilize each Fund's net asset value at $1.00 per Share. These procedures include a review of the extent of any deviation of net asset value per Share as a result of fluctuating interest rates, based on available market rates, from the Fund's $1.00 amortized cost price per Share. Should that deviation exceed 1/2 of 1%, the Trustees will consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redemption of Shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per Share as determined by using available market quotations. Each Fund i) will maintain a dollar-weighted average portfolio maturity of 90 days or less; ii) will not purchase any instrument with a remaining maturity greater than 397 days or subject to a repurchase agreement having a duration of greater than 397 days; iii) will limit portfolio investments, including repurchase agreements, to those U.S. dollar-denominated instruments that Janus Capital has determined present minimal credit risks pursuant to procedures established by the Trustees; and iv) will comply with certain reporting and recordkeeping procedures. The Trust has also established procedures to ensure that portfolio securities meet the Funds' high quality criteria. INVESTMENT ADVISER AND ADMINISTRATOR As stated in the Prospectus, each Fund has an Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each Advisory Agreement provides that Janus Capital will furnish continuous advice and recommendations concerning the Funds' investments. The Funds have each agreed to compensate Janus Capital for its advisory services by the monthly payment of an advisory fee at the annual rate of .20% of the average daily net assets of each Fund. However, Janus Capital has agreed to waive .10% of the value of each Fund's average daily net assets of the advisory fee. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads and other expenses in connection with the execution of portfolio transactions. On behalf of the Shares, each of the Funds has also entered into an Administration Agreement with Janus Capital. Under the terms of the Administration Agreements, each of the Funds has agreed to compensate Janus Capital for administrative services at the annual rate of .15% of the value of the average daily net assets of the Shares for certain services, including custody, transfer agent fees and expenses, legal fees not related to litigation, accounting expenses, net asset value determination and fund accounting, recordkeeping, and blue sky registration and monitoring services, registration fees, expenses of shareholders' meetings and reports to shareholders, costs of preparing, printing and mailing the Shares' Prospectuses and Statements of Additional Information to current shareholders, and other costs of complying with applicable laws regulating the sale of Shares. Each Fund will pay those expenses not assumed by Janus Capital, including interest and taxes, fees and expenses of Trustees who are not affiliated with Janus Capital, audit fees and expenses, and extraordinary costs. Janus Capital has agreed to waive a portion of the administration fee, and accordingly the effective rate for calculating the administration fee payable by the Shares will be .05% for that period. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. The following table summarizes the advisory fees paid by the Funds for the fiscal years ended October 31: 1996 1995 [TO BE FILED BY AMENDMENT] Advisory Advisory Advisory Advisory Fees Prior Fees After Fees Prior Fees After Fund Name to Waiver Waiver to Waiver Waiver - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $ $ Janus Government Money Market Fund $ $ Janus Tax-Exempt Money Market Fund $ $ - ------------------------------------------------------------------------------------------------------------------------------------
8 The following table summarizes the administration fees paid by the Shares for the fiscal years ended October 31: 1996 1995(1) [TO BE FILED BY AMENDMENT] Administration Administration Administration Administration Fees Prior Fees After Fees Prior Fees After Fund Name to Waiver Waiver to Waiver Waiver - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund - Institutional Shares $164,715 $54,905 Janus Government Money Market Fund - Institutional Shares $ 20,138 $ 6,712 Janus Tax-Exempt Money Market Fund - Institutional Shares $ 907 $ 302 - ------------------------------------------------------------------------------------------------------------------------------------
(1)April 14 (inception) to October 31, 1995. The Advisory Agreements for each Fund became effective on December 9, 1994 and will continue in effect until June 16, 1997, and thereafter from year to year so long as such continuance is approved annually by a majority of the Trustees who are not parties to the Advisory Agreements or interested persons of any such party, and by either a majority of the Funds' outstanding voting shares or the Trustees. Each Advisory Agreement i) may be terminated without the payment of any penalty by any Fund or Janus Capital on 60 days' written notice; ii) terminates automatically in the event of its assignment; and iii) generally, may not be amended without the approval of a majority of the Trustees of the affected Fund, including the Trustees who are not interested persons of that Fund or Janus Capital and, to the extent required by the 1940 Act, the vote of a majority of the outstanding voting securities of that Fund. Janus Capital also performs investment advisory services for other mutual funds, and for individual, charitable, corporate and retirement accounts. Investment decisions for each account managed by Janus Capital, including the Funds, are made independently from those for any other account that is or may in the future become managed by Janus Capital or its affiliates. If, however, a number of accounts managed by Janus Capital are contemporaneously engaged in the purchase or sale of the same security, the orders may be aggregated and/or the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by an account or the size of the position obtained or liquidated for an account. Pursuant to an exemptive order granted by the SEC, the Funds and other funds advised by Janus Capital may also transfer daily uninvested cash balances into one or more joint trading accounts. Assets in the joint trading accounts are invested in money market instruments and the proceeds are allocated to the participating funds on a pro rata basis. Each account managed by Janus Capital has its own investment objective and is managed in accordance with that objective by a particular portfolio manager or team of portfolio managers. As a result, from time to time two or more different managed accounts may pursue divergent investment strategies with respect to investments or categories of investments. As indicated in the Prospectus, Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy regarding personal investing by directors, officers and employees of Janus Capital and the Funds. The policy requires investment personnel and officers of Janus Capital, inside directors of Janus Capital and the Funds and other designated persons deemed to have access to current trading information to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for trading authority will be denied when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or to have been effected on behalf of any client account, including the Funds. In addition to the pre-clearance requirement described above, the policy subjects investment personnel, officers and directors/Trustees of Janus Capital and the Funds to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with Janus Capital's policy. Those persons also may be required under certain circumstances to forfeit their profits made from personal trading. The provisions of the policy are administered by and subject to exceptions authorized by Janus Capital. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the Funds' custodian. The custodian holds the Funds' assets in safekeeping and collects and remits the income thereon, subject to the instructions of each Fund. 9 Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds' transfer agent. In addition, Janus Service provides certain other administrative, recordkeeping and shareholder relations services to the Funds. The Funds do not pay Janus Service a fee. Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Funds. Janus Distributors is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the National Association of Securities Dealers, Inc. Janus Distributors acts as the agent of the Funds in connection with the sale of their shares in all states in which the shares are registered and in which Janus Distributors is qualified as a broker-dealer. Under the Distribution Agreement, Janus Distributors continuously offers the Funds' shares and accepts orders at net asset value. No sales charges are paid by investors. Promotional expenses in connection with offers and sales of shares are paid by Janus Capital. Janus Capital also may make payments to selected broker-dealer firms or institutions which were instrumental in the acquisition of shareholders for the Funds or which performed services with respect to shareholder accounts. The minimum aggregate size required for eligibility for such payments, and the factors in selecting the broker-dealer firms and institutions to which they will be made, are determined from time to time by Janus Capital. PORTFOLIO TRANSACTIONS AND BROKERAGE Decisions as to the assignment of portfolio business for the Funds and negotiation of its commission rates are made by Janus Capital whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all portfolio transactions. 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 October 31, 1996 and October 31, 1995, the total brokerage commissions paid by the Funds are summarized below: 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $ $ Janus Government Money Market Fund $ $ Janus Tax-Exempt Money Market Fund $ $ - ------------------------------------------------------------------------------------------------------------------------------------
The Funds buy and sell securities in principal and agency transactions. The Funds pay no commissions on principal transactions. The Funds engage in agency transactions and pay commissions only when Janus Capital believes that the net result of the transaction to the respective Fund will be no less favorable than that of contemporaneously available principal transactions. Janus Capital may use research products and services in servicing other accounts in addition to the Funds. If Janus Capital determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, Janus Capital may allocate the costs of such service or product accordingly. Only that portion of the product or service that Janus Capital determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may create a conflict of interest for Janus Capital. Janus Capital may consider sales of Shares by a broker-dealer or the recommendation of a broker-dealer to its customers that they purchase Shares as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. In placing portfolio business with such broker-dealers, Janus Capital will seek the best execution of each transaction. 10 When the Funds purchase or sell a security in the over-the-counter market, the transaction takes place directly with a principal market-maker, without the use of a broker, except in those circumstances where in the opinion of Janus Capital better prices and executions will be achieved through the use of a broker. OFFICERS AND TRUSTEES The following are the names of the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years. Thomas H. Bailey*# - Trustee, Chairman and President 100 Fillmore Street Denver, CO 80206-4928 Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief Executive Officer, Director and President of Janus Capital. Chairman and Director of IDEX Management, Inc., Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a group of mutual funds) ("IDEX"). James P. Craig, III*# - Trustee and Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Trustee and Executive Vice President of Janus Aspen Series. Chief Investment Officer, Vice President and Director of Janus Capital. Executive Vice President and Portfolio Manager of Janus Fund. Sharon S. Pichler* - Executive Vice President and Portfolio Manager 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President of Janus Money Market Fund, Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund. Vice President of Janus Capital. Formerly, Assistant Vice President and Portfolio Manager at USAA Investment Management Co. (1990-1994). David C. Tucker* - Vice President and General Counsel 100 Fillmore Street Denver, CO 80206-4928 Vice President and General Counsel of Janus Aspen Series. Vice President, Secretary and General Counsel of Janus Capital. Vice President, General Counsel and Director of Janus Service and Janus Distributors. Director, Vice President and Secretary of Janus Capital International Ltd. Steven R. Goodbarn* - Vice President and Chief Financial Officer 100 Fillmore Street Denver, CO 80206-4928 Vice President and Chief Financial Officer of Janus Aspen Series. Vice President of Finance, Treasurer and Chief Financial Officer of Janus Service, Janus Distributors and Janus Capital. Director of IDEX and Janus Distributors. Director, Treasurer and Vice President of Finance of Janus Capital International Ltd. Formerly (1979 to 1992), with the accounting firm of Price Waterhouse LLP, Denver, Colorado. Formerly (1992-1996), Treasurer of Janus Investment Fund and Janus Aspen Series. Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer 100 Fillmore Street Denver, CO 80206-4928 Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of Fund Accounting of Janus Capital. Kelley Abbott Howes* - Secretary 100 Fillmore Street Denver, CO 80206-4928 Secretary of Janus Aspen Series. Associate Counsel of Janus Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston Massachusetts (mutual fund administration services). John W. Shepardson# - Trustee P.O. Box 9591 Denver, CO 80209 Trustee of Janus Aspen Series. Historian. - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 11 William D. Stewart# - Trustee 5330 Sterling Drive Boulder, CO 80302 Trustee of Janus Aspen Series. President of HPS Corporation, Boulder, Colorado (manufacturer of vacuum fittings and valves). Gary O. Loo - Trustee 102 N. Cascade Avenue, Suite 500 Colorado Springs, CO 80903 Trustee of Janus Aspen Series. President and a Director of High Valley Group, Inc., Colorado Springs, Colorado (investments). Dennis B. Mullen - Trustee 1601 114th Avenue, SE Alderwood Building, Suite 130 Bellevue, WA 98004 Trustee of Janus Aspen Series. President and Chief Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona (restaurant chain). Martin H. Waldinger - Trustee 4940 Sandshore Court San Diego, CA 92130 Trustee of Janus Aspen Series. Private Consultant and Director of Run Technologies, Inc., a software development firm, San Carlos, California. Formerly (1989 to 1993), President and Chief Executive Officer of Bridgecliff Management Services, Campbell, California (a condominium association management company). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. The Trustees are responsible for major decisions relating to each Fund's objective, policies and techniques. The Trustees also supervise the operation of the Funds by their officers and review the investment decisions of the officers although they do not actively participate on a regular basis in making such decisions. The Executive Committee of the Trustees shall have and may exercise all the powers and authority of the Board except for matters requiring action by the whole Board pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts Law or the 1940 Act. The Money Market Funds Committee, consisting of Messrs. Craig, Shepardson, Loo and Waldinger, monitors the compliance with policies and procedures adopted particularly for money market funds. The following table shows the aggregate compensation paid to each Trustee by the Funds described in this SAI and all funds advised and sponsored by Janus Capital (collectively, the "Janus Funds") for the periods indicated. None of the Trustees receive any pension or retirement benefits from the Funds or the Janus Funds. [TO BE FILED BY AMENDMENT] Aggregate Compensation Total Compensation from the from the Funds for fiscal year Janus Funds for calendar year Name of Person, Position ended October 31, 1996 ended December 31, 1996** - ------------------------------------------------------------------------------------------------------------------------------------ Thomas H. Bailey, Chairman* $ $ James P. Craig, III, Trustee* $ $ John W. Shepardson, Trustee $ $ William D. Stewart, Trustee $ $ Gary O. Loo, Trustee $ $ Dennis B. Mullen, Trustee $ $ Martin H. Waldinger, Trustee $ $ - ------------------------------------------------------------------------------------------------------------------------------------
*An interested person of the Funds and of Janus Capital. Compensated by Janus Capital and not the Funds. **As of December 31, 1996, Janus Funds consisted of two registered investment companies comprised of a total of 29 funds. 12 PURCHASE OF SHARES As stated in the Prospectus, Janus Distributors is a distributor of the Funds' shares. Shares are sold at the net asset value per share as determined at the close of the regular trading session of the New York Stock Exchange (the "NYSE" or the "Exchange") next occurring after a purchase order is received and accepted by a Fund. A Fund's net asset value is calculated each day that both the NYSE and the New York Federal Reserve Bank are open. As stated in the Prospectus, the Funds each seek to maintain a stable net asset value per share of $1.00. The Shareholder's Guide Section of the Prospectus contains detailed information about the purchase of Shares. REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS If investors do not elect in writing or by phone to receive their dividends and distributions via wire transfer, all income dividends and capital gains distributions, if any, on Shares are reinvested automatically in additional Shares of that Fund at the NAV determined on the first business day following the record date. Any such election (which may be made on the Application or by phone) will apply to dividends and distributions the record dates of which fall on or after the date that a Fund receives such notice. Investors receiving distributions and dividends via wire transfer may elect in writing or by phone to change back to automatic reinvestment at any time. REDEMPTION OF SHARES Procedures for redemption of Shares are set forth in the Shareholder's Guide section of the Prospectus. Shares normally will be redeemed for cash (via wire), although each Fund retains the right to redeem Shares in kind under unusual circumstances, in order to protect the interests of remaining shareholders, by delivery of securities selected from its assets at its discretion. However, the Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to redeem Shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of that Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, their Fund will have the option of redeeming the excess in cash or in kind. If Shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described under "Determination of Net Asset Value" and such valuation will be made as of the same time the redemption price is determined. The right to require the Funds to redeem Shares may be suspended, or the date of payment may be postponed, whenever (1) trading on the NYSE is restricted, as determined by the Securities and Exchange Commission, or the NYSE is closed except for holidays and weekends, (2) the Securities and Exchange Commission permits such suspension and so orders, or (3) an emergency exists as determined by the Securities and Exchange Commission so that disposal of securities or determination of NAV is not reasonably practicable. RETIREMENT PLANS The Funds offer tax-deferred retirement plans for rollover accounts in excess of $250,000. The Individual Retirement Account ("IRA") may be used by individuals who meet the above requirement. Contributions under IRAs are subject to specific contribution limitations. Generally, such contributions may be invested at the direction of the participant. The investment is then held by Investors Fiduciary Trust Company as custodian. Each participant's account is charged an annual fee of $12. There is a maximum annual fee of $24 per taxpayer identification number. Distributions from retirement plans generally are subject to ordinary income tax and may be subject to an additional 10% tax if withdrawn prior to age 591/2. Several exceptions to the general rule may apply. Additionally, shareholders generally must start withdrawing retirement plan assets no later than April 1 of the year after they reach age 701/2. Several methods exist to determine the amount of the minimum annual distribution. Shareholders should consult with their tax advisor or legal counsel prior to receiving any distribution from any retirement plan, in order to determine the income tax impact of any such distribution. To receive additional information about IRAs along with the necessary materials to establish an account, please call the Funds at 1-800-525-3713 or write the Funds at P.O. Box 173375, Denver, CO 80217-3375. No contribution to any IRA can be made until the appropriate forms to establish any such plan have been completed. SHAREHOLDER ACCOUNTS Detailed information about the general procedures for shareholder accounts is set forth in the Prospectus. Applications to open accounts may be obtained by calling the Funds at 1-800-29JANUS or writing to the Funds at 100 Fillmore Street, Denver, Colorado 80206-4928, Attention: Extended Services. 13 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. A shareholder may receive dividends via wire transfer or may choose to have dividends automatically reinvested in a Fund's Shares. As described in the Prospectus, Shares purchased by wire on a bank business day will receive that day's dividend if the purchase is effected at or prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund. Otherwise, such Shares will begin to accrue dividends on the first bank business day following receipt of the order. Requests for redemption of Shares will be redeemed at the next determined net asset value. Redemption requests made by wire that are received prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that day. Proceeds of such a redemption will normally be sent to the predesignated bank account on that day, but that day's dividend will not be received. Closing times for purchase and redemption of Shares may be changed for days in which the bond market or the New York Stock Exchange close early. Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund) are taxable income and are subject to federal income tax (except for shareholders exempt from income tax), whether such distributions are received via wire transfer or are reinvested in additional Shares. Full information regarding the tax status of income dividends and any capital gains distributions will be mailed to shareholders for tax purposes on or before January 31st of each year. As described in detail in the Prospectus, Janus Tax-Exempt Money Market Fund anticipates that substantially all income dividends it pays will be exempt from federal income tax, although dividends attributable to interest on taxable investments, together with distributions from any net realized short- or long-term capital gains, are taxable. The Funds intend to qualify as regulated investment companies by satisfying certain requirements prescribed by Subchapter M of the Internal Revenue Code of 1986. Some money market securities employ a trust or other similar structure to modify the maturity, price characteristics, or quality of financial assets. For example, put features can be used to modify the maturity of a security, or interest rate adjustment features can be used to enhance price stability. If the structure does not perform as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service nor any other regulatory authority has ruled definitively on certain legal issues presented by structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by a portfolio. PRINCIPAL SHAREHOLDERS As of January 20, 1997, the Fund's officers and Trustees as a group owned less than 1% of the outstanding Shares. As of January 20, 1997, the following institutions owned more than 5% of Shares: [INFORMATION TO BE FILED BY AMENDMENT] Institution Address Ownership % - ------------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION Each Fund is a series of the Trust, a Massachusetts Business Trust that was created on February 11, 1986. The Trust is an open-end management investment company registered under the 1940 Act. As of the date of this SAI, the Trust consists of 19 separate series, three of which currently offer three classes of Shares. The Funds were added to the Trust as separate series on December 9, 1994. Janus Capital reserves the right to the name "Janus." In the event that Janus Capital does not continue to provide investment advice to the Funds, the Funds must cease to use the name "Janus" as soon as reasonably practicable. 14 Under Massachusetts law, shareholders of the Funds could, under certain circumstances, be held liable for the obligations of their Fund. However, the Agreement and Declaration of Trust (the "Declaration of Trust") disclaims shareholder liability for acts or obligations of the Funds and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Funds or the Trustees. The Declaration of Trust also provides for indemnification from the assets of the Funds for all losses and expenses of any Fund shareholder held liable for the obligations of their Fund. Thus, the risk of a shareholder incurring a financial loss on account of its liability as a shareholder of one of the Funds is limited to circumstances in which their Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The Trustees intend to conduct the operations of the Funds to avoid, to the extent possible, liability of shareholders for liabilities of their Fund. SHARES OF THE TRUST The Trust is authorized to issue an unlimited number of shares of beneficial interest with a par value of one cent per share for each series of the Trust. Shares of each Fund are fully paid and nonassessable when issued. All shares of a Fund participate equally in dividends and other distributions by such Fund, and in residual assets of that Fund in the event of liquidation. Shares of each Fund have no preemptive, conversion or subscription rights. The Trust is authorized to issue multiple classes of shares for each Fund. Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund each offer three classes of shares by separate prospectuses. The Shares discussed in this SAI are offered only to individual, institutional and corporate clients and foundations and trusts meeting certain minimum investment criteria. A second class of shares, Service Shares, is offered through Financial Institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs. A third class of shares, Investor Shares, is offered to the general public. VOTING RIGHTS The present Trustees were elected at a meeting of the Trust's shareholders held on July 10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in office until the termination of the Trust or his earlier death, retirement, resignation, bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote to elect or remove Trustees, to terminate or reorganize their Fund, to amend the Declaration of Trust, to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees. Each share of each series of the Trust has one vote (and fractional votes for fractional shares). Shares of all series of the Trust have noncumulative voting rights, which means that the holders of more than 50% of the shares of all series of the Trust voting for the election of Trustees can elect 100% of the Trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Trustees. Each series or class of the Trust will vote separately only with respect to those matters that affect only that series or class or if the interest of the series or class in the matter differs from the interests of other series or classes of the Trust. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado 80202, independent accountants for the Funds, audit the Funds' annual financial statements and prepare their tax returns. REGISTRATION STATEMENT The Trust has filed with the 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 Funds or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. FINANCIAL STATEMENTS The following audited financial statements of the Funds for the period ended October 31, 1996 are hereby incorporated into this SAI by reference to the Funds' Annual Report dated October 31, 1996. A copy of such report accompanies this SAI. 15 [TO BE FILED BY AMENDMENT] DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT Schedules of Investments as of October 31, 1996 Statements of Operations for the period ended October 31, 1996 Statements of Assets and Liabilities as of October 31, 1996 Statements of Changes in Net Assets for the periods ended October 31, 1996 and 1995* Financial Highlights for each of the periods indicated Notes to Financial Statements Report of Independent Accountants The portions of such Annual Report that are not specifically listed above are not incorporated by reference into this SAI and are not part of the Registration Statement. - -------------------------------------------------------------------------------- *Transactions in fund shares for the period April 14, 1995 to October 31, 1995. 16 APPENDIX A DESCRIPTION OF SECURITIES RATINGS MOODY'S AND STANDARD & POOR'S MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS The two highest ratings of Standard & Poor's Ratings Services ("S&P") for municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest rating assigned by S&P to a debt obligation. Capacity to pay interest and repay principal is extremely strong. Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree. The AA rating may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within that rating category. The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. Moody's states that Aa bonds are rated lower than the best bonds because margins of protection or other elements make long-term risks appear somewhat larger than Aaa securities. The generic rating Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1 indicates that the security ranks in the higher end of the Aa rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of such rating category. SHORT TERM MUNICIPAL LOANS S&P's highest rating for short-term municipal loans is SP-1. S&P states that short-term municipal securities bearing the SP-1 designation have a strong capacity to pay principal and interest. Those issues rated SP-1 which are determined to possess a very strong capacity to pay debt service will be given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay principal and interest with some vulnerability to adverse financial and economic changes over the term of the notes. Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1. Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of the best quality, enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are of high quality, with margins of protection ample although not so large as in the MIG-1/VMIG-1 group. OTHER SHORT-TERM DEBT SECURITIES Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for other short-term debt securities and commercial paper, and A-1 and A-2 are the two highest ratings for commercial paper assigned by S&P. Moody's uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of A. Issuers rated Prime-1 by Moody's have a superior ability for repayment of senior short-term debt obligations and have many of the following characteristics: leading market positions in well-established industries, high rates of return on funds employed, conservative capitalization structure with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior short-term debt obligations and display many of the same characteristics displayed by issuers rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P carry a strong degree of safety regarding timely repayment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus (+) designation. Issuers rated A-2 by S&P carry a satisfactory degree of safety regarding timely repayment. FITCH F-1+ - Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1 - Very strong credit quality. Issues assigned this rating reflect an assurance for timely payment only slightly less in degree than issues rated F-1+. F-2 - Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payments, but the margin of safety is not as great as the F-1+ and F-1 ratings. 17 DUFF & PHELPS INC. Duff 1+ - Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or ready access to alternative sources of funds, is clearly outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1 - Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1- - High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2 - Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. THOMSON BANKWATCH, INC. TBW-1- The highest category; indicates a very high degree of likelihood that principal and interest will be paid on a timely basis. TBW-2- The second highest category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated TBW-1. TBW-3- The lowest investment grade category; indicates that while more susceptible to adverse developments (both internal and external) than obligations with higher ratings, capacity to service principal and interest in a timely fashion is considered adequate. TBW-4- The lowest rating category; this rating is regarded as non-investment grade and therefore speculative. IBCA, INC. A1+ - Obligations supported by the highest capacity for timely repayment. Where issues possess a particularly strong credit feature, a rating of A1+ is assigned. A2 - Obligations supported by a good capacity for timely repayment. A3 - Obligations supported by a satisfactory capacity for timely repayment. B - Obligations for which there is an uncertainty as to the capacity to ensure timely repayment. C - Obligations for which there is a high risk of default or which are currently in default. 18 APPENDIX B DESCRIPTION OF MUNICIPAL SECURITIES Municipal Notes generally are used to provide for short-term capital needs and usually have maturities of one year or less. They include the following: 1. Project Notes, which carry a U.S. government guarantee, are issued by public bodies (called "local issuing agencies") created under the laws of a state, territory, or U.S. possession. They have maturities that range up to one year from the date of issuance. Project Notes are backed by an agreement between the local issuing agency and the Federal Department of Housing and Urban Development. These Notes provide financing for a wide range of financial assistance programs for housing, redevelopment, and related needs (such as low-income housing programs and renewal programs). 2. Tax Anticipation Notes are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenues, such as income, sales, use and business taxes, and are payable from these specific future taxes. 3. Revenue Anticipation Notes are issued in expectation of receipt of other types of revenues, such as Federal revenues available under the Federal Revenue Sharing Programs. 4. Bond Anticipation Notes are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the Notes. 5. Construction Loan Notes are sold to provide construction financing. After successful completion and acceptance, many projects receive permanent financing through the Federal Housing Administration under the Federal National Mortgage Association ("Fannie Mae") or the Government National Mortgage Association ("Ginnie Mae"). 6. Tax-Exempt Commercial Paper is a short-term obligation with a stated maturity of 365 days or less. It is issued by agencies of state and local governments to finance seasonal working capital needs or as short-term financing in anticipation of longer term financing. Municipal Bonds, which meet longer term capital needs and generally have maturities of more than one year when issued, have three principal classifications: 1. General Obligation Bonds are issued by such entities as states, counties, cities, towns, and regional districts. The proceeds of these obligations are used to fund a wide range of public projects, including construction or improvement of schools, highways and roads, and water and sewer systems. The basic security behind General Obligation Bonds is the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to the rate or amount of special assessments. 2. Revenue Bonds in recent years have come to include an increasingly wide variety of types of municipal obligations. As with other kinds of municipal obligations, the issuers of revenue bonds may consist of virtually any form of state or local governmental entity, including states, state agencies, cities, counties, authorities of various kinds, such as public housing or redevelopment authorities, and special districts, such as water, sewer or sanitary districts. Generally, revenue bonds are secured by the revenues or net revenues derived from a particular facility, group of facilities, or, in some cases, the proceeds of a special excise or other specific revenue source. Revenue bonds are issued to finance a wide variety of capital projects including electric, gas, water and sewer systems; highways, bridges, and tunnels; port and airport facilities; colleges and universities; and hospitals. Many of these bonds provide additional security in the form of a debt service reserve fund to be used to make principal and interest payments. Various forms of credit enhancement, such as a bank letter of credit or municipal bond insurance, may also be employed in revenue bond issues. Housing authorities have a wide range of security, including partially or fully insured mortgages, rent subsidized and/or collateralized mortgages, and/or the net revenues from housing or other public projects. Some authorities provide further security in the form of a state's ability (without obligation) to make up deficiencies in the debt service reserve fund. In recent years, revenue bonds have been issued in large volumes for projects that are privately owned and operated (see 3 below). 3. Private Activity Bonds are considered municipal bonds if the interest paid thereon is exempt from Federal income tax and are issued by or on behalf of public authorities to raise money to finance various privately operated facilities for business and manufacturing, housing and health. These bonds are also used to finance public facilities such as airports, mass transit systems and ports. The payment of the principal and interest on such bonds 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 19 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 revenue bonds, single family housing revenue bonds, industrial development revenue bonds, solid waste resource recovery revenue bonds, and so on. Other Municipal Obligations, incurred for a variety of financing purposes, include: municipal leases, which may take the form of a lease or an installment purchase or conditional sale contract, are issued by state and local governments and authorities to acquire a wide variety of equipment and facilities such as fire and sanitation vehicles, telecommunications equipment and other capital assets. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. To reduce this risk, the Fund will only purchase municipal leases subject to a non-appropriation clause when the payment of principal and accrued interest is backed by an unconditional irrevocable letter of credit, or guarantee of a bank or other entity that meets the criteria described in the Prospectus. Tax-exempt bonds are also categorized according to whether the interest is or is not includible in the calculation of alternative minimum taxes imposed on individuals, according to whether the costs of acquiring or carrying the bonds are or are not deductible in part by banks and other financial institutions, and according to other criteria relevant for Federal income tax purposes. Due to the increasing complexity of Internal Revenue Code and related requirements governing the issuance of tax-exempt bonds, industry practice has uniformly required, as a condition to the issuance of such bonds, but particularly for revenue bonds, an opinion of nationally recognized bond counsel as to the tax-exempt status of interest on the bonds. 20 [LOGO] JANUS INVESTMENT FUND 100 Fillmore Street Denver, CO 80206-4928 - -------------------------------------------------------------------------------- Statement of Additional Information February 17, 1997 - -------------------------------------------------------------------------------- Janus Money Market Fund Janus Government Money Market Fund Janus Tax-Exempt Money Market Fund Service Shares This Statement of Additional Information ("SAI") expands upon and supplements the information contained in the current Prospectus for the Service Shares (the "Shares") of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund (individually, a "Fund" and, collectively, the "Funds"). The Funds are each a separate series of Janus Investment Fund, a Massachusetts business trust (the "Trust"). Each Fund represents shares of beneficial interest in a separate portfolio of securities and other assets with its own objective and policies, and is managed separately by Janus Capital Corporation ("Janus Capital"). This SAI is not a Prospectus and should be read in conjunction with the Prospectus dated February 17, 1997, which is incorporated by reference into this SAI and may be obtained from the Trust at the above phone number or address. This SAI contains additional and more detailed information about the Funds' operations and activities than the Prospectus. 1 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS Page - -------------------------------------------------------------------------------- Investment Policies and Restrictions .............................. 3 Types of Securities and Investment Techniques ..................... 4 Performance Data .................................................. 7 Determination of Net Asset Value .................................. 8 Investment Adviser and Administrator .............................. 8 Custodian, Transfer Agent and Certain Affiliations ................ 10 Portfolio Transactions and Brokerage .............................. 10 Officers and Trustees ............................................. 11 Purchase of Shares ................................................ 13 Redemptions of Shares ............................................. 13 Shareholder Accounts .............................................. 13 Dividends and Tax Status .......................................... 13 Principal Shareholders ............................................ 14 Miscellaneous Information ......................................... 14 Shares of the Trust ............................................ 14 Voting Rights .................................................. 14 Independent Accountants ........................................ 15 Registration Statement ......................................... 15 Financial Statements .............................................. 15 Appendix A - Description of Securities Ratings .................... 16 Appendix B - Description of Municipal Securities .................. 18 - -------------------------------------------------------------------------------- 2 INVESTMENT POLICIES AND RESTRICTIONS INVESTMENT OBJECTIVES As discussed in the Prospectus, the investment objective of each of Janus Money Market Fund and Janus Government Money Market Fund is to seek maximum current income to the extent consistent with stability of capital. The investment objective of Janus Tax-Exempt Money Market Fund is to seek maximum current income that is exempt from federal income taxes to the extent consistent with stability of capital. There can be no assurance that a Fund will achieve its investment objective or maintain a stable net asset value of $1.00 per share. The investment objectives of the Funds are not fundamental and may be changed by the Trustees of the Trust (the "Trustees") without shareholder approval. INVESTMENT RESTRICTIONS APPLICABLE TO ALL FUNDS As indicated in the Prospectus, each Fund has adopted certain fundamental investment restrictions that cannot be changed without shareholder approval. Shareholder approval means approval by the lesser of (i) more than 50% of the outstanding voting securities of the Trust (or a particular Fund or particular class of Shares if a matter affects just that Fund or that class of Shares), or (ii) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of the Trust (or a particular Fund or class of Shares) are present or represented by proxy. As used in the restrictions set forth below and as used elsewhere in this SAI, the term "U.S. Government Securities" shall have the meaning set forth in the 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 Funds have adopted the following fundamental policies: (1) With respect to 75% of its assets, a Fund may not purchase a security other than a U.S. Government Security, if, as a result, more than 5% of the Fund's total assets would be invested in the securities of a single issuer or the Fund would own more than 10% of the outstanding voting securities of any single issuer. (As noted in the Prospectus, the Funds are also currently subject to the greater diversification standards of Rule 2a-7, which are not fundamental.) (2) A Fund may not purchase securities if 25% or more of the value of a Fund's total assets would be invested in the securities of issuers conducting their principal business activities in the same industry; provided that: (i) there is no limit on investments in U.S. Government Securities or in obligations of domestic commercial banks (including U.S. branches of foreign banks subject to regulations under U.S. laws applicable to domestic banks and, to the extent that its parent is unconditionally liable for the obligation, foreign branches of U.S. banks); (ii) this limitation shall not apply to a Fund's investments in municipal securities; (iii) there is no limit on investments in issuers domiciled in a single country; (iv) financial service companies are classified according to the end users of their services (for example, automobile finance, bank finance and diversified finance are each considered to be a separate industry); and (v) utility companies are classified according to their services (for example, gas, gas transmission, electric, and telephone are each considered to be a separate industry). (3) A Fund may not act as an underwriter of securities issued by others, except to the extent that a Fund may be deemed an underwriter in connection with the disposition of portfolio securities of such Fund. (4) A Fund may not lend any security or make any other loan if, as a result, more than 25% of a Fund's total assets would be lent to other parties (but this limitation does not apply to purchases of commercial paper, debt securities or repurchase agreements). (5) A Fund may not purchase or sell real estate or any interest therein, except that the Fund may invest in debt obligations secured by real estate or interests therein or securities issued by companies that invest in real estate or interests therein. (6) A Fund may borrow money for temporary or emergency purposes (not for leveraging) in an amount not exceeding 25% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If borrowings exceed 25% of the value of a Fund's total assets by reason of a decline in net assets, the Fund will reduce its borrowings within three business days to the extent necessary to comply with the 25% limitation. Reverse repurchase agreements or the segregation of assets in connection with such agreements shall not be considered borrowing for the purposes of this limit. (7) Each Fund may, notwithstanding any other investment policy or restriction (whether or not fundamental), invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as that Fund. Each Fund has adopted the following nonfundamental investment restrictions that may be changed by the Trustees without shareholder approval: 3 (1) A Fund may not invest in securities or enter into repurchase agreements with respect to any securities if, as a result, more than 10% of the Fund's net assets would be invested in repurchase agreements not entitling the holder to payment of principal within seven days and in other securities that are not readily marketable ("illiquid investments"). The Trustees, or the Fund's investment adviser acting pursuant to authority delegated by the Trustees, may determine that a readily available market exists for certain securities such as securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, or any successor to such rule, Section 4(2) commercial paper and municipal lease obligations. Accordingly, such securities may not be subject to the foregoing limitation. (2) A Fund may not purchase securities on margin, or make short sales of securities, except for short sales against the box and the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities. (3) A Fund may not pledge, mortgage, hypothecate or encumber any of its assets except to secure permitted borrowings or in connection with permitted short sales. (4) A Fund may not invest in companies for the purpose of exercising control of management. For purposes of the Funds' restriction on investing in a particular industry, the Funds will rely primarily on industry classifications as published by Bloomberg L.P. To the extent that such classifications are so broad that the primary economic characteristics in a single class are materially different, the Funds may further classify issuers in accordance with industry classifications as published by the Securities and Exchange Commission. TYPES OF SECURITIES AND INVESTMENT TECHNIQUES Each of the Funds may invest only in "eligible securities" as defined in Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a security that (i) is denominated in U.S. dollars and has a remaining maturity of 397 days or less (as calculated pursuant to Rule 2a-7); (ii) is rated, or is issued by an issuer with short-term debt outstanding that is rated, in one of the two highest rating categories by any two nationally recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a rating, by that NRSRO (the "Requisite NRSROs") or is unrated and of comparable quality to a rated security, as determined by Janus Capital; and (iii) has been determined by Janus Capital to present minimal credit risks pursuant to procedures approved by the Trustees. In addition, the Funds will maintain a dollar-weighted average portfolio maturity of 90 days or less. A description of the ratings of some NRSROs appears in Appendix A. Under Rule 2a-7, a Fund may not invest more than five percent of its total assets in the securities of any one issuer other than U.S. Government Securities, provided that in certain cases a Fund may invest more than 5% of its assets in a single issuer for a period of up to three business days. Until pending amendments to Rule 2a-7 become effective, up to 25% of Janus Tax-Exempt Money Market Fund's assets may be invested without regard to the foregoing limitations. Pursuant to Rule 2a-7, each Fund (except Janus Tax-Exempt Money Market Fund) will invest at least 95% of its total assets in "first-tier" securities. First-tier securities are eligible securities that are rated, or are issued by an issuer with short-term debt outstanding that is rated, in the highest rating category by the Requisite NRSROs or are unrated and of comparable quality to a rated security. In addition, a Fund may invest in "second-tier" securities which are eligible securities that are not first-tier securities. However, a Fund (except for Janus Tax-Exempt Money Market Fund, in certain cases) may not invest in a second-tier security if immediately after the acquisition thereof the Fund would have invested more than (i) the greater of one percent of its total assets or one million dollars in second-tier securities issued by that issuer, or (ii) five percent of its total assets in second-tier securities. The following discussion of types of securities in which the Funds may invest supplements and should be read in conjunction with the Prospectus. PARTICIPATION INTERESTS Each Fund may purchase participation interests in loans or securities in which the Funds may invest directly. Participation interests are generally sponsored or issued by banks or other financial institutions. A participation interest gives a Fund an undivided interest in the underlying loans or securities in the proportion that the Fund's interest bears to the total principal amount of the underlying loans or securities. Participation interests, which may have fixed, floating or variable rates, may carry a demand feature backed by a letter of credit or guarantee of a bank or institution permitting the holder to tender them back to the bank or other institution. For certain participation interests, a Fund will have the right to demand payment, on not more than seven days' notice, for all or a part of the Fund's participation interest. The Funds intend to exercise any demand rights they may have upon default under the terms of the loan or security, to provide liquidity or to maintain or improve the quality of the Funds' investment portfolio. A Fund will only purchase participation interests that Janus Capital determines present minimal credit risks. 4 VARIABLE AND FLOATING RATE NOTES Janus Money Market Fund also may purchase variable and floating rate demand notes of corporations and other entities, which are unsecured obligations redeemable upon not more than 30 days' notice. These obligations include master demand notes that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements with the issuer of the instrument. The issuer of these obligations often has the right, after a given period, to prepay the outstanding principal amount of the obligations upon a specified number of days' notice. These obligations generally are not traded, nor generally is there an established secondary market for these obligations. To the extent a demand note does not have a seven day or shorter demand feature and there is no readily available market for the obligation, it is treated as an illiquid investment. MORTGAGE- AND ASSET-BACKED SECURITIES The Funds may invest in mortgage-backed securities, which represent an interest in a pool of mortgages made by lenders such as commercial banks, savings and loan institutions, mortgage bankers, mortgage brokers and savings banks. Mortgage-backed securities may be issued by governmental or government-related entities or by non-governmental entities such as banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers. Interests in pools of mortgage-backed securities differ from other forms of debt securities which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. In contrast, mortgage-backed securities provide periodic payments which consist of interest and, in most cases, principal. In effect, these payments are a "pass-through" of the periodic payments and optional prepayments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments to holders of mortgage-backed securities are caused by prepayments resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs which may be incurred. As prepayment rates of individual pools of mortgage loans vary widely, it is not possible to predict accurately the average life of a particular security. Although mortgage-backed securities are issued with stated maturities of up to forty years, unscheduled or early payments of principal and interest on the underlying mortgages may shorten considerably the effective maturities. Mortgage-backed securities may have varying assumptions for average life. The volume of prepayments of principal on a pool of mortgages underlying a particular security will influence the yield of that security, and the principal returned to a Fund may be reinvested in instruments whose yield may be higher or lower than that which might have been obtained had the prepayments not occurred. When interest rates are declining, prepayments usually increase, with the result that reinvestment of principal prepayments will be at a lower rate than the rate applicable to the original mortgage-backed security. The Funds may invest in mortgage-backed securities that are issued by agencies or instrumentalities of the U.S. government. The Government National Mortgage Association ("GNMA") is the principal federal government guarantor of mortgage-backed securities. GNMA is a wholly-owned U.S. government corporation within the Department of Housing and Urban Development. GNMA Certificates are debt securities which represent an interest in one mortgage or a pool of mortgages which are insured by the Federal Housing Administration or the Farmers Home Administration or are guaranteed by the Veterans Administration. The Funds may also invest in pools of conventional mortgages which are issued or guaranteed by agencies of the U.S. government. GNMA pass-through securities are considered to be riskless with respect to default in that (i) the underlying mortgage loan portfolio is comprised entirely of government-backed loans and (ii) the timely payment of both principal and interest on the securities is guaranteed by the full faith and credit of the U.S. government, regardless of whether or not payments have been made on the underlying mortgages. GNMA pass-through securities are, however, subject to the same market risk as comparable debt securities. Therefore, the market value of a Fund's GNMA securities can be expected to fluctuate in response to changes in prevailing interest rate levels. Residential mortgage loans are pooled also by the Federal Home Loan Mortgage Corporation ("FHLMC"). FHLMC is a privately managed, publicly chartered agency created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC issues participation certificates ("PCs") which represent interests in mortgages from FHLMC's national portfolio. The mortgage loans in FHLMC's portfolio are not U.S. government backed; rather, the loans are either uninsured with loan-to-value ratios of 80% or less, or privately insured if the loan-to-value ratio exceeds 80%. FHLMC guarantees the timely payment of interest and ultimate collection of principal on FHLMC PCs; the U.S. government does not guarantee any aspect of FHLMC PCs. The Federal National Mortgage Association ("FNMA") is a government-sponsored corporation owned entirely by private shareholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases residential mortgages from a list of approved seller/servicers which include savings and loan associations, savings banks, commercial banks, credit unions and mortgage bankers. FNMA guarantees the timely payment of principal and interest on the pass-through securities issued by FNMA; the U.S. government does not guarantee any aspect of the FNMA pass-through securities. 5 The Funds may also invest in privately-issued mortgage-backed securities to the extent permitted by their investment restrictions. Mortgage-backed securities offered by private issuers include pass-through securities comprised of pools of conventional residential mortgage loans; mortgage-backed bonds which are considered to be debt obligations of the institution issuing the bonds and which are collateralized by mortgage loans; and collateralized mortgage obligations ("CMOs") which are collateralized by mortgage-backed securities issued by GNMA, FHLMC or FNMA or by pools of conventional mortgages. Asset-backed securities represent direct or indirect participations in, or are secured by and payable from, assets other than mortgage-backed assets such as motor vehicle installment sales contracts, installment loan contracts, leases of various types of real and personal property and receivables from revolving credit agreements (credit cards). Asset-backed securities have yield characteristics similar to those of mortgage-backed securities and, accordingly, are subject to many of the same risks. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements are transactions in which a Fund sells a security and simultaneously commits to repurchase that security from the buyer at an agreed upon price on an agreed upon future date. The resale price in a reverse repurchase agreement reflects a market rate of interest that is not related to the coupon rate or maturity of the sold security. For certain demand agreements, there is no agreed upon repurchase date and interest payments are calculated daily, often based upon the prevailing overnight repurchase rate. The Funds will use the proceeds of reverse repurchase agreements only to satisfy unusually heavy redemption requests or for other temporary or emergency purposes without the necessity of selling portfolio securities or to earn additional income on portfolio securities. Generally, a reverse repurchase agreement enables the Fund to recover for the term of the reverse repurchase agreement all or most of the cash invested in the portfolio securities sold and to keep the interest income associated with those portfolio securities. Such transactions are only advantageous if the interest cost to the Fund of the reverse repurchase transaction is less than the cost of obtaining the cash otherwise. In addition, interest costs on the money received in a reverse repurchase agreement may exceed the return received on the investments made by a Fund with those monies. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES Each Fund may purchase securities on a when-issued or delayed delivery basis. A Fund will enter into such transactions only when it has the intention of actually acquiring the securities. To facilitate such acquisitions, the Funds' custodian will segregate cash or high quality liquid assets in an amount at least equal to such commitments. On delivery dates for such transactions, the Fund will meet its obligations from maturities, sales of the segregated securities or from other available sources of cash. If a Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. At the time a Fund makes the commitment to purchase securities on a when-issued or delayed delivery basis, it will record the transaction as a purchase and thereafter reflect the value of such securities in determining its net asset value. INVESTMENT COMPANY SECURITIES From time to time, the Funds may invest in securities of other investment companies. The Funds are subject to the provisions of Section 12(d)(1) of the 1940 Act, which currently limits each Fund's investment in other investment companies to no more than 10% of the investing Fund's assets. MUNICIPAL LEASES Janus Money Market Fund and Janus Tax-Exempt Money Market Fund may invest in municipal leases. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. A 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 under "Taxable Investments." In evaluating municipal lease obligations, Janus Capital will consider such factors as it deems appropriate, including: (a) whether the lease can be canceled; (b) the ability of the lease obligee to direct the sale of the underlying assets; (c) the general creditworthiness of the lease obligor; (d) the likelihood that the municipality will discontinue appropriating funding for the leased property in the event such property is no longer considered essential by the municipality; (e) the legal recourse of the 6 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 Funds, 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 a Fund. PERFORMANCE DATA A Fund may provide current annualized and effective annualized yield quotations based on its daily dividends. These quotations may from time to time be used in advertisements, shareholder reports or other communications to shareholders. All performance information supplied by the Funds in advertising is historical and is not intended to indicate future returns. In performance advertising, the Funds may compare their Shares' performance information with data published by independent evaluators such as Morningstar, Inc., Lipper Analytical Services, Inc., or CDC/Wiesenberger, IBC/Donoghue's Money Fund Report or other companies which track the investment performance of investment companies ("Fund Tracking Companies"). The Funds may also compare their Shares' performance information with the performance of recognized stock, bond and other indices, including but not limited to the Municipal Bond Buyers Indices, the Salomon Brothers Bond Index, the Lehman Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S. Treasury bonds, bills or notes and changes in the Consumer Price Index as published by the U.S. Department of Commerce. The Funds may refer to general market performance over past time periods such as those published by Ibbotson Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook"). The Funds may also refer in such materials to mutual fund performance rankings and other data published by Fund Tracking Companies. Performance advertising may also refer to discussions of the Funds and comparative mutual fund data and ratings reported in independent periodicals, such as newspapers and financial magazines. The Funds may also compare the Shares' yield to those of certain U.S. Treasury obligations or other money market instruments. Any current yield quotation of the Shares which is used in such a manner as to be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as amended, shall consist of an annualized historical yield, carried at least to the nearest hundredth of one percent, based on a specific seven calendar day period. Current yield shall be calculated by (a) determining the net change during a seven calendar day period in the value of a hypothetical account having a balance of one Share at the beginning of the period, (b) dividing the net change by the value of the account at the beginning of the period to obtain a base period return, and (c) multiplying the quotient by 365/7 (i.e., annualizing). For this purpose, the net change in account value will reflect the value of additional Shares purchased with dividends declared on the original Share and dividends declared on both the original Share and any 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 Shares may advertise effective yield quotations. Effective yield quotations are calculated by adding 1 to the base period return, raising the sum to a power equal to 365/7, and subtracting 1 from the result (i.e., compounding). Janus Tax-Exempt Money Market Fund's tax equivalent yield is the rate an investor would have to earn from a fully taxable investment in order to equal such Shares' yield after taxes. Tax equivalent yields are calculated by dividing Janus Tax-Exempt Money Market Fund's yield by one minus the stated federal or combined federal and state tax rate. If only a portion of the Shares' yield is tax-exempt, only that portion is adjusted in the calculation. 7 The current yield and effective yield for the Investor Shares and Institutional Shares of the Funds for the seven day period ended October 31, 1996 are shown below. The Service Shares had not yet commenced operations as of October 31, 1996. The performance of the Service Shares is expected to differ from that of the classes listed below because the Service Shares are subject to different fees and expenses. Seven-day Effective Fund Name Yield Seven-day Yield - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund Investor Shares 5.01% 5.14% Institutional Shares 5.41% 5.56% Janus Government Money Market Fund Investor Shares 4.90% 5.02% Institutional Shares 5.29% 5.43% Janus Tax-Exempt Money Market Fund* Investor Shares 3.25% 3.30% Institutional Shares 3.70% 3.77% - ------------------------------------------------------------------------------------------------------------------------------------
*Janus Tax-Exempt Money Market Fund tax equivalent yield for the seven day period ended October 31, 1996 was 4.51% for the Investor Shares and 5.14% for the Institutional Shares. Although published yield information is useful to investors in reviewing a Fund's performance, investors should be aware that the Fund's yield fluctuates from day to day and that the Fund's yield for any given period is not an indication or representation by the Fund of future yields or rates of return on the Shares. Also, Financial Institutions may charge their customers direct fees in connection with an investment in a Fund, which will have the effect of reducing the Fund's net yield to those shareholders. The yield on a class of Shares is not fixed or guaranteed, and an investment in the Shares is not insured. Accordingly, yield information may not necessarily be used to compare Shares with investment alternatives which, like money market instruments or bank accounts, may provide a fixed rate of interest. In addition, because investments in the Funds are not insured or guaranteed, yield on the Shares may not necessarily be used to compare the Shares with investment alternatives which are insured or guaranteed. DETERMINATION OF NET ASSET VALUE Pursuant to the rules of the Securities and Exchange Commission, the Trustees have established procedures to stabilize each Fund's net asset value at $1.00 per Share. These procedures include a review of the extent of any deviation of net asset value per Share as a result of fluctuating interest rates, based on available market rates, from the Fund's $1.00 amortized cost price per Share. Should that deviation exceed 1/2 of 1%, the Trustees will consider whether any action should be initiated to eliminate or reduce material dilution or other unfair results to shareholders. Such action may include redemption of Shares in kind, selling portfolio securities prior to maturity, reducing or withholding dividends and utilizing a net asset value per Share as determined by using available market quotations. Each Fund i) will maintain a dollar-weighted average portfolio maturity of 90 days or less; ii) will not purchase any instrument with a remaining maturity greater than 397 days or subject to a repurchase agreement having a duration of greater than 397 days; iii) will limit portfolio investments, including repurchase agreements, to those U.S. dollar-denominated instruments that Janus Capital has determined present minimal credit risks pursuant to procedures established by the Trustees; and iv) will comply with certain reporting and recordkeeping procedures. The Trust has also established procedures to ensure that portfolio securities meet the Funds' high quality criteria. INVESTMENT ADVISER AND ADMINISTRATOR As stated in the Prospectus, each Fund has an Investment Advisory Agreement with Janus Capital, 100 Fillmore Street, Denver, Colorado 80206-4928. Each Advisory Agreement provides that Janus Capital will furnish continuous advice and recommendations concerning the Funds' investments. The Funds have each agreed to compensate Janus Capital for its advisory services by the monthly payment of an advisory fee at the annual rate of .20% of the average daily net assets of each Fund. However, Janus Capital has agreed to waive .10% of the value of each Fund's average daily net assets of the advisory fee. Janus Capital may modify or terminate the waiver at any time upon 90 days' notice to the Trustees. In addition, the Funds pay brokerage commissions or dealer spreads and other expenses in connection with the execution of portfolio transactions. The following table summarizes the advisory fees paid by the Funds for the fiscal years ended October 31: 1996 1995 Advisory Advisory Advisory Advisory Fees Prior Fees After Fees Prior Fees After Fund Name to Waiver Waiver to Waiver Waiver - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $3,101,530 $1,550,765 $874,302 $437,151 Janus Government Money Market Fund $ 330,914 $ 165,457 $151,606 $ 75,803 Janus Tax-Exempt Money Market Fund $ 140,898 $ 70,449 $ 82,622 $ 41,311 - ------------------------------------------------------------------------------------------------------------------------------------
8 On behalf of the Shares, each of the Funds has also entered into an Administration Agreement with Janus Capital. Under the terms of the Administration Agreements, each of the Funds has agreed to compensate Janus Capital for administrative services at the annual rate of .40% of the value of the average daily net assets of the Shares for certain services, including custody, transfer agent fees and expenses, legal fees not related to litigation, accounting expenses, net asset value determination and fund accounting, recordkeeping, and blue sky registration and monitoring services, registration fees, expenses of shareholders' meetings and reports to shareholders, costs of preparing, printing and mailing the Shares' Prospectuses and Statements of Additional Information to current shareholders, and other costs of complying with applicable laws regulating the sale of Shares. Each Fund will pay those expenses not assumed by Janus Capital, including interest and taxes, fees and expenses of Trustees who are not affiliated with Janus Capital, audit fees and expenses, and extraordinary costs. Janus Capital has agreed to waive a portion of the administration fee, and accordingly the effective rate for calculating the administration fee payable by the Shares will be .30% for that period. Janus Capital may terminate the waiver at any time upon 90 days' notice to the Trustees. Janus Capital may use all or a portion of its administration fee to compensate Financial Institutions for providing administrative services to their customers who invest in the Shares. The types of services that the Financial Institutions would provide include serving as the sole shareholder of record, shareholder recordkeeping, processing and aggregating purchase and redemption transactions, providing periodic statements, forwarding shareholder reports and other materials, and providing other similar services that the Funds would have to perform if they were dealing directly with the beneficial owners, rather than the Financial Institutions, as shareholders of record. The Advisory Agreements for each Fund became effective on December 9, 1994 and will continue in effect until June 16, 1997, and thereafter from year to year so long as such continuance is approved annually by a majority of the Trustees who are not parties to the Advisory Agreements or interested persons of any such party, and by either a majority of the Funds' outstanding voting shares or the Trustees. Each Advisory Agreement i) may be terminated without the payment of any penalty by any Fund or Janus Capital on 60 days' written notice; ii) terminates automatically in the event of its assignment; and iii) generally, may not be amended without the approval of a majority of the Trustees of the affected Fund, including the Trustees who are not interested persons of that Fund or Janus Capital and, to the extent required by the 1940 Act, the vote of a majority of the outstanding voting securities of that Fund. Janus Capital also performs investment advisory services for other mutual funds, and for individual, charitable, corporate and retirement accounts. Investment decisions for each account managed by Janus Capital, including the Funds, are made independently from those for any other account that is or may in the future become managed by Janus Capital or its affiliates. If, however, a number of accounts managed by Janus Capital are contemporaneously engaged in the purchase or sale of the same security, the orders may be aggregated and/or the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by an account or the size of the position obtained or liquidated for an account. Pursuant to an exemptive order granted by the SEC, the Funds and other funds advised by Janus Capital may also transfer daily uninvested cash balances into one or more joint trading accounts. Assets in the joint trading accounts are invested in money market instruments and the proceeds are allocated to the participating funds on a pro rata basis. Each account managed by Janus Capital has its own investment objective and is managed in accordance with that objective by a particular portfolio manager or team of portfolio managers. As a result, from time to time two or more different managed accounts may pursue divergent investment strategies with respect to investments or categories of investments. As indicated in the Prospectus, Janus Capital does not permit portfolio managers to purchase and sell securities for their own accounts except under the limited exceptions contained in Janus Capital's policy regarding personal investing by directors, officers and employees of Janus Capital and the Funds. The policy requires investment personnel and officers of Janus Capital, inside directors of Janus Capital and the Funds and other designated persons deemed to have access to current trading information to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for trading authority will be denied when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or to have been effected on behalf of any client account, including the Funds. In addition to the pre-clearance requirement described above, the policy subjects investment personnel, officers and directors/ Trustees of Janus Capital and the Funds to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with Janus Capital's policy. Those persons also may be required under certain circumstances to forfeit their profits made from personal trading. The provisions of the policy are administered by and subject to exceptions authorized by Janus Capital. Kansas City Southern Industries, Inc., a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services ("KCSI"), owns approximately 83% of Janus Capital. Thomas H. Bailey, the President and Chairman of the Board of Janus Capital, owns approximately 12% of its voting stock and, by agreement with KCSI, selects a majority of Janus Capital's Board. 9 CUSTODIAN, TRANSFER AGENT AND CERTAIN AFFILIATIONS United Missouri Bank, N.A., P.O. Box 419226, Kansas City, Missouri 64141-6226, is the Funds' custodian. The custodian holds the Funds' assets in safekeeping and collects and remits the income thereon, subject to the instructions of each Fund. Janus Service Corporation ("Janus Service"), P.O. Box 173375, Denver, Colorado 80217-3375, a wholly-owned subsidiary of Janus Capital, is the Funds' transfer agent. In addition, Janus Service provides certain other administrative, recordkeeping and shareholder relations services to the Funds. The Funds do not pay Janus Service a fee. Janus Distributors, Inc. ("Janus Distributors"), 100 Fillmore Street, Denver, Colorado 80206-4928, a wholly-owned subsidiary of Janus Capital, is a distributor of the Funds. Janus Distributors is registered as a broker-dealer under the Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the National Association of Securities Dealers, Inc. Janus Distributors acts as the agent of the Funds in connection with the sale of their shares in all states in which the shares are registered and in which Janus Distributors is qualified as a broker-dealer. Under the Distribution Agreement, Janus Distributors continuously offers the Funds' shares and accepts orders at net asset value. No sales charges are paid by investors. Promotional expenses in connection with offers and sales of shares are paid by Janus Capital. Janus Capital also may make payments to selected broker-dealer firms or institutions which were instrumental in the acquisition of shareholders for the Funds or which performed services with respect to shareholder accounts. The minimum aggregate size required for eligibility for such payments, and the factors in selecting the broker-dealer firms and institutions to which they will be made, are determined from time to time by Janus Capital. PORTFOLIO TRANSACTIONS AND BROKERAGE Decisions as to the assignment of portfolio business for the Funds and negotiation of its commission rates are made by Janus Capital whose policy is to obtain the "best execution" (prompt and reliable execution at the most favorable security price) of all portfolio transactions. 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 October 31, 1996 and October 31, 1995, the total brokerage commissions paid by the Funds are summarized below: 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Janus Money Market Fund $ $ Janus Government Money Market Fund $ $ Janus Tax-Exempt Money Market Fund $ $ - ------------------------------------------------------------------------------------------------------------------------------------
The Funds buy and sell securities in principal and agency transactions. The Funds pay no commissions on principal transactions. The Funds engage in agency transactions and pay commissions only when Janus Capital believes that the net result of the transaction to the respective Fund will be no less favorable than that of contemporaneously available principal transactions. Janus Capital may use research products and services in servicing other accounts in addition to the Funds. If Janus Capital determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, Janus Capital may allocate the costs of such service or product accordingly. Only that portion of the product or service that Janus Capital determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Such allocation may create a conflict of interest for Janus Capital. 10 Janus Capital may consider sales of Shares by a broker-dealer or the recommendation of a broker-dealer to its customers that they purchase Shares as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Janus Capital may also consider payments made by brokers effecting transactions for a Fund i) to the Fund or ii) to other persons on behalf of the Fund for services provided to the Fund for which it would be obligated to pay. In placing portfolio business with such broker-dealers, Janus Capital will seek the best execution of each transaction. When the Funds purchase or sell a security in the over-the-counter market, the transaction takes place directly with a principal market-maker, without the use of a broker, except in those circumstances where in the opinion of Janus Capital better prices and executions will be achieved through the use of a broker. OFFICERS AND TRUSTEES The following are the names of the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years. Thomas H. Bailey*# - Trustee, Chairman and President 100 Fillmore Street Denver, CO 80206-4928 Trustee, Chairman and President of Janus Aspen Series. Chairman, Chief Executive Officer, Director and President of Janus Capital. Chairman and Director of IDEX Management, Inc., Largo, Florida (50% subsidiary of Janus Capital and investment adviser to a group of mutual funds) ("IDEX"). James P. Craig, III*# - Trustee and Executive Vice President 100 Fillmore Street Denver, CO 80206-4928 Trustee and Executive Vice President of Janus Aspen Series. Chief Investment Officer, Vice President and Director of Janus Capital. Executive Vice President and Portfolio Manager of Janus Fund. Sharon S. Pichler* - Executive Vice President and Portfolio Manager 100 Fillmore Street Denver, CO 80206-4928 Executive Vice President of Janus Money Market Fund, Janus Tax-Exempt Money Market Fund and Janus Government Money Market Fund. Vice President of Janus Capital. Formerly, Assistant Vice President and Portfolio Manager at USAA Investment Management Co. (1990-1994). David C. Tucker* - Vice President and General Counsel 100 Fillmore Street Denver, CO 80206-4928 Vice President and General Counsel of Janus Aspen Series. Vice President, Secretary and General Counsel of Janus Capital. Vice President, General Counsel and Director of Janus Service and Janus Distributors. Director, Vice President and Secretary of Janus Capital International Ltd. Steven R. Goodbarn* - Vice President and Chief Financial Officer 100 Fillmore Street Denver, CO 80206-4928 Vice President and Chief Financial Officer of Janus Aspen Series. Vice President of Finance, Treasurer and Chief Financial Officer of Janus Service, Janus Distributors and Janus Capital. Director of IDEX and Janus Distributors. Director, Treasurer and Vice President of Finance of Janus Capital International Ltd. Formerly (1979 to 1992), with the accounting firm of Price Waterhouse LLP, Denver, Colorado. Formerly (1992-1996), Treasurer of Janus Investment Fund and Janus Aspen Series. Glenn P. O'Flaherty* - Treasurer and Chief Accounting Officer 100 Fillmore Street Denver, CO 80206-4928 Treasurer and Chief Accounting Officer of Janus Aspen Series. Director of Fund Accounting of Janus Capital. Kelley Abbott Howes* - Secretary 100 Fillmore Street Denver, CO 80206-4928 Secretary of Janus Aspen Series. Associate Counsel of Janus Capital. Formerly (1990 to 1994), with The Boston Company Advisors, Inc., Boston Massachusetts (mutual fund administration services). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. 11 John W. Shepardson# - Trustee P.O. Box 9591 Denver, CO 80209 Trustee of Janus Aspen Series. Historian. William D. Stewart# - Trustee 5330 Sterling Drive Boulder, CO 80302 Trustee of Janus Aspen Series. President of HPS Corporation, Boulder, Colorado (manufacturer of vacuum fittings and valves). Gary O. Loo - Trustee 102 N. Cascade Avenue, Suite 500 Colorado Springs, CO 80903 Trustee of Janus Aspen Series. President and a Director of High Valley Group, Inc., Colorado Springs, Colorado (investments). Dennis B. Mullen - Trustee 1601 114th Avenue, SE Alderwood Building, Suite 130 Bellevue, WA 98004 Trustee of Janus Aspen Series. President and Chief Executive Officer of BC Northwest, L.P., a franchise of Boston Chicken, Inc., Bellevue, Washington (restaurant chain). Formerly (1982 to 1993), Chairman, President and Chief Executive Officer of Famous Restaurants, Inc., Scottsdale, Arizona (restaurant chain). Martin H. Waldinger - Trustee 4940 Sandshore Court San Diego, CA 92130 Trustee of Janus Aspen Series. Private Consultant and Director of Run Technologies, Inc., a software development firm, San Carlos, California. Formerly (1989 to 1993), President and Chief Executive Officer of Bridgecliff Management Services, Campbell, California (a condominium association management company). - -------------------------------------------------------------------------------- * Interested person of the Trust and of Janus Capital. # Member of the Trust's Executive Committee. The Trustees are responsible for major decisions relating to each Fund's objective, policies and techniques. The Trustees also supervise the operation of the Funds by their officers and review the investment decisions of the officers although they do not actively participate on a regular basis in making such decisions. The Executive Committee of the Trustees shall have and may exercise all the powers and authority of the Board except for matters requiring action by the whole Board pursuant to the Trust's Bylaws or Declaration of Trust, Massachusetts Law or the 1940 Act. The Money Market Funds Committee, consisting of Messrs. Craig, Shepardson, Loo and Waldinger, monitors the compliance with policies and procedures adopted particularly for money market funds. The following table shows the aggregate compensation paid to each Trustee by the Funds described in this SAI and all funds advised and sponsored by Janus Capital (collectively, the "Janus Funds") for the periods indicated. None of the Trustees receive any pension or retirement benefits from the Funds or the Janus Funds. Aggregate Compensation Total Compensation from the from the Funds for fiscal year Janus Funds for calendar year Name of Person, Position ended October 31, 1996 ended December 31, 1996** - ------------------------------------------------------------------------------------------------------------------------------------ Thomas H. Bailey, Chairman* -- -- James P. Craig, III, Trustee* -- -- John W. Shepardson, Trustee $70,000 $ William D. Stewart, Trustee $70,000 $ Gary O. Loo, Trustee $67,000 $ Dennis B. Mullen, Trustee $67,000 $ Martin H. Waldinger, Trustee $70,000 $ - ------------------------------------------------------------------------------------------------------------------------------------
*An interested person of the Funds and of Janus Capital. Compensated by Janus Capital and not the Funds. **As of December 31, 1996, Janus Funds consisted of two registered investment companies comprised of a total of 29 funds. 12 PURCHASE OF SHARES As stated in the Prospectus, Janus Distributors is a distributor of the Funds' shares. Shares are sold at the net asset value per share as determined at the close of the regular trading session of the New York Stock Exchange (the "NYSE" or the "Exchange") next occurring after a purchase order is received and accepted by a Fund. A Fund's net asset value is calculated each day that both the NYSE and the New York Federal Reserve Bank are open. As stated in the Prospectus, the Funds each seek to maintain a stable net asset value per share of $1.00. The Shareholder's Guide Section of the Prospectus contains detailed information about the purchase of Shares. REDEMPTIONS OF SHARES Redemptions, like purchases, may only be effected through the trust accounts, cash management programs and similar programs of participating banks and financial institutions. Shares normally will be redeemed for cash, although each Fund retains the right to redeem its shares in kind under unusual circumstances, in order to protect the interests of remaining shareholders, by delivery of securities selected from its assets at its discretion. However, the Funds are governed by Rule 18f-1 under the 1940 Act, which requires each Fund to redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of that Fund during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, a Fund will have the option of redeeming the excess in cash or in kind. If shares are redeemed in kind, the redeeming shareholder generally will 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" and such valuation will be made as of the same time the redemption price is determined. The right to require the Funds to redeem its shares may be suspended, or the date of payment may be postponed, whenever (1) trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed except for holidays and weekends, (2) the SEC permits such suspension and so orders, or (3) an emergency exists as determined by the SEC so that disposal of securities or determination of NAV is not reasonably practicable. SHAREHOLDER ACCOUNTS Detailed information about the general procedures for shareholder accounts is set forth in the Prospectus. Applications to open accounts may be obtained by calling or writing your Financial Institution. 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. A shareholder may receive dividends via wire transfer or may choose to have dividends automatically reinvested in a Fund's Shares. As described in the Prospectus, Shares purchased by wire on a bank business day will receive that day's dividend if the purchase is effected at or prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund. Otherwise, such Shares will begin to accrue dividends on the first bank business day following receipt of the order. Requests for redemption of Shares will be redeemed at the next determined net asset value. Redemption requests made by wire that are received prior to 3:00 p.m. (New York time) for Janus Money Market Fund and Janus Government Money Market Fund and 12:00 p.m. (New York time) for Janus Tax-Exempt Money Market Fund will result in Shares being redeemed that day. Proceeds of such a redemption will normally be sent to the predesignated bank account on that day, but that day's dividend will not be received. Closing times for purchase and redemption of Shares may be changed for days in which the bond market or the New York Stock Exchange close early. Distributions for all of the Funds (except Janus Tax-Exempt Money Market Fund) are taxable income and are subject to federal income tax (except for shareholders exempt from income tax), whether such distributions are received via wire transfer or are reinvested in additional Shares. Full information regarding the tax status of income dividends and any capital gains distributions will be mailed to shareholders for tax purposes on or before January 31st of each year. As described in detail in the Prospectus, Janus Tax-Exempt Money Market Fund anticipates that substantially all income dividends it pays will be exempt from federal income tax, although dividends attributable to interest on taxable investments, together with distributions from any net realized short- or long-term capital gains, are taxable. The Funds intend to qualify as regulated investment companies by satisfying certain requirements prescribed by Subchapter M of the Internal Revenue Code of 1986. Some money market securities employ a trust or other similar structure to modify the maturity, price characteristics, or quality of financial assets. For example, put features can be used to modify the maturity of a security, or interest rate adjustment 13 features can be used to enhance price stability. If the structure does not perform as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service nor any other regulatory authority has ruled definitively on certain legal issues presented by structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by a portfolio. PRINCIPAL SHAREHOLDERS As of January 20, 1997, the Fund's officers and Trustees as a group owned less than 1% of the outstanding Shares. As of January 20, 1997, the following financial institutions owned more than 5% of Shares: [INFORMATION TO BE FILED BY AMENDMENT] Financial Institution Address Ownership % - ------------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION Each Fund is a series of the Trust, a Massachusetts Business Trust that was created on February 11, 1986. The Trust is an open-end management investment company registered under the 1940 Act. As of the date of this SAI, the Trust consists of 19 separate series, three of which currently offer three classes of Shares. The Funds were added to the Trust as separate series on December 9, 1994. Janus Capital reserves the right to the name "Janus." In the event that Janus Capital does not continue to provide investment advice to the Funds, the Funds must cease to use the name "Janus" as soon as reasonably practicable. Under Massachusetts law, shareholders of the Funds could, under certain circumstances, be held liable for the obligations of their Fund. However, the Agreement and Declaration of Trust (the "Declaration of Trust") disclaims shareholder liability for acts or obligations of the Funds and requires that notice of this disclaimer be given in each agreement, obligation or instrument entered into or executed by the Funds or the Trustees. The Declaration of Trust also provides for indemnification from the assets of the Funds for all losses and expenses of any Fund shareholder held liable for the obligations of their Fund. Thus, the risk of a shareholder incurring a financial loss on account of its liability as a shareholder of one of the Funds is limited to circumstances in which their Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The Trustees intend to conduct the operations of the Funds to avoid, to the extent possible, liability of shareholders for liabilities of their Fund. SHARES OF THE TRUST The Trust is authorized to issue an unlimited number of shares of beneficial interest with a par value of one cent per share for each series of the Trust. Shares of each Fund are fully paid and nonassessable when issued. All shares of a Fund participate equally in dividends and other distributions by such Fund, and in residual assets of that Fund in the event of liquidation. Shares of each Fund have no preemptive, conversion or subscription rights. The Trust is authorized to issue multiple classes of shares for each Fund. Currently, Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund each offer three classes of shares by separate prospectuses. The Shares discussed in this SAI are offered only through Financial Institutions that meet minimum investment requirements in connection with trust accounts, cash management programs and similar programs provided to their customers. A second class of shares, Institutional Shares, is offered to individual, institutional and corporate clients and foundations and trusts meeting certain minimum investment criteria. A third class of shares, Investor Shares, is offered to the general public. VOTING RIGHTS The present Trustees were elected at a meeting of the Trust's shareholders held on July 10, 1992, with the exception of Mr. Craig who was appointed by the Trustees as of June 30, 1995. Under the Declaration of Trust, each Trustee will continue in office until the termination of the Trust or his earlier death, resignation, bankruptcy, incapacity or removal. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the 1940 Act. Subject to the foregoing, shareholders have the power to vote to elect or remove Trustees, to terminate or reorganize their Fund, to amend the Declaration of Trust, to bring certain derivative actions and on any other matters on which a shareholder vote is required by the 1940 Act, the Declaration of Trust, the Trust's Bylaws or the Trustees. 14 Each share of each series of the Trust has one vote (and fractional votes for fractional shares). Shares of all series of the Trust have noncumulative voting rights, which means that the holders of more than 50% of the shares of all series of the Trust voting for the election of Trustees can elect 100% of the Trustees if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Trustees. Each series or class of the Trust will vote separately only with respect to those matters that affect only that series or class or if the interest of the series or class in the matter differs from the interests of other series or classes of the Trust. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver, Colorado 80202, independent accountants for the Funds, audit the Funds' annual financial statements and prepare their tax returns. REGISTRATION STATEMENT The Trust has filed with the 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 Funds or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. FINANCIAL STATEMENTS The following audited financial statements of the Institutional Shares and Investor Shares of the Funds for the period ended October 31, 1996 are hereby incorporated by reference to the Funds' Annual Report dated October 31, 1996. A copy of such report accompanies this SAI. DOCUMENTS INCORPORATED BY REFERENCE TO THE ANNUAL REPORT Schedules of Investments as of October 31, 1996 Statements of Operations for the period ended October 31, 1996 Statements of Assets and Liabilities as of October 31, 1996 Statements of Changes in Net Assets for the periods ended October 31, 1996 and the fiscal period ended October 31, 1995 Financial Highlights for Investor Shares for the fiscal year ended October 31, 1996 and the fiscal period February 15, 1995 to October 31, 1995 Financial Highlights for Institutional Shares for the fiscal year ended October 31, 1996 and the fiscal period April 17, 1995 to October 31, 1995 Notes to Financial Statements The portions of such Annual Report that are not specifically listed above are not incorporated by reference into this SAI and are not part of the Registration Statement. 15 APPENDIX A DESCRIPTION OF SECURITIES RATINGS MOODY'S AND STANDARD & POOR'S MUNICIPAL AND CORPORATE BONDS AND MUNICIPAL LOANS The two highest ratings of Standard & Poor's Ratings Services ("S&P") for municipal and corporate bonds are AAA and AA. Bonds rated AAA have the highest rating assigned by S&P to a debt obligation. Capacity to pay interest and repay principal is extremely strong. Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree. The AA rating may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within that rating category. The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. Moody's states that Aa bonds are rated lower than the best bonds because margins of protection or other elements make long-term risks appear somewhat larger than Aaa securities. The generic rating Aa may be modified by the addition of the numerals 1, 2 or 3. The modifier 1 indicates that the security ranks in the higher end of the Aa rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of such rating category. SHORT TERM MUNICIPAL LOANS S&P's highest rating for short-term municipal loans is SP-1. S&P states that short-term municipal securities bearing the SP-1 designation have a strong capacity to pay principal and interest. Those issues rated SP-1 which are determined to possess a very strong capacity to pay debt service will be given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to pay principal and interest with some vulnerability to adverse financial and economic changes over the term of the notes. Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1. Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are of the best quality, enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both. Loans bearing the MIG-2/VMIG-2 designation are of high quality, with margins of protection ample although not so large as in the MIG-1/VMIG-1 group. OTHER SHORT-TERM DEBT SECURITIES Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for other short-term debt securities and commercial paper, and A-1 and A-2 are the two highest ratings for commercial paper assigned by S&P. Moody's uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of Prime, while S&P uses the numbers 1, 2 and 3 to denote relative strength within its highest classification of A. Issuers rated Prime-1 by Moody's have a superior ability for repayment of senior short-term debt obligations and have many of the following characteristics: leading market positions in well-established industries, high rates of return on funds employed, conservative capitalization structure with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior short-term debt obligations and display many of the same characteristics displayed by issuers rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P carry a strong degree of safety regarding timely repayment. Those issues determined to possess extremely strong safety characteristics are denoted with a plus (+) designation. Issuers rated A-2 by S&P carry a satisfactory degree of safety regarding timely repayment. FITCH F-1+ - Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1 - Very strong credit quality. Issues assigned this rating reflect an assurance for timely payment only slightly less in degree than issues rated F-1+. F-2 - Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payments, but the margin of safety is not as great as the F-1+ and F-1 ratings. 16 DUFF & PHELPS INC. Duff 1+ - Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or ready access to alternative sources of funds, is clearly outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1 - Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Duff 1- - High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Duff 2 - Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. THOMSON BANKWATCH, INC. TBW-1- The highest category; indicates a very high degree of likelihood that principal and interest will be paid on a timely basis. TBW-2- The second highest category; while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated TBW-1. TBW-3- The lowest investment grade category; indicates that while more susceptible to adverse developments (both internal and external) than obligations with higher ratings, capacity to service principal and interest in a timely fashion is considered adequate. TBW-4- The lowest rating category; this rating is regarded as non-investment grade and therefore speculative. IBCA, INC. A1+ - Obligations supported by the highest capacity for timely repayment. Where issues possess a particularly strong credit feature, a rating of A1+ is assigned. A2 - Obligations supported by a good capacity for timely repayment. A3 - Obligations supported by a satisfactory capacity for timely repayment. B - Obligations for which there is an uncertainty as to the capacity to ensure timely repayment. C - Obligations for which there is a high risk of default or which are currently in default. 17 APPENDIX B DESCRIPTION OF MUNICIPAL SECURITIES Municipal Notes generally are used to provide for short-term capital needs and usually have maturities of one year or less. They include the following: 1. Project Notes, which carry a U.S. government guarantee, are issued by public bodies (called "local issuing agencies") created under the laws of a state, territory, or U.S. possession. They have maturities that range up to one year from the date of issuance. Project Notes are backed by an agreement between the local issuing agency and the Federal Department of Housing and Urban Development. These Notes provide financing for a wide range of financial assistance programs for housing, redevelopment, and related needs (such as low-income housing programs and renewal programs). 2. Tax Anticipation Notes are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenues, such as income, sales, use and business taxes, and are payable from these specific future taxes. 3. Revenue Anticipation Notes are issued in expectation of receipt of other types of revenues, such as Federal revenues available under the Federal Revenue Sharing Programs. 4. Bond Anticipation Notes are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the Notes. 5. Construction Loan Notes are sold to provide construction financing. After successful completion and acceptance, many projects receive permanent financing through the Federal Housing Administration under the Federal National Mortgage Association ("Fannie Mae") or the Government National Mortgage Association ("Ginnie Mae"). 6. Tax-Exempt Commercial Paper is a short-term obligation with a stated maturity of 365 days or less. It is issued by agencies of state and local governments to finance seasonal working capital needs or as short-term financing in anticipation of longer term financing. Municipal Bonds, which meet longer term capital needs and generally have maturities of more than one year when issued, have three principal classifications: 1. General Obligation Bonds are issued by such entities as states, counties, cities, towns, and regional districts. The proceeds of these obligations are used to fund a wide range of public projects, including construction or improvement of schools, highways and roads, and water and sewer systems. The basic security behind General Obligation Bonds is the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to the rate or amount of special assessments. 2. Revenue Bonds in recent years have come to include an increasingly wide variety of types of municipal obligations. As with other kinds of municipal obligations, the issuers of revenue bonds may consist of virtually any form of state or local governmental entity, including states, state agencies, cities, counties, authorities of various kinds, such as public housing or redevelopment authorities, and special districts, such as water, sewer or sanitary districts. Generally, revenue bonds are secured by the revenues or net revenues derived from a particular facility, group of facilities, or, in some cases, the proceeds of a special excise or other specific revenue source. Revenue bonds are issued to finance a wide variety of capital projects including electric, gas, water and sewer systems; highways, bridges, and tunnels; port and airport facilities; colleges and universities; and hospitals. Many of these bonds provide additional security in the form of a debt service reserve fund to be used to make principal and interest payments. Various forms of credit enhancement, such as a bank letter of credit or municipal bond insurance, may also be employed in revenue bond issues. Housing authorities have a wide range of security, including partially or fully insured mortgages, rent subsidized and/ or collateralized mortgages, and/or the net revenues from housing or other public projects. Some authorities provide further security in the form of a state's ability (without obligation) to make up deficiencies in the debt service reserve fund. In recent years, revenue bonds have been issued in large volumes for projects that are privately owned and operated (see 3 below). 3. Private Activity Bonds are considered municipal bonds if the interest paid thereon is exempt from Federal income tax and are issued by or on behalf of public authorities to raise money to finance various privately operated facilities for business and manufacturing, housing and health. These bonds are also used to finance public facilities such as airports, mass transit systems and ports. The payment of the principal and interest on such bonds 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 18 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 revenue bonds, single family housing revenue bonds, industrial development revenue bonds, solid waste resource recovery revenue bonds, and so on. Other Municipal Obligations, incurred for a variety of financing purposes, include: municipal leases, which may take the form of a lease or an installment purchase or conditional sale contract, are issued by state and local governments and authorities to acquire a wide variety of equipment and facilities such as fire and sanitation vehicles, telecommunications equipment and other capital assets. Municipal leases frequently have special risks not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the government issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt-issuance limitations of many state constitutions and statutes are deemed to be inapplicable because of the inclusion in many leases or contracts of "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. To reduce this risk, the Fund will only purchase municipal leases subject to a non-appropriation clause when the payment of principal and accrued interest is backed by an unconditional irrevocable letter of credit, or guarantee of a bank or other entity that meets the criteria described in the Prospectus. Tax-exempt bonds are also categorized according to whether the interest is or is not includible in the calculation of alternative minimum taxes imposed on individuals, according to whether the costs of acquiring or carrying the bonds are or are not deductible in part by banks and other financial institutions, and according to other criteria relevant for Federal income tax purposes. Due to the increasing complexity of Internal Revenue Code and related requirements governing the issuance of tax-exempt bonds, industry practice has uniformly required, as a condition to the issuance of such bonds, but particularly for revenue bonds, an opinion of nationally recognized bond counsel as to the tax-exempt status of interest on the bonds. 19 This page intentionally left blank. JANUS INVESTMENT FUND PART C - OTHER INFORMATION ITEM 24. Financial Statements and Exhibits List all financial statements and exhibits filed as part of the Registration Statement. (a)(1) Financial Statements Included in the Prospectus: Financial Highlights for all of the Funds (except Janus Special Situations Fund) will be filed by amendment on or before the effective date of this amendment. (a)(2) Financial Statements Incorporated by Reference into the Statement of Additional Information: The Financial Statements for all of the Funds (except Janus Special Situations Fund) will be included in the Annual Report dated October 31, 1996, and will be incorporated by reference into the respective Statement of Additional Information by amendment which will be filed on or before the effective date of this amendment. (b) Exhibits: Exhibit 1 (a) Agreement and Declaration of Trust, dated February 11, 1986 is filed herein as Exhibit 1(a). (b) Certificate of Designation for Janus Growth and Income Fund is filed herein as Exhibit 1(b). (c) Certificate of Designation for Janus Worldwide Fund is filed herein as Exhibit 1(c). (d) Certificate of Designation for Janus Twenty Fund is incorporated herein by reference to Exhibit 1(d) to Post- Effective Amendment No. 46. (e) Certificate of Designation for Janus Flexible Income Fund is incorporated herein by reference to Exhibit 1(e) to Post-Effective Amendment No. 46. (f) Certificate of Designation for Janus Intermediate Government Securities Fund is incorporated herein by reference to Exhibit 1(f) to Post-Effective Amendment No. 46. (g) Certificate of Designation for Janus Venture Fund is incorporated herein by reference to Exhibit 1(g) to Post- Effective Amendment No. 47. C-1 (h) Certificate of Designation for Janus Enterprise Fund is incorporated herein by reference to Exhibit 1(h) to Post- Effective Amendment No. 48. (i) Certificate of Designation for Janus Balanced Fund is incorporated herein by reference to Exhibit 1(i) to Post- Effective Amendment No. 48. (j) Certificate of Designation for Janus Short-Term Bond Fund is incorporated herein by reference to Exhibit 1(j) to Post-Effective Amendment No. 48. (k) Certificate of Designation for Janus Federal Tax-Exempt Fund is incorporated herein by reference to Exhibit 1(k) to Post-Effective Amendment No. 54. (l) Certificate of Designation for Janus Mercury Fund is incorporated herein by reference to Exhibit 1(l) to Post- Effective Amendment No. 54. (m) Certificate of Designation for Janus Overseas Fund is incorporated herein by reference to Exhibit 1(m) to Post-Effective Amendment No. 60. (n) Form of Amendment to the Registrant's Agreement and Declaration of Trust is incorporated herein by reference to Exhibit 1(n) to Post-Effective Amendment No. 62. (o) Form of Certificate of Designation for Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 1(o) to Post-Effective Amendment No. 62. (p) Form of Certificate of Designation for Janus High-Yield Fund and Janus Olympus Fund is incorporated herein by reference to Exhibit 1(p) to Post-Effective Amendment No. 68. (q) Certificate of Designation for Janus Equity Income Fund is incorporated herein by reference to Exhibit 1(q) to Post-Effective Amendment No. 72. (r) Form of Certificate of Establishment and Designation for Janus Special Situations Fund is incorporated herein by reference to Exhibit 1(r) to Post-Effective Amendment No. 75. C-2 (s) Form of Amendment to Registrant's Agreement and Declaration of Trust is incorporated herein by reference to Exhibit 1(s) to Post-Effective Amendment No. 75. Exhibit 2 (a) Restated Bylaws are incorporated herein by reference to Exhibit 2(a) to Post-Effective Amendment No. 71. (b) First Amendment to the Bylaws is incorporated herein by reference to Exhibit 2(b) to Post-Effective Amendment No. 71. Exhibit 3 Not Applicable. Exhibit 4 (a) Specimen Stock Certificate for Janus Fund(1) is filed herein as Exhibit 4(b). (b) Specimen Stock Certificate for Janus Growth and Income Fund is filed herein as Exhibit 4(b). (c) Specimen Stock Certificate for Janus Worldwide Fund is filed herein as Exhibit 4(c). (d) Specimen Stock Certificate for Janus Twenty Fund(1) is incorporated herein by reference to Exhibit 4(d) to Post- Effective Amendment No. 46. (e) Specimen Stock Certificate for Janus Flexible Income Fund(1) is incorporated herein by reference to Exhibit 4(e) to Post-Effective Amendment No. 46. (f) Specimen Stock Certificate for Janus Intermediate Government Securities Fund(1) is incorporated herein by reference to Exhibit 4(f) to Post-Effective Amendment No. 46. (g) Specimen Stock Certificate for Janus Venture Fund(1) is incorporated herein by reference to Exhibit 4(g) to Post-Effective Amendment 47. (h) Specimen Stock Certificate for Janus Enterprise Fund is incorporated herein by reference to Exhibit 4(h) to Post- Effective Amendment No. 48. - ------------------- (1) Outstanding certificates representing shares of predecessor entity to this series of the Trust are deemed to represent shares of this series. C-3 (i) Specimen Stock Certificate for Janus Balanced Fund is incorporated herein by reference to Exhibit 4(i) to Post- Effective Amendment No. 48. (j) Specimen Stock Certificate for Janus Short-Term Bond Fund is incorporated herein by reference to Exhibit 4(j) to Post-Effective Amendment No. 48. (k) Specimen Stock Certificate for Janus Federal Tax-Exempt Fund is incorporated herein by reference to Exhibit 4(k) to Post-Effective Amendment No. 54. (l) Specimen Stock Certificate for Janus Mercury Fund is incorporated herein by reference to Exhibit 4(l) to Post- Effective Amendment No. 54. (m) Specimen Stock Certificate for Janus Overseas Fund is incorporated herein by reference to Exhibit 4(m) to Post-Effective Amendment No. 60. (n) Revised Specimen Stock Certificates for Janus High-Yield Fund and Janus Olympus Fund are filed herein as Exhibit 4(n). (o) Revised Specimen Stock Certificate for Janus Equity Income Fund is filed herein as Exhibit 4(o). (p) Revised Specimen Stock Certificate for Janus Special Situations Fund is filed herein as Exhibit 4(p). Exhibit 5 (a) Restated form of Investment Advisory Agreement for Janus Fund is filed herein as Exhibit 5(a). (b) Restated form of Investment Advisory Agreement for Janus Growth and Income Fund and Janus Worldwide Fund is filed herein as Exhibit 5(b). (c) Restated form of Investment Advisory Agreement for Janus Twenty Fund and Janus Venture Fund is filed herein as to Exhibit 5(c). (d) Restated form of Investment Advisory Agreement for Janus Flexible Income Fund is filed herein as Exhibit 5(d). (e) Restated form of Investment Advisory Agreement for Janus Enterprise Fund, Janus Balanced Fund and Janus Short-Term Bond Fund is filed herein as Exhibit 5(e). (f) Restated form of Investment Advisory Agreement for Janus Federal Tax-Exempt Fund and Janus Mercury Fund is filed herein as Exhibit 5(f). C-4 (g) Restated form of Investment Advisory Agreement for Janus Overseas Fund is filed herein as Exhibit 5(g). (h) Form of Investment Advisory Agreement for Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 5(h) to Post-Effective Amendment No. 64. (i) Restated form of Investment Advisory Agreement for Janus High-Yield Fund is filed herein as Exhibit 5(i). (j) Restated form of Investment Advisory Agreement for Janus Olympus Fund is filed herein as Exhibit 5(j). (k) Form of Investment Advisory Agreement for Janus Equity Income Fund is incorporated herein by reference to Exhibit 5(k) to Post-Effective Amendment No. 73. (l) Form of Investment Advisory Agreement for Janus Special Situations Fund is incorporated herein by reference to Exhibit 5(l) to Post-Effective Amendment No. 75. Exhibit 6 Form of Distribution Agreement between Janus Investment Fund and Janus Distributors, Inc. is incorporated herein by reference to Exhibit 6 to Post-Effective Amendment No. 57. Exhibit 7 Not Applicable. Exhibit 8 (a) Custodian Contract between Janus Investment Fund and State Street Bank and Trust Company is filed herein as Exhibit 8(a). (b) Amendment dated April 25, 1990 of State Street Custodian Contract is filed herein as Exhibit 8(b). (c) Letter Agreement dated February 1, 1991 regarding State Street Custodian Contract is filed herein as Exhibit 8(c). (d) Custodian Contract between Janus Investment Fund and Investors Fiduciary Trust Company is hereby withdrawn. (e) Letter Agreement dated October 9, 1992 regarding State Street Custodian Agreement is incorporated herein by reference to Exhibit 8(e) to Post-Effective Amendment No. 52. (f) Letter Agreement dated April 28, 1993 regarding State Street Custodian Agreement is incorporated herein by C-5 reference to Exhibit 8(f) to Post-Effective Amendment No. 60. (g) Letter Agreement dated April 4, 1994 regarding State Street Custodian Agreement is incorporated herein by reference to Exhibit 8(g) to Post-Effective Amendment No. 64. (h) Form of Custody Agreement between Janus Investment Fund, on behalf of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund, and United Missouri Bank, N.A. is incorporated herein by reference to Exhibit 8(h) to Post- Effective Amendment No. 64. (i) Letter Agreement dated December 12, 1995 regarding State Street Custodian Contract is incorporated herein by reference to Exhibit 8(i) to Post-Effective Amendment No. 72. (j) Amendment dated October 11, 1995 of State Street Custodian Contract is incorporated herein by reference to Exhibit 8(j) to Post-Effective Amendment No. 71. (k) Form of Amendment dated September 10, 1996 of State Street Custodian Contract is incorporated herein by reference to Exhibit 8(k) to Post-Effective Amendment No. 75. (l) Letter Agreement dated September 10, 1996 regarding State Street Custodian Contract is incorporated herein by reference to Exhibit 8(l) to Post-Effective Amendment No. 75. (m) 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(m) to Post-Effective Amendment No. 75. Exhibit 9 (a) Transfer Agency Agreement with Investors Fiduciary Trust Company is hereby withdrawn. (b) Subagency Agreement between Janus Service Corporation and Investors Fiduciary Trust Company is hereby withdrawn. (c) Form of Administration Agreement with Janus Capital Corporation for Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt C-6 Money Market Fund is incorporated herein by reference to Exhibit 9(c) to Post-Effective Amendment No. 64. (d) Transfer Agency Agreement dated December 9, 1994 with Janus Service Corporation for Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund filed as Exhibit 9(d) to Post-Effective Amendment No. 64 is withdrawn. (e) Transfer Agency Agreement dated September 27, 1995 with Janus Service Corporation for Janus Money Market Fund, Janus Government Money Market Fund, Janus Tax-Exempt Money Market Fund, Janus High-Yield Fund and Janus Olympus Fund is incorporated herein by reference to Exhibit 9(e) to Post-Effective Amendment No. 70. (f) Letter Agreement dated December 21, 1995 regarding Janus Service Corporation Transfer Agency Agreement is incorporated herein by reference to Exhibit 9(f) to Post-Effective Amendment No. 72. (g) Letter Agreement dated May 21, 1996 regarding Janus Service Corporation Transfer Agency Agreement is incorporated by reference to Exhibit 9(g) to Post-Effective Amendment No. 73. (h) Form of Amended Administration Agreement with Janus Capital Corporation for Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-Exempt Money Market Fund is incorporated by reference to Exhibit 9(h) to Post-Effective Amendment No. 77. (i) Letter Agreement dated September 10, 1996 regarding Janus Service Corporation Transfer Agency Agreement is incorporated herein by reference to Exhibit 9(i) to Post-Effective Amendment No. 76. Exhibit 10 (a) Opinion and Consent of Messrs. Davis, Graham & Stubbs with respect to shares of Janus Fund is filed herein as Exhibit 10 (a). (b) Opinion and Consent of Fund Counsel with respect to shares of Janus Growth and Income Fund and Janus Worldwide Fund is filed herein as Exhibit 10(b). (c) Opinion and Consent of Fund Counsel with respect to shares of Janus Enterprise Fund, Janus Balanced Fund and Janus Short-Term Bond Fund is incorporated herein by reference to Exhibit 10(d) to Post-Effective Amendment No. 48. C-7 (d) Opinion and Consent of Messrs. Sullivan and Worcester with respect to shares of Janus Twenty Fund is incorporated herein by reference to Exhibit 10(e) to Post- Effective Amendment No. 49. (e) Opinion and Consent of Messrs. Sullivan and Worcester with respect to shares of Janus Venture Fund is incorporated herein by reference to Exhibit 10(f) to Post-Effective Amendment No. 49. (f) Opinion and Consent of Messrs. Sullivan and Worcester with respect to shares of Janus Flexible Income Fund is incorporated herein by reference to Exhibit 10(g) to Post-Effective Amendment No. 49. (g) Opinion and Consent of Messrs. Sullivan and Worcester with respect to shares of Janus Intermediate Government Securities Fund is incorporated herein by reference to Exhibit 10(h) to Post-Effective Amendment No. 49. (h) Opinion and Consent of Fund Counsel with respect to shares of Janus Federal Tax-Exempt Fund and Janus Mercury Fund is incorporated herein by reference to Exhibit 10(i) to Post-Effective Amendment No. 54. (i) Opinion and Consent of Fund Counsel with respect to shares of Janus Overseas Fund is incorporated herein by reference to Exhibit 10(i) to Post-Effective Amendment No. 60. (j) Opinion and Consent of Fund Counsel with respect to shares of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 10(j) to Post-Effective Amendment No. 62. (k) Opinion and Consent of Fund Counsel with respect to Institutional Shares of Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 10(k) to Post-Effective Amendment No. 65. (l) Opinion and Consent of Fund Counsel with respect to shares of Janus High-Yield Fund and Janus Olympus Fund is incorporated herein by reference to Exhibit 10(l) to Post-Effective Amendment No. 68. (m) Opinion and Consent of Fund Counsel with respect to shares of Janus Equity Income Fund is incorporated herein C-8 by reference to Exhibit 10(m) to Post-Effective Amendment No. 72. (n) Opinion and Consent of Fund Counsel with respect to shares of Janus Special Situations Fund is incorporated herein by reference to Exhibit 10(n) to Post-Effective Amendment No. 75. (o) Opinion and Consent of Fund Counsel with respect to shares of Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 10(o) to Post-Effective Amendment No. 76. Exhibit 11 Consent of Price Waterhouse LLP is filed herein as Exhibit 11. Exhibit 12 Not Applicable. Exhibit 13 Not Applicable. Exhibit 14 (a) Model Individual Retirement Plan is incorporated herein by reference to Exhibit 14(a) to Post-Effective Amendment No. 57. (b) Model Defined Contribution Retirement Plan is incorporated herein by reference to Exhibit 14(b) to Post-Effective Amendment No. 41. (c) Model Section 403(b)(7) Plan is incorporated herein by reference to Exhibit 14(c) to Post-Effective Amendment No. 38. Exhibit 15 Not Applicable. Exhibit 16 (a) Computation of Total Return is incorporated herein by reference to Exhibit 16 to Post-Effective Amendment No. 44. (b) Computation of Current Yield and Effective Yield is incorporated herein by reference to Exhibit 16(b) to Post- Effective Amendment No. 67. Exhibit 17 Powers of Attorney dated as of June 30, 1995, are incorporated herein by reference to Exhibit 17 to Post- Effective Amendment No. 67. Exhibit 18 (a) Form of plan entered into by Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax- Exempt Money Market Fund pursuant to Rule 18f-3 setting C-9 forth the separate arrangement and expense allocation of each class of such Funds filed as Exhibit 18 to Post-Effective Amendment No. 66 is withdrawn. (b) Restated form of Rule 18f-3 Plan entered into by Janus Money Market Fund, Janus Government Money Market Fund and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 18(b) to Post-Effective Amendment No. 69. (c) Amended and Restated form of Rule 18f-3 Plan entered into by Janus Money Market Fund, Janus Government Money Market Fund, and Janus Tax-Exempt Money Market Fund is incorporated herein by reference to Exhibit 18(c) to Post-Effective Amendment No. 78. Exhibit 27 Financial Data Schedules for all of the Funds, except Janus Special Situations Fund, (or classes thereof) to be filed by amendment on or before the effective date of this amendment. ITEM 25. Persons Controlled by or Under Common Control with Registrant None C-10 ITEM 26. Number of Holders of Securities The number of record holders of shares of the Registrant as of October 31, 1996, was as follows: Number of Title of Class Record Holders Janus Fund shares 799,880 Janus Growth and Income Fund shares 96,914 Janus Worldwide Fund shares 249,340 Janus Overseas Fund shares 47,070 Janus Twenty Fund shares 330,454 Janus Flexible Income Fund shares 30,117 Janus Intermediate Government Securities Fund shares 3,586 Janus Venture Fund shares 128,875 Janus Enterprise Fund shares 86,408 Janus Balanced Fund shares 21,216 Janus Short-Term Bond Fund shares 4,285 Janus Federal Tax-Exempt Fund shares 3,851 Janus Mercury Fund shares 214,487 Janus Money Market Fund - Investor Shares 71,765 Janus Money Market Fund - Institutional Shares 163 Janus Money Market Fund - Service Shares N/A Janus Government Money Market Fund - Investor Shares 11,127 Janus Government Money Market Fund - Institutional Shares 37 Janus Government Money Market Fund - Service Shares N/A Janus Tax-Exempt Money Market Fund - Investor Shares 5,603 Janus Tax-Exempt Money Market Fund - Institutional Shares 12 Janus Tax-Exempt Money Market Fund - Service Shares N/A Janus High-Yield Fund shares 5,918 Janus Olympus Fund shares 39,708 Janus Equity Income Fund shares 3,111 Janus Special Situations Fund shares N/A ITEM 27. Indemnification Article VIII of Janus Investment Fund's Agreement and Declaration of Trust provides for indemnification of certain persons acting on behalf of the Funds. In general, Trustees and officers will be indemnified against liability and against all expenses of litigation incurred by them in connection with any claim, action, suit or proceeding (or settlement of the same) in which they become involved by virtue of their Fund office, 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 or not opposed to the best interests of the Funds. 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 Funds also may advance money for these expenses, provided that the Trustee or officer undertakes to repay the Funds if his conduct is later determined to preclude indemnification, and that either he provide C-11 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 28. Business and Other Connections of Investment Adviser The only business of Janus Capital Corporation is to serve as the investment adviser of the Registrant and as investment adviser or subadviser to several other mutual funds and private and retirement accounts. Business backgrounds of the principal executive officers and directors of the adviser that also hold positions with the Registrant are included under "Officers and Trustees" in the currently effective Statements of Additional Information of the Registrant. The remaining principal executive officers of the investment adviser and their positions with the adviser and affiliated entities are: Mark B. Whiston, Vice President and Chief Marketing Officer of Janus Capital Corporation, Director and President of Janus Capital International Ltd.; Marjorie G. Hurd, Vice President of Janus Capital Corporation, Director and President of Janus Service Corporation; and Stephen L. Stieneker, Assistant General Counsel, Chief Compliance Officer and Vice President of Compliance of Janus Capital Corporation. Mr. Michael E. Herman, a director of Janus Capital Corporation, is Chairman of the Finance Committee (1990 to present) of Ewing Marion Kauffman Foundation, 4900 Oak, Kansas City, Missouri 64112. Mr. Michael N. Stolper, a director of Janus Capital Corporation, is President of Stolper & Company, Inc., 525 "B" Street, Suite 1080, San Diego, California 92101, an investment performance consultant. Mr. Thomas A. McDonnell, a director of Janus Capital Corporation, is President, Chief Executive Officer and a Director of DST Systems, Inc., 1055 Broadway, 9th Floor, Kansas City, Missouri 64105, provider of data processing and recordkeeping services for various mutual funds, and is Executive Vice President and a director of Kansas City Southern Industries, Inc., 114 W. 11th Street, Kansas City, Missouri 64105, a publicly traded holding company whose primary subsidiaries are engaged in transportation, information processing and financial services. Mr. Landon H. Rowland, a director of Janus Capital Corporation, is President and Chief Executive Officer of Kansas City Southern Industries, Inc. ITEM 29. Principal Underwriters (a) Janus Distributors, Inc. ("Janus Distributors") does not serve as a principal underwriter for any investment company other than Registrant. (b) The principal business address, positions with Janus Distributors and positions with Registrant of David C. Tucker 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 officers of Janus Distributors are Dana R. Cunningham, President, and Jennifer A. Davis, Secretary. Mr. Cunningham and Ms. Davis do not hold any positions with the Registrant. The principal business address of each person is 100 Fillmore Street, Denver, Colorado 80206-4928. (c) Not applicable. C-12 ITEM 30. Location of Accounts and Records The accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder are maintained by Janus Capital Corporation and Janus Service Corporation, both of which are located at 100 Fillmore Street, Denver, Colorado 80206-4928, and by State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts 02101, and United Missouri Bank, P.O. Box 419226, Kansas City, Missouri 64141-6226. ITEM 31. Management Services The Registrant has no management-related service contract which is not discussed in Part A or Part B of this form. ITEM 32. Undertakings (a) Not applicable. (b) Not applicable. (c) The Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. C-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Denver, and State of Colorado, on the 18th day of December, 1996. JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President Janus Investment Fund is organized under the Agreement and Declaration of Trust of the Registrant dated February 11, 1986, a copy of which is on file with the Secretary of State of The Commonwealth of Massachusetts. 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 Agreement and Declaration of Trust of the Registrant. 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 Declaration of Trust. 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 December 18, 1996 Thomas H. Bailey (Principal Executive Officer) and Trustee /s/ Steven R. Goodbarn Vice President and December 18, 1996 Steven R. Goodbarn Chief Financial Officer (Principal Financial Officer) /s/ Glenn P. O'Flaherty Treasurer and Chief December 18, 1996 Glenn P. O'Flaherty Accounting Officer (Principal Accounting Officer) /s/ James P. Craig, III Trustee December 18, 1996 James P. Craig, III Gary O. Loo* Trustee December 18, 1996 Gary O. Loo Dennis B. Mullen* Trustee December 18, 1996 Dennis B. Mullen John W. Shepardson* Trustee December 18, 1996 John W. Shepardson William D. Stewart* Trustee December 18, 1996 William D. Stewart Martin H. Waldinger* Trustee December 18, 1996 Martin H. Waldinger /s/ Steven R. Goodbarn *By Steven R. Goodbarn Attorney-in-Fact INDEX OF EXHIBITS Exhibit 1(a) Agreement and Declaration of Trust dated February 11, 1986 Exhibit 1(b) Certificate of Designation for Janus Growth and Income Fund Exhibit 1(c) Certificate of Designation for Janus Worldwide Fund Exhibit 4(a) Specimen Stock Certificate for Janus Fund Exhibit 4(b) Specimen Stock Certificate for Janus Growth and Income Fund Exhibit 4(c) Specimen Stock Certificate for Janus Worldwide Fund Exhibit 4(n) Revised Specimen Stock Certificates for Janus Olympus Fund and Janus High-Yield Fund. Exhibit 4(o) Revised Specimen Stock Certificate for Janus Equity Income Fund Exhibit 4(p) Revised Specimen Stock Certificate for Janus Special Situations Fund Exhibit 5(a) Restated Investment Advisory Agreement for Janus Fund Exhibit 5(b) Restated Investment Advisory Agreement for Janus Growth and Income Fund and Janus Worldwide Fund Exhibit 5(c) Restated Investment Advisory Agreement for Janus Twenty Fund and Janus Venture Fund Exhibit 5(d) Restated Investment Advisory Agreement for Janus Flexible Income Fund Exhibit 5(e) Restated Investment Advisory Agreement for Janus Enterprise Fund, Janus Balanced and Janus Short-Term Bond Fund Exhibit 5(f) Restated Investment Advisory Agreement for Janus Federal Tax-Exempt Fund and Janus Mercury Fund Exhibit 5(g) Restated Investment Advisory Agreement for Janus Overseas Fund Exhibit 8(a) Custodian Contract between Janus Investment Fund and State Street Bank and Trust Company Exhibit 8(b) Amendment dated April 25, 1990 to State Street Contract Exhibit 8(c) Letter Agreement dated February 1, 1991 regarding State Street Custodian Contract Exhibit 10(a) Opinion and Consent of Fund Counsel for Janus Fund. Exhibit 10(b) Opinion and Consent of Fund Counsel for Janus Growth and Income Fund and Janus Worldwide Fund Exhibit 11 Consent of Price Waterhouse EX-99 2 EX 1(A)-AGMT. & DECL. OF TRUST EXHIBIT 1(a) JANUS INVESTMENT FUND AGREEMENT AND DECLARATION OF TRUST _________________________________________ Dated: February 11, 1986 JANUS INVESTMENT FUND AGREEMENT AND DECLARATION OF TRUST TABLE OF CONTENTS Page RECITALS ......................................................................1 ARTICLE I THE TRUST ...................................................... 2 Section 1.1 Name .......................................................... . 2 Section 1.2 Location ........................................................ 2 Section 1.3 Nature of Trust ................................................. 2 Section 1.4 Definitions ......................................................3 Section 1.5 Real Property to be Converted into Personal Property ................................................7 ARTICLE II PURPOSE OF THE TRUST ..............................................8 ARTICLE III POWERS OF THE TRUSTEES ............................................8 Section 3.1 Powers in General ................................................8 (a) Investments ..................................................9 (b) Dispositions of Assets .......................................9 (c) Ownership Powers .............................................9 (d) Form of Holding .............................................10 (e) Reorganization, etc .........................................10 (f) Voting Trusts, etc ..........................................10 (g) Contracts, etc ..............................................10 (h) Guarantees, etc .............................................11 (i) Partnerships, etc ...........................................11 (j) Insurance ...................................................11 (k) Pensions, etc ...............................................11 (l) Power of Collection and Litigation ..........................11 (m) Issuance and Repurchase of Shares ...........................12 (n) Offices .....................................................12 (o) Expenses ....................................................12 (p) Agents, etc .................................................12 (q) Accounts ....................................................12 (r) Valuation ...................................................12 (s) Indemnification .............................................13 (t) General .....................................................13 Section 3.2 Borrowings; Financings; Issuance of Securities ......................................................13 Section 3.3 Deposits ........................................................13 Section 3.4 Allocations .....................................................14 Section 3.5 Further Powers; Limitations .....................................14 -i- ARTICLE IV TRUSTEES AND OFFICERS ...........................................15 Section 4.1 Number, Designation, Election, Term, etc ........................15 (a) Initial Trustee ............................................15 (b) Number .....................................................15 (c) Election and Term ..........................................15 (d) Resignation and Retirement .................................16 (e) Removal ....................................................16 (f) Vacancies ..................................................16 (g) Acceptance of Trusts .......................................16 (h) Effect of Death, Resignation, etc ..........................17 (i) Conveyance .................................................17 (j) No Accounting ..............................................17 (k) Filings ....................................................17 Section 4.2 Trustees' Meetings; Participation by Telephone, etc ..................................................18 Section 4.3 Committees; Delegation ..........................................18 Section 4.4 Advisory Trustees ...............................................18 Section 4.5 Officers ........................................................19 Section 4.6 Compensation of Trustees and Officers ...........................19 Section 4.7 Ownership of Shares and Securities of the Trust ...........................................................19 Section 4.8 Right of Trustees and Officers to Own Property or to Engage in Business; Authority of Trustees to Permit Others to Do Likewise .....................20 Section 4.9 Reliance on Experts............................................ .20 Section 4.10 Surety Bonds ....................................................20 Section 4.11 Apparent Authority of Trustees and Officers ........................................................21 Section 4.12 Other Relationships Not Prohibited ..............................21 Section 4.13 Payment of Trust Expenses .......................................22 Section 4.14 Ownership of the Trust Property .................................22 ARTICLE V DELEGATION OF MANAGERIAL RESPONSIBILITIES .......................22 Section 5.1 Appointment; Action by Less than All Trustees ........................................................22 Section 5.2 Certain Contracts ...............................................23 (a) Advisory ....................................................23 (b) Administration ..............................................24 (c) Distribution ................................................24 (d) Custodian ...................................................24 (e) Transfer and Dividend Disbursing Agency .....................24 (f) Shareholder Servicing .......................................25 (g) Accounting ...............................................25 ARTICLE VI FUNDS AND SHARES ................................................25 Section 6.1 Description of Funds and Shares .................................25 (a) Shares; Funds; Series of Shares ............................25 -ii- (b) Establishment, etc. of Funds; Authorization of Shares ...................................26 (c) Character of Separate Funds and Shares Thereof ...................................................26 (d) Consideration for Shares ..................................27 Section 6.2 Establishment and Designation of the Janus Fund; General Provisions for All Funds ........................27 (a) Assets Belonging to Funds ..................................27 (b) Liabilities of Funds .......................................28 (c) Dividends ..................................................28 (d) Liquidation ................................................29 (e) Voting .....................................................29 (f) Redemption by Shareholder ..................................29 (g) Redemption at the Option of the Trust ......................30 (h) Net Asset Value ............................................30 (i) Transfer ...................................................31 (j) Equality ...................................................31 (k) Rights of Fractional Shares ................................31 (l) Conversion Rights ..........................................31 Section 6.3 Ownership of Shares ............................................31 Section 6.4 Investments in the Trust .......................................32 Section 6.5 No Preemptive Rights ...........................................32 Section 6.6 Status of Shares ...............................................32 ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS .......................33 Section 7.1 Voting Powers ..................................................33 Section 7.2 Number of Votes and Manner of Voting; Proxies ..................33 Section 7.3 Meetings .......................................................34 Section 7.4 Record Dates ...................................................34 Section 7.5 Quorum and Required Vote .......................................35 Section 7.6 Action by Written Consent ......................................35 Section 7.7 Inspection of Records ..........................................35 Section 7.8 Additional Provisions ..........................................35 ARTICLE VIII LIMITATION OF LIABILITY; INDEMNIFICATION .......................35 Section 8.1 Trustees, Shareholders, etc. Not Personally Liable; Notice ................................................36 Section 8.2 Trustees' Good Faith Action; Expert Advice; No Bond or Surety ..............................................36 Section 8.3 Indemnification of Shareholders ................................37 Section 8.4 Indemnification of Trustees, Officers, etc .....................37 Section 8.5 Compromise Payment .............................................38 Section 8.6 Indemnification Not Exclusive, etc .............................39 Section 8.7 Liability of Third Persons Dealing with Trustees .......................................................39 ARTICLE IX DURATION; REORGANIZATION; AMENDMENTS ...........................39 -iii- Section 9.1 Duration and Termination of Trust ..............................39 Section 9.2 Reorganization .................................................40 Section 9.3 Amendments; etc ................................................40 Section 9.4 Filing of Copies of Declaration and Amendments .....................................................41 ARTICLE X MISCELLANEOUS ..................................................42 Section 10.1 Governing Law ..................................................42 Section 10.2 Counterparts ...................................................42 Section 10.3 Reliance by Third Parties ......................................42 Section 10.4 References; Headings ...........................................42 Section 10.5 Provisions in Conflict with Law or Regulations ................................................42 Section 10.6 Use of the Name "Janus" ........................................43 SIGNATURES ...................................................................43 ACKNOWLEDGEMENTS .............................................................44 -iv- AGREEMENT AND DECLARATION OF TRUST OF JANUS INVESTMENT FUND This AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts, this 11th day of February, 1986, by and between the Settlor and the Trustee whose signature is set forth below (the "INITIAL TRUSTEE"), W I T N E S S E T H T H A T: WHEREAS, Bryan G. Tyson, an individual residing in Brookline, Massachusetts (the "Settlor"), proposed to deliver to the Initial Trustee the sum of one hundred dollars ($100.00) lawful money of the United States of America in trust hereunder and to authorize the initial Trustee and all other Persons acting as Trustees hereunder to employ such funds, and any other funds coming into their hands or the hands of their successor or successors as such Trustees, to carry on the business of an investment company, and as such of buying, selling, investing in or otherwise dealing in and with stocks, bonds, debentures, warrants, options, futures contracts and other securities and interests therein, or calls or puts with respect to any of the same, or such other and further investment media and other property as the Trustees may deem advisable, which are not prohibited by law or the terms of this Declaration; and WHEREAS, the Initial Trustee is willing to accept sum, together with any and all additions thereto and the income or increments thereof, upon the terms, conditions and trusts hereinafter set forth; and WHEREAS, the assets held by the Trustees may be divided into separate funds, each with its own separate investment portfolio, investment objectives, policies and purposes, and that the beneficial interest in each such Fund shall be divided into transferable Shares of Beneficial Interest, a separate Series of Shares for each Fund, all in accordance with the provisions hereinafter set forth; and WHEREAS, it is desired that the trust established hereby (the "Trust") be managed and operated as a trust with transferable shares under the laws of Massachusetts, of the type commonly known as and referred to as a Massachusetts business trust, in accordance with the provisions hereinafter set forth, -1- NOW, THEREFORE, the Initial Trustee, for himself and his successors as Trustees, hereby declares, and agrees with the Settlor, for himself and for all Persons who shall hereafter become holders of Shares of Beneficial Interest of the Trust, of any Series, that the Trustees will hold the sum delivered to them upon the execution hereof, and all other and further cash, securities and other property of every type and description which they may in any way acquire in their capacity as such Trustees, together with the income therefrom and the proceeds thereof, IN TRUST NEVERTHELESS, to manage and dispose of the same for the benefit of the holders from time to time of the Shares of Beneficial Interest of the several Series being issued and to be issued hereunder and in the manner and subject to the provisions hereof, to wit: ARTICLE I THE TRUST Section 1.1 NAME. The name of the Trust shall be "JANUS INVESTMENT FUND," and so far as may be practicable the Trustees shall conduct the Trust's activities, execute all documents and sue or be sued under that name, which name (and the word "TRUST" wherever used in this Agreement and Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees in their capacity as Trustees, or to the holders of the Shares of Beneficial Interest of the Trust, of any Series. If the Trustees determine that the use of such name is not practicable, legal or convenient at any time or in any jurisdiction, or if the Trust is required to discontinue the use of such name pursuant to Section 10.5 hereof, then subject to that Section, the Trustees may use such other designation, or they may adopt such other name for the Trust as they deem proper, and the Trust may hold property and conduct its activities under such designation or name. Section 1.2 LOCATION. The Trust shall have an office in Boston, Massachusetts, unless changed by the Trustees to another location in Massachusetts or elsewhere, but such office need not be the sole or principal office of the Trust. The Trust may have such other offices or places of business as the Trustees may from time to time determine to be necessary or expedient. Section 1.3 NATURE OF TRUST. The Trust shall be a trust with transferable shares under the laws of the Commonwealth of Massachusetts, of the type referred to in Section 1 of Chapter 182 of the Massachusetts General Laws and commonly termed a Massachusetts business trust. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general partnership, limited partnership, joint venture, -2- corporation or joint stock company. The Shareholders shall be beneficiaries, and their relationship to the Trustees shall be solely in that capacity in accordance with the rights conferred upon them hereunder. Section 1.4 DEFINITIONS. As used in this Agreement and Declaration of Trust, the following terms shall have the meanings set forth below unless the context thereof otherwise requires: "ACCOUNTING AGENT" shall have the meaning designated in Section 5.2(g) hereof. "ADMINISTRATOR" shall have the meaning designated in Section 5.2(b) hereof. "AFFILIATED PERSON" shall have the meaning assigned to it in the 1940 Act "BYLAWS" shall mean the Bylaws of the Trust, as amended from time to time "CERTIFICATE OF DESIGNATION" shall have the meaning designated in Section 6.1 hereof. "CERTIFICATE OF TERMINATION" shall have the meaning designated in Section 6.1 hereof. "COMMISSION" shall have the same meaning as in the 1940 Act. "CONTRACTING PARTY" shall have the meaning designated in the preamble to Section 5.2 hereof. "COVERED PERSON" shall have the meaning designated in Section 8.4 hereof. "CUSTODIAN" shall have the meaning designated in Section 5.2(d) hereof. "DECLARATION" and "DECLARATION OF TRUST" shall mean this Agreement and Declaration of Trust and all amendments or modifications thereof as from time to time in effect. References in this Agreement and Declaration of Trust to "HEREOF," "HEREIN" and "HEREUNDER" shall be deemed to refer to the Declaration of Trust generally, and shall not be limited to the particular text, Article or Section in which such words appear. "DISABLING CONDUCT" shall have the meaning designated in Section 8.4 hereof. -3- "DISTRIBUTOR" shall have the meaning designated in Section 5.2(c) hereof. "DIVIDEND DISBURSING AGENT" shall have the meaning designated in Section 5.2(e) hereof. "FUND" or "FUNDS" shall mean one or more of the separate components of the assets of the Trust which are now or hereafter established and designated under or in accordance with the provisions of Article VI hereof. "FUND ASSETS" shall have the meaning defined in Section 6.2(a) hereof. "GENERAL ITEMS" shall have the meaning defined in Section 6.2(a) hereof. "INITIAL TRUSTEE" shall have the meaning defined in the preamble hereto. "INVESTMENT ADVISER" shall have the meaning stated in Section 5.2(a) hereof. "MAJORITY OF THE TRUSTEES" shall mean a majority of the Trustees in office at the time in question. At any time at which there shall be only one (1) Trustee in office, such term shall mean such Trustee. "MAJORITY SHAREHOLDER VOTE," as used with respect to the election of any Trustee at a meeting of Shareholders, shall mean the vote for the election of such Trustee of a plurality of all outstanding Shares of the Trust, without regard to Series, represented in person or by proxy and entitled to vote thereon, provided that a quorum (as determined in accordance with the Bylaws) is present, and as used with respect to any other action required or permitted to be taken by Shareholders, shall mean the vote for such action of the holders of that majority of all outstanding Shares (or, where a separate vote of Shares of any particular Series is to be taken, the affirmative vote of that majority of the outstanding Shares of that Series) of the Trust which consists of: (i) a majority of all Shares (or of Shares of the particular Series) represented in person or by proxy and entitled to vote on such action at the meeting of Shareholders at which such action is to be taken, provided that a quorum (as determined in accordance with the Bylaws) is present; or (ii) if such action is to be taken by written consent of Shareholders, a majority of all Shares (or of Shares of the particular Series) issued and outstanding and entitled to vote on such action; PROVIDED, that (iii) as used with respect to any action requiring the affirmative vote of "a majority of the outstanding voting securities," as the quoted phrase is defined -4- in the 1940 Act, of the Trust or of any Fund, "Majority Shareholder Vote" means the vote for such action at a meeting of Shareholders of the smallest majority of all outstanding Shares of the Trust (or of Shares of the particular Fund) entitled to vote on such action which satisfies such 1940 Act voting requirement. "1940 ACT" shall mean the provisions of the Investment Company Act of 1940 and the rules and regulations thereunder, both as amended from time to time, and any order or orders thereunder which may from time to time be applicable to the Trust. "PERSON" shall mean and include individuals, as well as corporations, limited partnerships, general partnerships, joint stock companies, joint venture, associations, banks, trust companies, land trusts, business trusts or other organizations established under the laws of any jurisdiction, whether or not considered to be legal entities, and governments and agencies and political subdivisions thereof. "PRINCIPAL UNDERWRITER" shall have the meaning designated in Section 5.2(c) hereof. "PROSPECTUS," as used with respect to any Fund or Series of Shares, shall mean the prospectus relating to such Fund or Series which constitutes part of the currently effective Registration Statement of the Trust under the Securities Act of 1933, as such prospectus may be amended or supplemented from time to time. "SECURITIES" shall mean any and all bills, notes, bonds, debentures or other obligations or evidences of indebtedness, certificates of deposit, bankers' acceptances, commercial paper, repurchase agreements or other money market instruments; stocks, shares or other equity ownership interests; and warrants, options, futures contracts or other instruments representing rights to subscribe for, purchase, receive or otherwise acquire or to sell, transfer, assign or otherwise dispose of, and scrip, certificates, receipts or other instruments evidencing any ownership rights or interests in, any of the foregoing and "when issued" and "delayed delivery " contracts for securities, issued, guaranteed or sponsored by any governments, political subdivisions or governmental authorities, agencies or instrumentalities, by any individuals, firms, companies, corporations, syndicates, associations or trusts, or by any other organizations or entities whatsoever, irrespective of their forms or the names by which they may be described, whether or not they be organized and operated for profit, and whether they be domestic or foreign with respect to The Commonwealth of Massachusetts or the United States of America. -5- "SECURITIES OF THE TRUST" shall mean any Securities issued by the Trust. "SERIES" shall mean one or more of the series of Shares authorized by the Trustees to represent the beneficial interest in one or more of the Funds. "SETTLOR" shall have the meaning stated in the first "Whereas" clause set forth above. "SHAREHOLDER" shall mean as of any particular time any Person shown of record at such time on the books of the Trust as a holder of outstanding Shares of any Series, and shall include a pledgee into whose name any such Shares are transferred in pledge. "SHAREHOLDER SERVICING AGENT" shall have the meaning designated in Section 5.2(f) hereof. "SHARES" shall mean the transferable units into which the beneficial interest in the Trust and each Fund of the Trust (as the context may require) shall be divided from time to time, and includes fractions of Shares as well as whole Shares. All references herein to "Shares" which are not accompanied by a reference to any particular Series or Fund shall be deemed to apply to outstanding Shares without regard to Series. "SINGLE CLASS VOTING," as used with respect to any matter to be acted upon at a meeting or by written consent of Shareholders, shall mean a style of voting in which each holder of one or more Shares shall be entitled to one vote on the matter in question for each Share standing in his name on the records of the Trust, irrespective of Series, and all outstanding Shares of all Series vote as a single class. "STATEMENT OF ADDITIONAL INFORMATION," as used with respect to any Fund or Series of Shares, shall mean the statement of additional information relating to such Fund or Series, which constitutes part of the currently effective Registration Statement of the Trust under the Securities Act of 1933, as such statement of additional information may be amended or supplemented from time to time. "TRANSFER AGENT" shall have the meaning defined in Section 5.2(e) hereof. "TRUST" shall have the meaning stated in the fourth "Whereas" clause set forth above. "TRUST PROPERTY" shall mean, as of any particular time, any and all property which shall have been transferred, -6- conveyed or paid to the Trust or the Trustees, and all interest, dividends, income, earnings, profits and gains therefrom, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever from the same may be, and which at such time is owned or held by, or for the account of, the Trust or the Trustees, without regard to the Fund to which such property is allocated. "TRUSTEES" shall mean, collectively, the Initial Trustee, so long as he shall continue in office, and all other individuals who at the time in question have been duly elected or appointed as Trustees of the Trust in accordance with the provisions hereof and who have qualified and are then in office. At any time at which there shall be only one (1) Trustee in office, such term shall mean such single Trustee. Section 1.5 REAL PROPERTY TO BE CONVERTED INTO PERSONAL PROPERTY. Notwithstanding any other provision hereof, any real property at any time forming part of the Trust Property shall be held in trust for sale and conversion into personal property at such time or times and in such manner and upon such terms as the Trustees shall approve, but the Trustees shall have power until the termination of this Trust to postpone such conversion as long as they in their uncontrolled discretion shall think fit, and for the purpose of determining the nature of the interest of the Shareholders therein, all such real proeprty shall at all times be considered as personal property. ARTICLE II PURPOSE OF THE TRUST The purpose of the Trust shall be to engage in the business of being an investment company, and as such of subscribing for, purchasing or otherwise acquiring, holding for investment or trading in, borrowing, lending and selling short, selling, assigning, negotiating or exchanging and otherwise disposing of, and turning to account, realizing upon and generally dealing in and with, in any manner, (a) Securities of all kinds, (b) precious metals and other minerals, contracts to purchase and sell, and other interests of every nature and kind in , such metals or minerals, and (c) rare coins and other numismatic items, and all as the Trustees in their discretion shall determine to be necessary, desirable or appropriate, and to exercise and perform any and every act, thing or power necessary, suitable or desireable for the accomplishment of such purpose, the attainment of any of the objects or the furtherance of any of the powers given hereby which are lawful purposes, objects or powers of a trust with transferable shares of the type commonly -7- termed a Massachusetts business trust; and to do every other act or acts or thing or things incidental or appurtenant to or growing out of or in connection with the aforesaid objects, purposes or powers, or any of them, which a trust of the type commonly termed a Massachusetts business trust is not now or hereafter prohibited from doing, exercising or performing. ARTICLE III POWERS OF THE TRUSTEES Section 3.1 POWERS IN GENERAL. The Trustees shall have, without other or further authorization, full, entire, exclusive and absolute power, control and authority over, and management of, the business of the Trust and over the Trust Property, to the same extent as if the Trustees were the sole owners of the business and property of the Trust in their own right, and with such powers of delegation as may be permitted by this Declaration, subject only to such limitations as may be expressly imposed by this Declaration of Trust or by applicable law. The enumeration of any specific power or authority herein shall not be construed as limiting the aforesaid power or authority or any specific power or authority. Without limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration of Trust providing for the conduct of the business and affairs of the Trust and may amend and repeal them to the extent that such Bylaws do not reserve that right to the Shareholders; they may select, and from time to time change, the fiscal year of the Trust; they may adopt and use a seal for the Trust, PROVIDED, that unless otherwise required by the Trustees, it shall not be necessary to place the seal upon, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust; they may from time to time in accordance with the provisions of Section 6.1 hereof establish one or more Funds to which they may allocate such of the Trust Property, subject to such liabilities, as they shall deem appropriate, each such Fund to be operated by the Trustees as a separate and distinct investment medium and with separately defined investment objectives and policies and distinct investment purposes, all as established by the Trustees, or from time to time changed by them or by the shareholders of said Fund; they may as they consider appropriate elect and remove officers and appoint and terminate agents and consultants and hire and terminate employees, any one or more of the foregoing of whom may be a Trustee; they may appoint from their own number, and terminate, any one or more committees consisting of one or more Trustees, including without implied limitation an Executive Committee, which may, when the Trustees are not in session and subject to the 1940 Act, exercise some or all of the power and authority of the Trustees as the Trustees may determine; in accordance with Section 5.2 they may employ one or more -8- Investment Advisers, Administrators and Custodians and may authorize any Custodian to employ subcustodians or agents and to deposit all or any part of such assets in a system or systems for the Central handling of Securities, retain Transfer, Dividend Disbursing, Accounting or Shareholder Servicing Agents or any of the foregoing, provide for the distribution of Shares by the Trust directly to the public or through one or more Distributors, Principal Underwriters or otherwise, set record dates or times for the determination of Shareholders entitled to participate in, benefit from or act with respect to various matters; and in general they may delegate to any officer of the Trust, to any Committee of the Trustees and to any employee, Investment Adviser, Administrator, Distributor, Custodian, Transfer Agent, Dividend Disbursing Agent, or any other agent or consultant of the Trust, such authority, powers, functions and duties as they consider desirable or appropriate for the conduct of the business and affairs of the Trust, including without implied limitation the power and authority to act in the name of the Trust and of the Trustees, to sign documents and to act as attorney-in-fact for the Trustees. Without limiting the foregoing and to the extent not inconsistent with the 1940 Act or other applicable law, the Trustees shall have power and authority: (a) INVESTMENTS. To invest and reinvest cash and other property; to buy, for cash or on margin, and otherwise acquire and hold, Securities created or issued by any Persons, including Securities maturing after the possible termination of the Trust; to make payment therefor in any lawful manner in exchange for any of the Trust Property; and to hold cash or other property uninvested without in any event being bound or limited by any present or future law or custom in regard to investments by trustees; (b) DISPOSITION OF ASSETS. Upon such terms and conditions as they deem best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate, convey, transfer or otherwise dispose of, and to trade in, any and all of the Trust Property, free and clear of all trusts, for cash or on terms, with or without advertisement, and on such terms as to payment, security or otherwise, all as they shall deem necessary or expedient; (c) OWNERSHIP POWERS. To vote or give assent, or exercise and any all other rights, powers and privileges of ownership with respect to, and to perform any and all duties and obligations as owners of, any Securities or other property forming part of the Trust Property, the same as any individual might do; to exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of Securities, and to receive powers of attorney -9- from, and to execute and deliver proxies or powers of attorney to, such Person or Persons as the Trustees shall deem proper, receiving from or granting to such Person or Persons such power and discretion with relation to Securities or other property of the Trust, all as the Trustees shall deem proper; (d) FORM OF HOLDING. To hold any Security or other property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust, or of the Fund to which such Securities or property belong, or in the name of a Custodian, subcustodian or other nominee or nominees, or otherwise, upon such terms, in such manner or with such powers, as the Trustees may determine, and with or without indicating any trust or the interest of the Trustees therein; (e) REORGANIZATION, ETC. To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any Security of which is or was held in the Trust or any Fund; to consent to any contract, lease, mortgage, purchase or sale of property by such corporations or issuer, and to pay calls or subscriptions with respect to any Security forming part of the Trust Property; (f) VOTING TRUSTS, ETC. To join with other holders of any Securities in acting through a committee, depository, voting trustee or otherwise, and in that connection to deposit any Security with, or transfer any Security to, any such committee, depository or trustee, and to delegate to them such power and authority with relation to any Security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depository or trustee as the Trustees shall deem proper; (g) CONTRACTS, ETC. To enter into, make and perform all such obligations, contracts, agreements and undertakings of every kind and description, with any Person or Persons, as the Trustees shall in their discretion deem expedient in the conduct of the business of the Trust, for such terms as they shall see fit, whether or not extending beyond the term of office of the Trustees, or beyond the possible expiration of the Trust; to amend, extend, release or cancel any such obligations, contracts, agreements or understandings; and to execute, acknowledge, deliver and record all written instruments which they may deem necessary or expedient in the exercise of their powers; -10- (h) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust Property or any part thereof to secure any of or all such obligations; (i) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited partnerships and any other combinations or associations; (j) INSURANCE. To purchase and pay for entirely out of Trust Property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, consultants, Investment Advisers, managers, Administrators, Distributors, Principal Underwriters, or other independent contractors, or any thereof (or any Person connected therewith), of the Trust, individually, against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person in any such capacity, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such Person against such liability; (k) PENSIONS, ETC. To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust; (1) POWER OF COLLECTION AND LITIGATION. To collect, sue for and receive all sums of money coming due to the Trust, to employ counsel, and to commence, engage in, prosecute, intervene in, join, defend, compound, compromise, adjust or abandon, in the name of the Trust, any and all actions, suits, proceedings, disputes, claims, controversies, demands or other litigation or legal proceedings relating to the Trust, the business of the Trust, the Trust Property, or the Trustees, officers, employees, agents and other independent contractors of the Trust, in their capacity as such, at law or in equity, or before any other bodies or tribunals, and to compromise, -11- arbitrate or otherwise adjust any dispute to which the Trust may be a party, whether or not any suit is commence or any claim shall have been made or asserted; (m) ISSUANCE AND REPURCHASE OF SHARES. To issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares of any Series, and, subject to Article VI hereof, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares of any Series, any of the Fund Assets belonging to the Fund to which such Series relates, whether constituting capital or surplus or otherwise, to the full extent now or hereafter permitted by applicable law; PROVIDED, that any Shares belonging to the Trust shall not be voted, directly or indirectly; (n) OFFICES. To have one or more offices, and to carry on all or any of the operations and business of the Trust, in any of the States, Districts or Territories of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory or country; (o) EXPENSES. To incur and pay any and all such expenses and charges as they may deem advisable (including, without limitation, appropriate fees to themselves as Trustees), and to pay all such sums of money for which they may be held liable by way of damages, penalty, fine or otherwise; (p) AGENTS, ETC. To retain and employ any and all such servants, agents, employees, attorneys, brokers, investment advisers, accountants, escrow agents, depositories, consultants, ancillary trustees, custodians, agents for collection, insurers, banks and officers, as they think best for the business of the Trust or any Fund, to supervise and direct the acts of any of the same, and to fix and pay their compensation and define their duties; (q) ACCOUNTS. To determine, and from time to time change, the method or form in which the accounts of the Trust shall be kept; (r) VALUATION. Subject to the requirements of the 1940 Act, to determine from time to time the value of all or any part of the Trust Property and of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and from time to time to revalue all or any part of the Trust Property in accordance with such appraisals or other information as is, in the Trustees' sole judgment, necessary and satisfactory; -12- (s) INDEMNIFICATION. In addition to the mandatory indemnification provided for in Article VIII hereof and to the extent permitted by law, to indemnify or enter into agreements with respect to indemnification with any Person with whom this Trust has dealings, including, without limitation, any independent contractor, to such extent as the Trustees shall determine; and (t) GENERAL. To do all such other acts and things and to conduct, operate, carry on and engage in such other lawful businesses or business activities as they shall in their sole and absolute discretion consider to be incidental to the business of the Trust or any Fund as an investment company, and to exercise all powers which they shall in their discretion consider necessary, useful or appropriate to carry on the business of the Trust or any Fund, to promote any of the purposes for which the Trust is formed, whether or not such things are specifically mentioned herein, in order to protect or promote the interests of the Trust or any Fund, or otherwise to carry out the provisions of this Declaration. Section 3.2 BORROWINGS; FINANCINGS; ISSUANCE OF SECURITIES. Subject to the requirements of the 1940 Act, the Trustees have power to borrow or in any other manner raise such sum or sums of money, and to incur such other indebtedness for goods or services, or for or in connection with the purchase or other acquisition of property, as they shall deem advisable for the purposes of the Trust, in any manner and on any terms, and to evidence the same by negotiable or nonnegotiable Securities which may mature at any time or times, even beyond the possible date of termination of the Trust; to issue Securities of any type for such cash, property, services or other considerations, and at such time or times and upon such terms, as they may deem advisable; and to reacquire any such Securities. Any such Securities of the Trust may, at the discretion of the Trustees, be made convertible into Shares of any Series, or may evidence the right to purchase, subscribe for or otherwise acquire Shares of any Series, at such times and on such terms as the Trustees may prescribe. Section 3.3 DEPOSITS. Subject to the requirements of the 1940 Act, the Trustees shall have power to deposit any moneys or Securities included in the Trust Property with any one or more banks, trust companies or other banking institutions, whether or not such deposits will draw interest. Such deposits are to be subject to withdrawal in such manner as the Trustees may determine, and the Trustees shall have no responsibility for any loss which may occur by reason of the failure of the bank, trust company or other banking institution with which any such moneys -13- or Securities have been deposited, other than liability based on their gross negligence or willful fault. Section 3.4 ALLOCATIONS. The Trustees shall have power to determine whether moneys or other assets received by the Trust shall be charged or credited to income or capital, or allocated between income and capital, including the power to amortize or fail to amortize any part or all of any premium or discount, to treat any part of all of the profit resulting from the maturity or sale of any asset, whether purchased at a premium or at a discount, as income or capital, or to apportion the same between income and capital, or to apportion the sale price of any asset between income and capital, and to determine in what manner any expenses or disbursements are to be borne as between income and capital, whether or not in the absence of the power and authority conferred by this Section 3.4 such assets would be regarded as income or as capital or such expense or disbursement would be charged to income or to capital; to treat any dividend or other distribution on any investment as income or capital, or to apportion the same between income and capital; to provide or fail to provide reserves, including reserves for depreciation, amortization or obsolescence in respect of any Trust Property in such amounts and by such methods as they shall determine; to allocate less than all of the consideration paid for Shares of any Series to the shares of beneficial interest account of the Fund to which such Shares relate and to allocate the balance thereof to paid-in capital of that Fund, and to reallocate such amounts from time to time; all as the Trustees may reasonably deem proper. Section 3.5 FURTHER POWERS; LIMITATIONS. The Trustees shall have power to do all such other matters and things, and to execute all such instruments, as they deem necessary, proper or desirable in order to carry out, promote or advance the interests of the Trust, although such matters or things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees. The Trustees shall not be required to obtain any court order to deal with the Trust Property. The Trustees may limit their right to exercise any of their powers through express restrictive provisions in the instruments evidencing or providing the terms for any Securities of the Trust or in other contractual instruments adopted on behalf of the Trust. -14- ARTICLE IV TRUSTEES AND OFFICERS Section 4.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC. (a) INITIAL TRUSTEE. Upon his execution of this Declaration of Trust or a counterpart hereof or some other writing in which he accepts such Trusteeship and agrees to the provisions hereof, the individual whose signature is affixed hereto as Initial Trustee shall become the Initial Trustee hereof. (b) NUMBER. The Trustees serving as such, whether named above or hereafter becoming Trustees, may increase (to not more than fifteen (15)) or decrease the number of Trustees to a number other than the number theretofore determined by a written instrument signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees). No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to subsection (e) of this Section 4.1. (c) ELECTION AND TERM. The Trustees shall be elected by the Shareholders of the Trust at the first meeting of Shareholders immediately prior to the date that the Trust acquires assets in addition to the one hundred dollars contributed by the Settlor and the term of office of any Trustees in office before such election shall terminate at the time of such election. Subject to Section 16(a) of the 1940 Act and to the preceding sentence of this subsection (c), the Trustees shall have the power to set and alter the terms of office of the Trustees, and at any time to lengthen or shorten their own terms or make their terms of unlimited duration, to elect their own successors and, pursuant to subsection (f) of this Section 4.1, to appoint Trustees to fill vacancies; PROVIDED, that Trustees shall e elected by a Majority Shareholder Vote at any such time or times as the Trustees shall determine that such action is required under Section 16(a) of the 1940 Act or, if not so required, that such action is advisable; and FURTHER PROVIDED, that, after the initial election of Trustees by the Shareholders, the term of office of any incumbent Trustee shall continue until the termination of this Trust or his earlier death, resignation, retirement, bankruptcy, adjudicated incompetency or other incapacity or removal, or if not so terminated, until the election of such Trustee's successor -15- in office has become effective in accordance with this subsection (c). (d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or retire as a Trustee, by a written instrument signed by him and delivered to the other Trustees or to any officer of the Trust, and such resignation or retirement shall take effect upon such delivery or upon such later date as is specified in such instrument. (e) REMOVAL. Any Trustee may be removed with or without cause at any time: (i) by vote of Shareholders holding not less than a majority of the Shares of each Series then outstanding, cast in person or by proxy at any meeting called for the purpose; or (ii) by a written declaration signed by Shareholders holding not less than a majority of the Shares of each Series then outstanding and filed with the Trust's Custodian. (f) VACANCIES. Any vacancy or anticipated vacancy resulting from any reason, including an increase in the number of Trustees, may (but need not unless required by the 1940 Act) be filled by a Majority of the Trustees through the appointment in writing of such other individual as such remaining Trustees in their discretion shall determine; PROVIDED, that after filling any such vacancy, at least two-thirds of the Trustees then holding office shall have been elected to their offices by the Shareholders; and, PROVIDED FURTHER, that if there shall be not Trustees in office, such vacancy or vacancies shall be filled by vote of the Shareholders. Any such appointment or election shall be effective upon such individual's written acceptance of his appointment as a Trustee and his agreement to be bound by the provisions of this Declaration of Trust, except that any such appointment in anticipation of a vacancy to occur by reason of retirement, resignation or increase in the number of Trustees to be effective at a later date shall become effective only at or after the effective date of said retirement, resignation or increase in the number of Trustees. (g) ACCEPTANCE OF TRUSTS. Any individual appointed as a Trustee under subsection (f), and any individual elected as a Trustee under subsection (c), of this Section 4.1 who was not, immediately prior to such election, acting as a Trustee, shall accept such appointment or election in writing and agree in such writing to be bound by the provisions hereof, and whenever such individual shall have executed such writing and any conditions to such appointment or election shall have been satisfied, such individual shall become a Trustee and the Trust Property shall vest in the -16- new Trustee, together with the continuing Trustees, without any further act or conveyance. (h) EFFECT OF DEATH, RESIGNATION, ETC. No vacancy, whether resulting from the death, resignation, retirement, removal or incapacity of any Trustee, an increase in the number of Trustees or otherwise, shall operate to annul or terminate the Trust hereunder or to revoke or terminate any existing agency or contract created or entered into pursuant to the terms of this Declaration of Trust. Until such vacancy is filled as provided in this Section 4.1, the Trustees in office (if any), regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration. A written instrument certifying the existence of such vacancy signed by a Majority of the Trustees shall be conclusive evidence of the existence of such vacancy. (i) CONVEYANCE. In the event of the resignation or removal of a Trustee or his otherwise ceasing to be a Trustee, such former Trustee or his legal representative shall, upon request of the continuing Trustees, execute and deliver such documents as may be required for the purpose of consummating or evidencing the conveyance to the Trust or the remaining Trustees of any Trust Property held in such former Trustee's name, but the execution and delivery of such documents shall not be requisite to the vesting of title to the Trust Property in the remaining Trustees, as provided in subsection (g) of this Section 4.1 and in Section 4.13 hereof. (j) NO ACCOUNTING. Except to the extent required by the 1940 Act or under circumstances which would justify his removal for cause, no Person ceasing to be a Trustee (nor the estate of any such Person) shall be required to make an accounting to the Shareholders or remaining Trustees upon such cessation. (k) FILINGS. Whenever there shall be a change in the composition of the Trustees, the Trust shall cause to be filed in the office of the Secretary of The Commonwealth of Massachusetts and in each other place where the Trust is required to file amendments to this Declaration a copy of (i) the instrument by which (in the case of the appointment of a new Trustee, or the election of an individual who was not theretofore a Trustee) the new Trustee accepted his appointment or election and agreed to be bound by the terms of this Declaration, or (in the case of a resignation) by which the former Trustee resigned as such, together in either case with a certificate of one of the other Trustees as to the circumstances of such election, appointment or -17- resignation, or (ii) in the case of the removal or death of a Trustee, a certificate of one of the Trustees as to the fact of such removal or death. Section 4.2 TRUSTEES' MEETINGS; PARTICIPATION BY TELEPHONE, ETC. An annual meeting of Trustees shall be held each fiscal year of the Trust and special meetings may be held from time to time, in each case, upon the call of such officers as may be thereunto authorized by the Bylaws or vote of the Trustees, or by any two (2) Trustees, or pursuant to a vote of the Trustees adopted at a duly constituted meeting of the Trustees, and upon such notice as shall be provided in the Bylaws. The Trustees may act with or without a meeting, and a written consent to any matter, signed by a Majority of the Trustees, shall be equivalent to action duly taken at a meeting of the Trustees, duly called and held. Except as otherwise provided by the 1940 Act or other applicable law, or by this Declaration of Trust or the Bylaws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (a quorum, consisting of at least a Majority of the Trustees, being present), within or without Massachusetts. If authorized by the Bylaws, all or any one or more Trustees may participate in a meeting of the Trustees or any Committee thereof by means of conference telephone or similar means of communication by means of which all Persons participating in the meeting can hear each other, and participation in a meeting pursuant to such means of communication shall constitute presence in person at such meeting. The minutes of any meeting thus held shall be prepared in the same manner as a meeting at which all participants were present in person. Section 4.3 COMMITTEES; DELEGATION. The Trustees shall have power, consistent with their ultimate responsibility, to supervise the affairs of the Trust, to delegate from time to time to an Executive committee, and to one or more other Committees, or to any single Trustee or to any other Person, the doing of such things and the execution of such deeds or other instruments, either in the name of the Trust or the names of the Trustees or as their attorney or attorneys in fact, or otherwise as the Trustees may from time to time deem expedient, and any agreement, deed, mortgage, lease or other instrument or writing executed by the Trustee or Trustees or other Person to whom such delegation was made shall be valid and binding upon the Trustees and upon the Trust. Section 4.4 ADVISORY TRUSTEES. The Trustees may appoint one or more Advisory Trustees for the purpose of advising the Trustees in such matters as the Trustees may request. Such -18- Advisory Trustees shall meet and confer at such times and places as the Trustees may specify, including, if the Trustees so request, with the Trustees at annual and special meetings of the Trustees, provided that no Advisory Trustee shall be entitled to vote at any meeting of the Trustees and the actions or decisions of Advisory Trustees shall be advisory only. Advisory Trustees shall be entitled to such compensation, if any, as may be determined by the Trustees. Section 4.5 OFFICERS. The Trustees shall annually elect such offices or agents who shall have such powers, duties and responsibilities as the Trustees may deem to be advisable, and as they shall specify by resolution or in the Bylaws. Except as may be provided in the Bylaws, any officer elected by the Trustees may be removed at any time with or without cause. Any two (2) or more offices may be held by the same individual. Section 4.6 COMPENSATION OF TRUSTEES AND OFFICERS. The Trustees shall fix the compensation of all officers and Trustees. Without limiting the generality of any of the provisions hereof, the Trustees shall be entitled to receive reasonable compensation for their general services as such, and to fix the amount of such compensation, and to pay themselves or any one or more of themselves such compensation for special services, including legal, accounting, or other professional services, as they in good faith may deem reasonable. No Trustee or officer resigning and (except where a right to receive compensation for a definite future period shall be expressly provided in a written agreement with the Trust, duly approved by the Trustees) no Trustee or office removed shall have any right to any compensation as such Trustee or officer for any period following his resignation or removal, or any right to damages on account of his removal, whether his compensation be by the month, by the year or otherwise. Section 4.7 OWNERSHIP OF SHARES AND SECURITIES OF THE TRUST. Any Trustee, and any officer, employee or agent of the Trust, and any organization in which any such Person is interested, may acquire, own, hold and dispose of Shares of any Series and other Securities of the Trust for his or its individual account, and may exercise all rights of a holder of such Shares or Securities to the same extent and in the same manner as if such Person were not such a Trustee, officer, employee or agent of the Trust; subject, in the case of Trustees and officers, to the same limitations as directors or officers (as the case may be) of a Massachusetts business corporation; and the Trust may issue and sell or cause to be sold and may purchase any such Shares or other Securities from any such Person or any such organization, subject only to the general limitations, restrictions or other provisions applicable to the sale or -19- purchase of Shares of such Series or other Securities of the Trust generally. Section 4.8 RIGHT OF TRUSTEES AND OFFICERS TO OWN PROPERTY OR TO ENGAGE IN BUSINESS; AUTHORITY OF TRUSTEES TO PERMIT OTHERS TO DO LIKEWISE. The Trustees, in their capacity as Trustees, and (unless otherwise specifically directed by vote of the Trustees) the officers of the Trust in their capacity as such, shall not be required to devote their entire time to the business and affairs of the Trust. Except as otherwise specifically provided by vote of the Trustees, or by agreement in any particular case, any Trustee or officer of the Trust may acquire, own, hold and dispose of, for his own individual account, any property, and acquire, own, hold, carry on and dispose of, for his own individual account, any business entity or business activity, whether similar or dissimilar to any property or business entity or business activity invested in or carried on by the Trust, and without first offering the same as an investment opportunity to the Trust, and may exercise all rights in respect thereof as if he were not a Trustee or officer of the Trust. The Trustees shall also have power, generally or in specific cases, to permit employees or agents of the Trust to have the same rights (or lesser rights) to acquire, hold, own and dispose of property and businesses, to carry on businesses, and to accept investment opportunities without offering them to the Trust, as the Trustees have by virtue of this Section 4.7. Section 4.9 RELIANCE ON EXPERTS. The Trustees and officers may consult with counsel, engineers, brokers, appraisers, auctioneers, accountants, investment bankers, securities analysts or other Persons (any of which may be a firm in which one or more of the Trustees or officers is or are members or otherwise interested) whose profession gives authority to a statement made by them on the subject in question, and who are reasonably deemed by the Trustees or officers in question to be competent, and the advice or opinion of such Persons shall be full and complete personal protection to all of the Trustees and officers in respect of any action taken or suffered by them in good faith and in reliance on or in accordance with such advice or opinion. In discharging their duties, Trustees and officers, when acting in good faith, may rely upon financial statements of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position of the Trust. The Trustees and officers may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine. Section 4.10 SURETY BONDS. No Trustee, officer, employee or agent of the Trust shall, as such, be obligated to give any bond or surety or other security for the performance of -20- any of his duties, unless required by applicable law or regulation, or unless the Trustees shall otherwise determine in any particular case. Section 4.11 APPARENT AUTHORITY OF TRUSTEES AND OFFICERS. No purchaser, lender, transfer agent or other Person dealing with the Trustees or any officer of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by such officer, or to make inquiry concerning or be liable for the application of money or property paid, loaned or delivered to or on the order of the Trustees or of such officer. Section 4.12 OTHER RELATIONSHIPS NOT PROHIBITED. The fact that: (i) any of the Shareholders, Trustees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter or distributor or agent of or for any Contracting Party (as defined in Section 5.2 hereof), or of or for any parent or affiliate of any Contracting Party, or that the Contracting Party or any parent or affiliate thereof is a Shareholder or has an interest in the Trust or any Fund, or that (ii) any Contracting Party may have a contract providing for the rendering of any similar services to one or more other corporations, trusts, associations, partnership, limited partnerships or other organizations, or have other business or interests, shall not affect the validity of any contract for the performance and assumption of services, duties and responsibilities to, for or of the Trust and/or the Trustees or disqualify any Shareholder, Trustee of officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or to the holders of Shares of any Series; PROVIDED that, in the case of any relationship or interest referred to in the preceding clause (i) on the part of any Trustee or officer of the Trust, either (x) the material facts as to such relationship or interest have been disclosed to or are known by the Trustees not having any such relationship or interest and the contract involved is approved in good faith by a majority of such Trustees not having any such relationship or interest (even though such unrelated or disinterested or interest (even though such unrelated or disinterested Trustees), (y) the material facts as to such relationship or interest and as to the contract have been disclosed to or are known by the Shareholders entitled to vote thereon and the contract involved is specifically approved in good faith by vote of the Shareholders, or (z) the specific contract involved is fair -21- to the Trust as of the time it is entered into by the Shareholders. Section 4.13 PAYMENT OF TRUST EXPENSES. The Trustees are authorized to pay or to cause to be paid out of the principal or income of the Trust, or partly out of principal and partly out of income, and according to any allocation to particular Funds made by them pursuant ot Section 6.2(b) hereof, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the business and affairs of the Trust of in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, Investment Adviser, Administrator, Distributor, Principal Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend Disbursing Agent, Accounting Agent, Shareholder Servicing Agent, and such other agents, consultants, and independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur. Section 4.14 OWNERSHIP OF THE TRUST PROPERTY. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants, except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or of any particular Fund, or in the name of any other Person as nominee, on such terms as the Trustees may determine; PROVIDED that the interest of the Trust and of the respective Fund therein is appropriately protected. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the termination of the term of office of a Trustee as provided in Section 4.1(c), (d) or (e) hereof, such Trustee shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to Section 4.1(i) hereof. ARTICLE V DELEGATION OF MANAGERIAL RESPONSIBILITIES Section 5.1 APPOINTMENT; ACTION BY LESS THAN ALL TRUSTEES. The Trustees shall be responsible for the general operating policy of the Trust and for the general supervision of the business of the Trust conducted by officers, agents, employees or advisers of the Trust or by independent contractors, but the Trustees shall not be required personally to conduct all -22- the business of the Trust and, consistent with their ultimate responsibility as stated herein, the Trustees may appoint, employ or contract with one or more officers, employees and agents to conduct, manage and/or supervise the operations of the Trust, and may grant or delegate such authority to such officers, employees and/or agents as the Trustees may, in their sole discretion, deem to be necessary or desirable, without record to whether such authority is normally granted or delegated by trustees. Section 5.2 CERTAIN CONTRACTS. Subject to compliance with the provisions of the 1940 Act, but notwithstanding any limitations of present and future law or custom in regard to delegation of powers by trustees generally, the Trustees may, at any time and from time to time in their discretion and without limiting the generality of their powers and authority otherwise set forth herein, enter into one or more contracts with any one or more corporations, trusts, associations, partnerships, limited partnerships or other types of organizations, or individuals ("CONTRACTING PARTY"), to provide for the performance and assumption of some or all of the following services, duties and responsibilities to, for or on behalf of the Trust and/or any Fund, and/or the Trustees, and to provide for the performance and assumption of such other services, duties and responsibilities in addition to those set forth below, as the Trustees may deem appropriate: (a) ADVISORY. An investment advisory or management agreement whereby the Investment Adviser shall undertake to furnish the Trust such management, investment advisory or supervisory, administrative, accounting, legal, statistical and research facilities and services, and such other facilities and services, if any, as the Trustees shall from time to time consider desirable, all upon such terms and conditions as the Trustees may in their discretion determine to be not inconsistent with this Declaration, the applicable provisions of the 1940 Act or any applicable provisions of the Bylaws. Any such advisory or management agreement and any amendment thereto shall be subject to approval by a Majority Shareholder Vote at a meeting of the Shareholders of the Trust. Notwithstanding any provisions of this Declaration, the Trustees may authorize the Investment Adviser (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales, loans or exchanges of portfolio securities of the Trust on behalf of the Trustees or may authorize any officer or employee of the Trust or any Trustee to effect such purchases, sales, loans or exchanges pursuant to recommendations of the Investment Adviser (and all without further action by the Trustees). Any such purchases, sales, loans and exchanges shall be deemed to have been authorized by all of the Trustees. The Trustees -23- may, in their sole discretion, call a meeting of Shareholders in order to submit to a vote of Shareholders at such meeting the approval of continuance of any such investment advisory or management agreement. If the Shareholders of any Fund should fail to approve any such investment advisory or management agreement, the Investment Adviser may nonetheless serve as Investment Adviser with respect to any other Fund whose Shareholders shall have approved such contract. (b) ADMINISTRATION. An agreement whereby the agent, subject to the general supervision of the Trustees and in conformity with any policies of thge Trustees with respect to the operations of the Trust and each Fund, will supervise all or any part of the operations of the Trust and each Fund, and will provide all or any part of the administrative and clerical personnel, office space and office equipment and services appropriate for the efficient administration and operations of the Trust and each Fund (any such agent being herein referred to as an "ADMINISTRATOR"). (c) DISTRIBUTION. An agreement providing for the sale of Shares of any one or more Series to net the Trust not less than the net asset value per Share (as described in Section 6.2(h) hereof) and pursuant to which the Trust may appoint the other party to such agreement as its principal underwriter or sales agent for the distribution of such Shares. The agreement shall contain such terms and conditions as the Trustees may in their discretion determine to be not inconsistent with this Declaration, the applicable provisions of the 1940 Act and any applicable provisions of the Bylaws (any such agent being herein referred to as a "DISTRIBUTOR" or a "PRINCIPAL UNDERWRITER," as the case may be). (d) CUSTODIAN. The appointment of a bank or trust company having an aggregate capital, surplus and undivided profits (as shown in its last published report) of at least two million dollars ($2,000,000) as custodian of the Securities and cash of the Trust and of each Fund and of the accounting records in connection therewith (any such agent being herein referred to as a "CUSTODIAN"). (e) TRANSFER AND DIVIDEND DISBURSING AGENCY. An agreement with a agent to maintain records of the ownership of outstanding Shares, the issuance and redemption and the transfer thereof (any such agent being herein referred to as a "TRANSFER AGENT"), and to disburse any dividends declared by the Trustees and in accordance with the policies of the Trustees and/or the instructions of any particular Shareholder to reinvest any such dividends (any such agent -24- being herein referred to as a "DIVIDEND DISBURSING AGENT"). (f) Shareholder Servicing. An agreement with an agent to provide service with respect to the relationship of the Trust and its Shareholders, records with respect to Shareholders and their Shares, and similar matters (any such agent being herein referred to as a "SHAREHOLDER SERVICING AGENT"). (g) ACCOUNTING. An agreement with an agent to handle all or any part of the accounting responsibilities, whether with respect to the Trust's properties, Shareholders or otherwise (any such agent being herein referred to as an "ACCOUNTING AGENT". The same Person may be the Contracting Party for some or all of the services, duties and responsibilities to, for and of the Trust and/or the Trustees, and the contracts with respect thereto may contain such terms interpretive of or in addition to the delineation of the services, duties and responsibilities provided for, including provisions that are not inconsistent with the 1940 Act relating to the standard of duty of and the rights to indemnification of the Contracting Party and others, as the Trustees may determine. Nothing herein shall preclude, prevent or limit the Trust or a Contracting Party from entering into sub- contractual arrangements relative to any of the matters referred to in subsections (a) through (g) of this Section 5.2. ARTICLE VI FUNDS AND SHARES Section 6.1 DESCRIPTION OF FUNDS AND SHARES. (a) SHARES; FUNDS; SERIES OF SHARES. The beneficial interest in the Trust shall be divided into Shares having a nominal or par value of one cent ($.01) per Share, and all of the one class, of which an unlimited number may be issued. The Trustees shall have the authority from time to time to establish and designate one or more separate, distinct and independent Funds into which the assets of the Trust shall be divided, and to authorize a separate Series of Shares for each such Fund (each of which Series, including without limitation each Series authorized in Section 6.2 hereof, shall represent interests only in the Fund with respect to which such Series was authorized), as they deem necessary or desirable. Except as otherwise provided as to a particular Fund herein, or in the Certificate of Designation therefor, the Trustees shall have all the rights and powers, and be subject to all the duties -25- and obligations, with respect to each such Fund and the assets and affairs thereof as they have under this Declaration with respect to the Trust and the Trust Property in general. (b) ESTABLISHMENT, ETC. OF FUNDS; AUTHORIZATION OF SHARES. The establishment and designation of any Fund in addition to the Fund established and designated in Section 6.2 hereof and the authorization of the Shares thereof shall be effective upon the execution by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees) of an instrument setting forth such establishment and designation and the relative rights and preferences of the Shares of such Fund and the manner in which the same may be amended (a "CERTIFICATE OF DESIGNATION"), and may provide that the number of Shares of such Series which may be issued is unlimited, or may limit the number issuable. At any time that there are no Shares outstanding of any particular Fund previously established and designated, including any Fund established and designated in Section 6.2 hereof, the Trustees may by an instrument executed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees) terminate such Fund and the establishment and designation thereof and the authorization of its Shares (a "CERTIFICATE OF TERMINATION"). Each Certificate of Designation, Certificate of Termination and any instrument amending a Certificate of Designation shall have the status of an amendment to this Declaration of Trust, and shall be filed and become effective as provided in Section 9.4 hereof. (c) CHARACTER OF SEPARATE FUNDS AND SHARES THEREOF. Each Fund established hereunder shall be a separate component of the assets of the Trust, and the holders of Shares of the Series representing the beneficial interest in the assets of that Fund shall be considered Shareholders of such Fund, but such Shareholders shall also be considered Shareholders of the Trust for purposes of receiving reports and notices and, except as otherwise provided herein or in the Certificate of Designation of a particular Fund as to such Fund, or as required by the 1940 Act or other applicable law, the right to vote, all without distinction by Series. The Trustees shall have exclusive power without the requirement of Shareholder approval to establish and designate such separate and distinct Funds, and to fix and determine the relative rights and preferences as between the shares of the respective Funds as to rights of redemption and the price, terms and manner of redemption, special and relative rights as to dividends and other distributions and on liquidation, sinking or purchase fund provisions, -26- conversion rights, and conditions under which the Shareholders of the several Funds shall have separate voting rights or no voting rights. (d) CONSIDERATION FOR SHARES. The Trustees may issue Shares of any Series for such consideration (which may include property subject to, or acquired in connection with the assumption, liabilities) and on such terms as they may determine (or for no consideration if pursuant to a Share dividend or split-up), all without action or approval of the Shareholders. All Shares when so issued on the terms determined by the Trustees shall be fully paid and non-assessable (but may be subject to mandatory contribution back to the Trust as provided in Section 6.2(h) hereof). The Trustees may classify or reclassify any unissued Shares, or any Shares of any Series previously issued and reacquired by the Trust, into Shares of one or more other Funds that may be established and designated from time to time. Section 6.2 ESTABLISHMENT AND DESIGNATION OF THE JANUS FUND; GENERAL PROVISIONS FOR ALL FUNDS. Without limiting the authority of the Trustees set forth in Section 6.1(a) hereof to establish and designate further Funds, there is hereby established and designated the Janus Fund. The Shares of such Fund, and the Shares of any further Fund that may from time to time be established and designated by the Trustees shall (unless the Trustees otherwise determine with respect to some further Fund at the time of establishing and designating the same) have the following relative rights and preferences: (a) ASSETS BELONGING TO FUNDS. Any portion of the Trust Property allocated to a particular Fund, and all consideration received by the Trust for the issue or sale of Shares of such Fund, together with all assets in which such consideration is invested or reinvested, all interest, dividends, income, earnings, profits and gains therefrom, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held by the Trustees in trust for the benefit of the holders of Shares of that Fund and shall irrevocably belong to that Fund for all purposes, and shall be so recorded upon the books of account of the Trust, and the Shareholders of such Fund shall not have, and shall be conclusively deemed to have waived, any claims to the assets of any Fund of which they are not Shareholders. Such consideration, assets, interest, dividends, income, earnings, profits, gains and proceeds, together with any General Items allocated to that Fund as provided in the following sentence, are herein referred to collectively as "FUND ASSETS" of such Fund, and -27- as assets "BELONGING TO" that Fund. In the event that there are any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Fund (collectively "GENERAL ITEMS"), the Trustees shall allocate such General Items to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable; and any General Items so allocated to a particular Fund shall belong to and be part of the Fund Assets of that Fund. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Funds for all purposes. (b) LIABILITIES OF FUNDS. The assets belonging to each particular Fund shall be charged with the liabilities in respect of that Fund and all expenses, costs, charges and reserves attributable to that Fund, and any general liabilities, expenses, costs, charges or reserves attributable to that Fund, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as pertaining to any particular Fund shall be allocated and charged by the Trustees to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The indebtedness, expenses, costs, charges and reserves allocated and so charged to a particular Fund are herein referred to as "LIABILITIES OF" that Fund. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all Funds for all purposes. Any creditor of any Fund may look only to the assets of that Fund to satisfy such creditor's debt. (c) DIVIDENDS. Dividends and distributions on Shares of a particular Fund may be paid with such frequency as the Trustees may determine, which may be daily or otherwise pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine, to the Shareholders of that Fund, from such of the income, accrued or realized, and capital gains, realized or unrealized, and out of the assets belonging to that Fund, as the Trustees may determine, after providing for actual and accrued liabilities of that Fund. All dividends and distributions on Shares of a particular Fund shall be distributed pro rata to the Shareholders of that Fund in proportion to the number of such Shares held by such holders at the date and time of record established for the payment of such dividends or distributions, except that in connection with any dividend or distribution program or -28- procedure the Trustees may determine that no dividend or distribution shall be payable on Shares as to which the Shareholder's purchase order and/or payment have not been received by the time or times established by the Trustees under such program or procedure, or that dividends or distributions shall be payable on Shares which have been tendered by the holder thereof for redemption or repurchase, but the redemption or repurchase proceeds of which have not yet been paid to such Shareholder. Such dividends and distributions may be made in cash or Shares of that Fund or a combination thereof as determined by the Trustees, or pursuant to any program that the Trustees may have in effect at the time for the election by each Shareholder of the mode of the making of such dividend or distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with subsection (h) of this Section 6.2. (d) LIQUIDATION. In the event of the liquidation or dissolution of the Trust, the Shareholders of each Fund of which Shares are outstanding shall be entitled to receive, when and as declared by the Trustees, the excess of the Fund Assets over the liabilities of such Fund. The assets so distributable to the Shareholders of any particular Fund shall be distributed among such Shareholders in proportion to the number of Shares of that Fund held by them and recorded on the books of the Trust. The liquidation of any particular Fund may be authorized by vote of a Majority of the Trustees, subject to the affirmative vote of "a majority of the outstanding voting securities" of that Fund, as the quoted phrase is defined in the 1940 Act, determined in accordance with clause (iii) of the definition of "MAJORITY SHAREHOLDER VOTE" in Section 1.4 hereof. (e) VOTING. The Shareholders shall have the voting rights set forth in or determined under Article VII hereof. (f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular Fund shall have the right at such times as may be permitted by the Trust, but no less frequently than once a week, to require the Trust to redeem all or any part of his Shares of that Fund at a redemption price equal to the net asset value per Share of that Fund next determined in accordance with subsection (h) of this Section 6.2 after the Shares are properly tendered for redemption; PROVIDED that the Trustees may from time to time, in their discretion, determine and impose a fee for such redemption. Payment of the redemption price shall be in cash; PROVIDED, HOWEVER, that if the Trustees determine, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Trust may -29- make payment wholly or partly in Securities or other assets belonging to such Fund at the value of such Securities or assets used in such determination of net asset value. Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares of any Fund to require the Trust to redeem Shares of that Fund during any period or at any time when and to the extent permissible under the 1940 Act. (g) REDEMPTION AT THE OPTION OF THE TRUST. Each Shares of any Fund shall be subject to redemption at the option of the Trust at the redemption price which would be applicable if such Share were then being redeemed by the Shareholder pursuant to subsection (f) of this Section 6.2: (i) at any time, if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the Shares of the Trust or of any Fund, or (ii) upon such other conditions with respect to maintenance of Shareholder accounts of a minimum amount as may from time to time be determined by the Trustees and set forth in the then current Prospectus of such Fund. Upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. (h) NET ASSET VALUE. The net asset value per Share of any Fund at any time shall be the quotient obtained by dividing the value of the net assets of such Fund at such time (being the current value of the assets belonging to such Fund, less its then existing liabilities) by the total number of Shares of that Fund then outstanding, all determined i accordance with the methods and procedures, including without limitation those with respect to rounding, established by the Trustees from time to time. The Trustees may determine to maintain the net asset value per Share of any Fund at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the 1940 Act for the continuing declaration of income attributable to that Fund as dividends payable in additional Shares of that Fund at the designated constant dollar amount and for the handling of any losses attributable to that Fund. Such procedures may provide that in the event of any loss each Shareholder shall be deemed to have contributed to the shares of beneficial interest account of that Fund his pro rata portion of the total number of Shares required to be cancelled in order to permit the net asset value per share of that Fund to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Trust shall be deemed to have expressly agreed, by his investment in any Fund with respect to which the Trustees shall have adopted any such procedure, to make -30- the contribution referred to in the preceding sentence in the event of any such loss. (i) TRANSFER. All Shares of each particular Fund shall be transferable, but transfers of Shares of a particular Fund will be recorded on the Share transfer records of the Trust applicable to that Fund only at such times as Shareholders shall have the right to require the Trust to redeem Shares of that Fund and at such other times as may be permitted by the Trustees. (j) EQUALITY. All Shares of each particular Fund shall represent an equal proportionate interest in the assets belonging to that Fund (subject to the liabilities of that Fund), and each Share of any particular Fund shall be e1ual to each other Share thereof; but the provisions of this sentence shall not restrict any distinctions permissible under subsection (c) of this Section 6.2 that may exist with respect to dividends and distributions on Shares of the same Fund. The Trustees may from time to time divide or combine the Shares of any particular Fund into a greater or lesser number of Shares of that Fund without thereby changing the proportionate beneficial interest in the assets belonging to that Fund or in any way affecting the rights of the holders of Shares of any other Fund. (k) RIGHTS OF FRACTIONAL SHARES. Any fractional Share of any Series shall carry proportionately all the rights and obligations of a whole Share of that Series, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust or of the Fund to which they pertain. (l) CONVERSION RIGHTS. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that holders of Shares of any Fund shall have the right to convert said Shares into Shares of one or more other Funds in accordance with such requirements and procedures as the Trustees may establish. Section 6.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the books of the Trust or of a Transfer Agent or similar agent for the Trust, which books shall be maintained separately for the Shares of each Series that has been authorized. Certificates evidencing the ownership of Shares need not be issued except as the Trustees may otherwise determine from time to time, and the Trustees shall have power to call outstanding Share certificates and to replace them with book entries. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the use of -31- facsimile signatures, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any Transfer Agent or similar agent, as the case may be, shall be conclusive as to who are the Shareholders and as to the number of Shares of each Fund held from time to time by each such Shareholder. The holders of Shares of each Fund shall upon demand disclose to the Trustees in writing such information with respect to their direct and indirect ownership of Shares of such Fund as the Trustees deem necessary to comply with the provisions of the Internal Revenue Code, or to comply with the requirements of any other authority. Section 6.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments in any Fund of the Trust from such Persons and on such terms and for such consideration, not inconsistent with the provisions of the 1940 Act, as they from time to time authorize. The Trustees may authorize any Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person to accept orders for the purchase of Shares that conform to such authorized terms and to reject any purchase orders for Shares, whether or not conforming to such authorized terms. Section 6.5 NO PREEMPTIVE RIGHTS. No Shareholder, by virtue of holding Shares of any Fund, shall have any preemptive or other right to subscribe to any additional Shares of that Fund, or to any shares of any other Fund, or any other Securities issued by the Trust. Section 6.6 STATUS OF SHARES. Every Shareholder, by virtue of having become a Shareholder, shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. Shares shall be deemed to be personal property, giving only the rights provided herein. Ownership of Shares shall not entitled the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the Trust or any Fund, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Declaration of Trust. -32- ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS Section 7.1 VOTING POWERS. The Shareholders shall have power to vote only (i) for the election or removal of Trustees as provided in Sections 4.1(c) and (e) hereof, (ii) with respect to the approval or termination in accordance with the 1940 Act of any contract with a Contracting Party as provided in Section 5.2 hereof as to which Shareholder approval is required by the 1940 Act, (iii) with respect to any termination or reorganization of the Trust or any Fund to the extent and as provided in Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment of this Declaration of Trust to the extent and as provided in Section 9.3 hereof, (v) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or any Fund, or the Shareholders of any of them (PROVIDED, HOWEVER, that a Shareholder of a particular Fund shall not in any event be entitled to maintain a derivative or class action on behalf of any other Fund or the Shareholders thereof), and (vi) with respect to such additional matters relating to the Trust as may be required by the 1940 Act, this Declaration of Trust, the Bylaws or any registration of the Trust with the Commission (or any successor agency) or any State, or as the Trustees may consider necessary or desirable. If and to the extent that the Trustees shall determine that such action is required by law, they shall cause each matter required or permitted to be voted upon at a meeting or by written consent of Shareholders to be submitted to a separate vote of the outstanding Shares of each Fund entitled to vote thereon; PROVIDED that (i) when expressly required by this Declaration or by the 1940 Act, actions of Shareholders shall be taken by Single Class Voting of all outstanding Shares of each Series whose holders are entitled to vote thereon; and (ii) when the Trustees determine that any matter to be submitted to a vote of Shareholders affects only the rights or interests of Shareholders of one or more but not all Funds, then only the Shareholders of the Funds so affected shall be entitled to vote thereon. Section 7.2 NUMBER OF VOTES AND MANNER OF VOTING; PROXIES. On each matter submitted to a vote of the Shareholders, each holder of Shares of any Series shall be entitled to a number of votes equal to the number of Shares of such Series standing in his name on the books of the Trust. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two (2) or more Persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one -33- of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or the Bylaws to be taken by Shareholders. Section 7.3 MEETINGS. Meetings of Shareholders may be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as herein provided, or upon any other matter deemed by the Trustees to be necessary or desirable. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing such notice at least ten (10) days before such meeting, postage prepaid, stating the time, place and purpose of the meeting, to each Shareholder at the Shareholder's address as it appears on the records of the Trust. The Trustees shall promptly call and give notice of a meeting of Shareholders for the purpose of voting upon removal of any Trustee of the Trust when requested to do so in writing by Shareholders holding not less than ten percent (10%) of the Shares then outstanding. If the Trustees shall fail to call or give notice of any meeting of Shareholders for a period of thirty (30) days after written application by Shareholders holding at least ten percent (10%) of the Shares then outstanding requesting that a meeting be called for any other purpose requiring action by the Shareholders as provided herein or in the Bylaws, then Shareholders holding at least ten percent (10%) of the Shares then outstanding may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. Section 7.4 RECORD DATES. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding thirty (30) days (except at or in connection with the termination of the Trust), as the Trustees may determine; or without closing the transfer books the Trustees may fix a date and time not more than ninety (90) days prior to the date of any meeting of Shareholders or other action as the date and time of record for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to be treated as Shareholders of record for purposes of such other action, and any Shareholder who was a Shareholder at the date and time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action, even though he has since that date and time disposed of his -34- Shares, and no Shareholder becoming such after that date and time shall be so entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action. Section 7.5 QUORUM AND REQUIRED VOTE. Thirty percent (30%) of the Shares entitled to vote shall be a quorum for the transaction of business at a Shareholders' meeting, but any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without the necessity of further notice. A Majority Shareholder Vote at a meeting at which a quorum is present shall decide any question, except when a different vote is required or permitted by any provision of the 1940 Act or other applicable law or by this Declaration of Trust or the Bylaws, or when the Trustees shall in their discretion require a larger vote or the vote of a majority or larger fraction of the Shares of one or more particular Series. Section 7.6 ACTION BY WRITTEN CONSENT. Subject to the provisions of the 1940 Act and other applicable law, any action taken by Shareholders may be taken without a meeting if Shareholders who held at least thirty percent (30%) of the Shares entitled to vote on the matter (or such larger proportion thereof or of the Shares of any particular Series as shall be required by the 1940 Act or by any express provision of this Declaration of Trust or the Bylaws or as shall be permitted by the Trustees) consent to the action in writing and if the writings in which such consent is given are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. Section 7.7 INSPECTION OF RECORDS. The records of the Trust shall be open to inspection by Shareholders to the same extent as is permitted stockholders of a Massachusetts business corporation under the Massachusetts Business Corporation Law. Section 7.8 ADDITIONAL PROVISIONS. The Bylaws may include further provisions for Shareholders' votes and meetings and related matters not inconsistent with the provisions hereof. ARTICLE VIII LIMITATION OF LIABILITY; INDEMNIFICATION Section 8.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. The Trustees and officers of the Trust, in incurring any debts, liabilities or obligations, or in limiting or omitting any other actions for or in connection with -35- the Trust, are or shall be deemed to be acting as Trustees or officers of the Trust and not in their own capacities. No Shareholder shall be subject to any personal liability whatsoever in tort, contract or otherwise to any other Person or Persons in connection with the assets or the affairs of the Trust or of any Fund, and subject to Section 8.4 hereof, no Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever in tort, contract, or otherwise, to any other Person, or Persons in connection with the assets or affairs of the Trust or of any Fund, save only that arising from his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office or the discharge of his functions. The Trust (of if the matter relates only to a particular Fund, that Fund) shall be solely liable for any and all debts, claims, demands, judgments, decrees, liabilities or obligations of any and every kind, against or with respect to the Trust or such Fund in tort, contract or otherwise in connection with the assets or the affairs of the Trust or such Fund, and all Persons dealing with the Trust or any Fund shall be deemed to have agreed that resort shall be had solely to the Trust Property of the Trust or the Fund Assets of such Fund, as the case may be, for the payment or performance thereof. The Trustees shall use their best efforts to ensure that every note, bond, contract, instrument, certificate, or undertaking made or issued by the Trustees or by any officers or officer shall give notice that this Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts and shall recite to the effect that the same was executed or made by or on behalf of the Trust or by them as Trustees or Trustee or as officers or officer, and not individually, and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust, or the particular Fund in question, as the case may be, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or Shareholders or Shareholder individually, or to subject the Fund Assets of any Fund to the obligations of any other Fund. Section 8.2 TRUSTEES' GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. Subject to Section 8.4 hereof, a Trustee shall be liable for his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of the Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, consultant, Investment Adviser, -36- Administrator, Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee; (ii) the Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice; and (iii) in discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant, and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of a Contracting Party appointed by the Trustees pursuant to Section 5.2 hereof. The Trustees as such shall not be required to give any bond or surety or any other security for the performance of their duties. Section 8.3 INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder (or former Shareholder) of the Trust shall be charged or held to be personally liable for any obligation or liability of the Trust solely by reason of being or having been a Shareholder and not because of such Shareholder's acts or omissions or for some other reason, the Trust shall assume the defense against such charge and satisfy any judgment thereon, and the Shareholder or former Shareholder (or the heirs, executors, administrators or other legal representatives thereof, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled (but solely out of the assets of the Fund of which such Shareholder or former Shareholder is or was the holder of Shares) to b held harmless from and indemnified against all loss and expense arising from such liability. Section 8.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to the limitations set forth hereinafter in this Section 8.4, the Trust shall indemnify (from the assets of the Fund or Funds to which the conduct in question relates) each of its Trustees and officers (including Persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise [hereinafter, together with such Person's heirs, executors, administrators or personal representative, referred to as a "COVERED PERSON"]) against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and expenses, including reasonable accountants' and counsel fees, incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or -37- administrative or legislative body, in which such Covered Person may be or my have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer, director or trustee, except with respect to any matter as to which it has been determined that such Covered Person (i) did not act in good faith in the reasonable belief that such Covered Person's action was in or not opposed to the best interests of the Trust or (ii) had acted with willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office (either and both of the conduct described in (i) and (ii) being referred to hereafter as "DISABLING CONDUCT"). A determination that the Covered Person is entitled to indemnification may be made by (i) a final decision on the merits by a court or other body before whom the proceeding was brought that the Covered Person to be indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a court action or an administrative proceeding against a Covered Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable determination, based upon a review of the facts, that the indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are neither "interested persons" of the Trust as defined in Section 2(a) (19) of the 1940 Act nor parties to the proceeding, or (b) an independent legal counsel in a written opinion. Expenses, including accountants' and counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), may be paid from time to time by the Fund or Funds to which the conduct in question related in advance of the final disposition of any such action, suit or proceeding; PROVIDED that the Covered Person shall have undertaken to repay the amounts so paid to such Fund or Funds if it is ultimately determined that indemnification of such expenses is not authorized under this Article VIII and (i) Covered Person shall have provided security for such undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the disinterested Trustees, or an independent legal counsel in a written opinion, shall have determined, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification. Section 8.5 COMPROMISE PAYMENT. As to any matter disposed of by a compromise payment by any such Covered Person referred to in Section 8.4 hereof, pursuant to a consent decree or otherwise, such indemnification for said payment and for any other expenses shall be provided if such indemnification shall be approved (i) by a majority of a quorum of the disinterested Trustees or (ii) by an independent legal counsel in -38- a written opinion. Approval by the Trustees pursuant to clause (i) or by independent legal counsel pursuant to clause (ii) shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with either of such clauses as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such Covered Person's action was in or not opposed to the best interests of the Trust or to have been liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Section 8.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of indemnification provided by this Article VIII shall not be exclusive of or affect any other rights to which any such Covered Person may be entitled. As used in this Article VIII, a "DISINTERESTED" Person is one against whom none of the actions, suits or other proceedings in question, and no other action, suit or other proceeding on the same or similar grounds is then or has been pending or threatened. Nothing contained in this Article VIII shall affect any rights to indemnification to which personnel of the Trust, other than Trustees and officers, and other Persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such Person. Section 8.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of ny payments made or property transferred to the Trust or upon its order. ARTICLE IX DURATION; REORGANIZATION; AMENDMENTS Section 9.1 DURATION AND TERMINATION OF TRUST. Unless terminated as provided herein, the Trust shall continue without limitation of time and, without limiting the generality of the foregoing, no change, alteration or modification with respect to any Fund or Series of Shares shall operate to terminate the Trust. The Trust may be terminated at any time by a Majority of the Trustees, subject to the favorable vote of the holders of not less than a majority of the Shares outstanding and entitled to vote of each Fund of the Trust, or by an instrument or instruments in writing without a meeting, consented to by the holders of not less than a majority of such Shares, or by such greater or different vote of Shareholders of any Series as may be -39- established by the Certificate of Designation by which such Series was authorized. Upon termination, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets to distributable form in cash, Securities or other property, or any combination thereof, and distribute the proceeds to the Shareholders, in conformity with the provisions of Section 6.2(d) hereof. Section 9.2 REORGANIZATION. The Trustees may sell, convey and transfer all or substantially all of the assets of the Trust, or the assets belonging to any one or more Funds, to another Trust, partnership, association or corporation organized under the laws of any State of the United States, or may transfer such assets to another Fund of the Trust, in exchange for cash, Shares or other Securities (including, in the case of a transfer to another Fund of the Trust, Shares of such other Fund), or to the extent permitted by law then in effect may merge or consolidate the Trust or any Fund with any other trust or any corporation, partnership, or association organized under the laws of any State of the United States, all upon such terms and conditions and for such consideration when and as authorized by vote or written consent of a Majority of the Trustees and approved by the affirmative vote of the holders of not less than a majority of the Shares outstanding and entitled to vote of each Fund whose assets are affected by such transaction, or by an instrument or instruments in writing without a meeting, consented to by the holders of not less than a majority of such Shares, and/or by such other vote of any Series as may be established by the Certificate of Designation with respect to such Series. Following such transfer, the Trustees shall distribute the cash, Shares or other Securities or other consideration received in such transaction (giving due effect to the assets belonging to and indebtedness of, and any other differences among, the various Funds of which the assets have so been transferred) among the Shareholders of the Fund of which the assets have been so transferred; and if all of the assets of the Trust have been so transferred, the Trust shall be terminated. Nothing in this Section 9.2 shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations, and to sell, convey or transfer less than substantially all of the Trust Property or the assets belonging to any Fund to such organizations or entities. Section 9.3 AMENDMENTS; ETC. All rights granted to the Shareholders under this Declaration of Trust are granted subject to the reservation of the right to amend this Declaration of Trust as herein provided, except that no amendment shall -40- repeal the limitations on personal liability of any Shareholder or Trustee or the prohibition of assessment upon the Shareholders (otherwise than as permitted under Section 6.2(h)) without the express consent of each Shareholder or Trustee involved. Subject to the foregoing, the provisions of this Declaration of Trust (whether or not related to the rights of Shareholders) may be amended at any time, so long as such amendment does not adversely affect the rights of any Shareholder with respect to which such amendment is or purports to be applicable and so long as such amendment is not in contravention of applicable law, including the 1940 Act, by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees). Any amendment to this Declaration of Trust that adversely affects the rights of all Shareholders may be adopted at any time by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the Trustees) when authorized to do so by the vote in accordance with Section 7.1 hereof of Shareholders holding a majority of all the Shares outstanding and entitled to vote, without regard to Series, or if said amendment adversely affects the rights of the Shareholders of less than all of the Funds, by the vote of the holders of a majority of all the Shares entitled to vote of each Fund so affected. Subject to the foregoing, any such amendment shall be effective when the instrument containing the terms thereof and a certificate (which may be a part of such instrument) to the effect that such amendment has been duly adopted, and setting forth the circumstances thereof, shall have been executed and acknowledged by a Trustee or officer of the Trust and filed as provided in Section 9.4 hereof. Section 9.4 FILING OF COPIES OF DECLARATION AND AMENDMENTS. The original or a copy of this Declaration and of each amendment hereto (including each Certificate of Designation and Certificate of Termination), as well as the certificates called for by Section 4.1(k) hereof as to changes in the Trustees, shall be kept at the office of the Trust where it may be inspected by any Shareholder, and one copy of each such instrument shall be filed with the Secretary of The Commonwealth of Massachusetts, as well as with any other governmental office where such filing may from time to time be required by the laws of Massachusetts. A restated Declaration, integrating into a single instrument all of the provisions of this Declaration which are then in effect and operative, may be executed from time to time by a Majority of the Trustees and shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto. -41- ARTICLE X MISCELLANEOUS Section 10.1 GOVERNING LAW. This Declaration of Trust is executed and delivered in The Commonwealth of Massachusetts and with reference to the laws thereof, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the laws of said Commonwealth. Section 10.2 COUNTERPARTS. This Declaration of Trust and any amendment hereto may be simultaneously executed in several counterparts, each of which so executed shall be deemed to be an original, and such counterparts, together, shall constitute but one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. Section 10.3 RELIANCE BY THIRD PARTIES. Any certificate executed by an individual who, according to the records in the office of the Secretary of The Commonwealth of Massachusetts appears to be a Trustee hereunder, certifying to: (a) the number or identity of Trustees or Shareholders, (b) the due authorization of the execution of any instrument or writing, (c) the form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration of Trust, (e) the form of any Bylaw adopted, or the identity of any officers elected, by the Trustees, or (f) the existence or non existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any Person dealing with the Trustees, or any of them, and the Successors of such Person. Section 10.4 REFERENCES; HEADINGS. The masculine gender shall include the feminine and neuter genders. Headings are placed herein for convenience of reference only and shall not be taken as a part of this Declaration or control or affect the meaning, construction or effect hereof. Section 10.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with requirements of the 1940 Act, would be inconsistent with any of the conditions necessary for qualification of the Trust as a regulated investment company under the United States Internal Revenue Code or is inconsistent with other -42- applicable laws and regulations, such provision shall be deemed never to have constituted a part of this Declaration, PROVIDED that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such validity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction. Section 10.6 USE OF THE NAME "JANUS." Janus Capital Corporation ("JANUS") has consented to the use by the Trust and by each Fund and each Series thereof to the identifying work "Janus" in the name of the Trust and of each Fund and Series Thereof. Such consent is conditioned upon the Trust's employment of Janus as investment adviser to the Trust and to each Fund and each Series thereof. As between Janus and the Trust, Janus shall control the use of such name insofar as such name contains the identifying work "Janus." Janus may from time to time use the identifying work "Janus" in other connections and for other purposes, including without limitation in the names of other investment companies, corporations or businesses that it may manage, advise, sponsor or own or in which it may have a financial interest. Janus may require the Trust or any Fund or Series thereof to cease using the identifying work "Janus" in the name of the Trust or any Fund or any Series thereof if the Trust or any Fund or Series thereof ceases to employ Janus or a subsidiary or affiliate thereof as investment adviser. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal, for himself and his assigns, and has thereby accepted the Trusteeship as the Initial Trustee of Janus Trust hereby granted and agreed to the provisions hereof, all as of the day and year first above written. /s/ Thomas E. Weesner Thomas E. Weesner The undersigned Settlor of Janus Trust, hereby accepts, approves and authorizes the foregoing Agreement and Declaration of Trust of Janus Trust. Dated: February 11, 1986 /s/ Bryan G. Tyson Bryan G. Tyson -43- ACKNOWLEDGMENTS M A S S A C H U S E T T S Suffolk, ss: February 11, 1986 Then personally appeared the above named Thomas E. Weesner and acknowledged the foregoing instrument to be his free act and deed. Before me, /s/ Frances R. DiPietro Notary Public My Commission Expires: January 22, 1993 M A S S A C H U S E T T S Suffolk, ss: February 11, 1986 Then personally appeared the above named Bryan G. Tyson and acknowledged the foregoing instrument to be his free act and deed. Before me, /s/ Frances R. DiPietro Notary Public My Commission Expires: January 22, 1993 -44- ACCEPTANCE OF TRUSTS The undersigned George M. Berman, of Lexington, Massachusetts, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ George M. Berman George M. Berman STATE OF MASSACHUSETTS) : COUNTY OF MIDDLESEX ) On this 7th day of March, 1986, before me personally came George M. Berman, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/______________________ Notary Public My Commission Expires: August 20, 1987 ACCEPTANCE OF TRUSTS The undersigned Gary O. Loo, of Colorado Springs, Colorado, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ Gary O. Loo Gary O. Loo STATE OF COLORADO) : COUNTY OF EL PASO) On this 19th day of February, 1986, before me personally came Gary O. Loo, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/ Margaret R. Buchanan Notary Public My Commission Expires: 3/3/88 6714 Dublin Loop W. Colorado Springs, CO 80918 ACCEPTANCE OF TRUSTS The undersigned Dennis B. Mullen, of Scottsdale, Arizona, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ Dennis B. Mullen Dennis B. Mullen STATE OF ARIZONA ) : COUNTY OF MARICOPA) On this 20th day of February, 1986, before me personally came Dennis B. Mullen, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/ Notary Public My Commission Expires: April 26, 1989 ACCEPTANCE OF TRUSTS The undersigned John W. Shepardson, of Denver, Colorado, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ John W. Shepardson John W. Shepardson STATE OF COLORADO) : COUNTY OF DENVER ) On this 24th day of February, 1986, before me personally came John W. Shepardson, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/ Janice L. Jones Notary Public My Commission Expires: September 9, 198_ ACCEPTANCE OF TRUSTS The undersigned William D. Stewart, of Boulder, Colorado, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ William D. Stewart William D. Stewart STATE OF COLORADO) : COUNTY OF BOULDER) On this 27th day of February, 1986, before me personally came William D. Stewart, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/ Susana M. Giles Notary Public My Commission Expires: 4/19/86 ACCEPTANCE OF TRUSTS The undersigned Martin H. Waldinger, of Los Gatos, California, having been duly appointed a Trustee of Janus Investment Fund, does hereby accept the trust established under the Agreement and Declaration of Trust between Bryan G. Tyson, of Brookline, Massachusetts, as Settlor, and Thomas E. Weesner, of Boston, Massachusetts, under which such Trust has been established, and does agree faithfully to perform the duties of a Trustee of Janus Investment Fund in accordance with the terms of such Agreement and Declaration of Trust, to the best of his ability. /s/ Martin H. Waldinger Martin H. Waldinger STATE OF CALIFORNIA ) : COUNTY OF SANTA CLARA) On this 21st day of February, 1986, before me personally came Martin H. Waldinger, to me known, and known to me to be the person described in and who executed the foregoing Acceptance of Trusts, and acknowledged that he had executed the same as his free act and deed. /s/ Rosanne Burton Notary Public My Commission Expires: 11-28-86 EX-99 3 EX 1(B)-CERT/DESIG JANUS G&I FUND EXHIBIT 1(b) JANUS INVESTMENT FUND CERTIFICATE OF DESIGNATION FOR JANUS GROWTH AND INCOME FUND The undersigned, being the Secretary of Janus Investment Fund (hereinafter referred to as the "Trust"), a trust with transferable shares of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that, pursuant to the authority conferred upon the Trustees of the Trust by Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated February 11, 1986, and by the affirmative vote of a Majority of the Trustees at a meeting duly called and held on December 2, 1992, the Declaration of Trust is amended as follows: There is hereby established and designated the Janus Growth and Income Fund (hereinafter referred to as the "Growth and Income Fund"). The beneficial interest in the Growth and Income Fund shall be divided into Shares having a nominal or par value of one cent ($.01) per Share, of which an unlimited number may be issued, which Shares shall represent interests only in the Growth and Income Fund. The Shares of the Growth and Income Fund shall have the following rights and preferences: (a) Assets Belonging to the Growth and Income Fund. Any portion of the Trust Property allocated to the Growth and Income Fund, and all consideration received by the Trust for the issue or sale of Shares of the Growth and Income Fund, together with all assets in which such consideration is invested or reinvested, all interest, dividends, income, earnings, profits and gains therefrom, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held by the Trustees in trust for the benefit of the holders of Shares of the Growth and Income Fund and shall irrevocably belong to the Growth and Income Fund for all purposes, and shall be so recorded upon the books of account of the Trust, and the Shareholders of any other Fund who are not Shareholders of 1 Certificate of Designation Growth and Income Fund the Growth and Income Fund shall not have, and shall be conclusively deemed to have waived, any claims to the assets of the Growth and Income Fund. Such consideration, assets, interest, dividends, income, earnings, profits, gains and proceeds, together with any General Items allocated to the Growth and Income Fund as provided in the following sentence, are herein referred to collectively as "Fund Assets" of the Growth and Income Fund, and as assets "belonging to" the Growth and Income Fund. In the event that there are any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Fund (collectively "General Items"), the Trustees shall allocate such General Items to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable; and any General Items so allocated to the Growth and Income Fund shall belong to and be part of the Fund Assets of the Growth and Income Fund. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all the Funds for all purposes. (b) Liabilities of the Growth and Income Fund. The assets belonging to the Growth and Income Fund shall be charged with the liabilities in respect of the Growth and Income Fund and all expenses, costs, charges and reserves attributable to the Growth and Income Fund, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as pertaining to any particular Fund shall be allocated and charged by the Trustees to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The indebtedness, expenses, costs, charges and reserves allocated and so charged to the Growth and Income Fund are herein referred to as "liabilities of" the Growth and Income Fund. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all the Funds for all purposes. Any creditor of the Growth and Income Fund may look only to the assets of the Growth and Income Fund to satisfy such creditor's debt. (c) Dividends. Dividends and distributions on Shares of the Growth and Income Fund may be paid with such frequency as the Trustees may determine, which may be daily or otherwise pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine, to the Shareholders of the Growth and Income Fund, from such of the income, accrued or realized, and capital gains, realized or unrealized, and out of the assets belonging to the Growth and Income Fund, as the Trustees may determine, after providing for actual and accrued liabilities of the Growth and Income Fund. 2 Certificate of Designation Growth and Income Fund All dividends and distributions on Shares of the Growth and Income Fund shall be distributed pro rata to the Shareholders of the Growth and Income Fund in proportion to the number of such Shares held by such holders at the date and time of record established for the payment of such dividends or distributions, except that in connection with any dividend or distribution program or procedure the Trustees may determine that no dividend or distribution shall be payable on Shares as to which the Shareholder's purchase order and/or payment have not been received by the time or times established by the Trustees under such program or procedure, or that dividends or distributions shall be payable on Shares which have been tendered by the holder thereof for redemption or repurchase, but the redemption or repurchase proceeds of which have not yet been paid to such Shareholder. Such dividends and distributions may be made in cash or Shares of the Growth and Income Fund or a combination thereof as determined by the Trustees, or pursuant to any program that the Trustees may have in effect at the time for the election by each Shareholder of the mode of the making of such dividend or distribution to that Shareholder. Any such dividend or distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with subsection (h) hereof. (d) Liquidation. In the event of the liquidation or dissolution of the Trust, the Shareholders of the Growth and Income Fund shall be entitled to receive, when and as declared by the Trustees, the excess of the Fund Assets over the liabilities of the Growth and Income Fund. The assets so distributable to the Shareholders of the Growth and Income Fund shall be distributed among such Shareholders in proportion to the number of Shares of the Growth and Income Fund held by them and recorded on the books of the Trust. The liquidation of the Growth and Income Fund may be authorized by vote of a Majority of the Trustees, subject to the affirmative vote of "a majority of the outstanding voting securities" of the Growth and Income Fund, as the quoted phrase is defined in the 1940 Act, determined in accordance with clause (iii) of the definition of "Majority Shareholder Vote" in Section 1.4 of the Declaration of Trust. (e) Voting. The Shareholders shall have the voting rights set forth in or determined under Article 7 of the Declaration of Trust. (f) Redemption by Shareholder. Each holder of Shares of the Growth and Income Fund shall have the right at such times as may be permitted by the Trust, but no less frequently than once each week, to require the Trust to redeem all or any part of his Shares of the Growth and Income Fund at a redemption price equal to the net asset value per Share of the Growth and Income Fund next determined in accordance with subsection (h) hereof after 3 Certificate of Designation Growth and Income Fund the Shares are properly tendered for redemption; provided, that the Trustees may from time to time, in their discretion, determine and impose a fee for such redemption. Payment of the redemption price shall be in cash; provided, however, that if the Trustees determine, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Trust may make payment wholly or partly in Securities or other assets belonging to the Growth and Income Fund at the value of such Securities or assets used in such determination of net asset value. Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares of the Growth and Income Fund to require the Trust to redeem Shares of the Growth and Income Fund during any period or at any time when and to the extent permissible under the 1940 Act. (g) Redemption at the Option of the Trust. Each Share of the Growth and Income Fund shall be subject to redemption at the option of the Trust at the redemption price which would be applicable if such Share were then being redeemed by the Shareholder pursuant to subsection (f) hereof: (i) at any time, if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the Shares of the Trust or of any Fund, or (ii) upon such other conditions with respect to maintenance of Shareholder accounts of a minimum amount as may from time to time be determined by the Trustees and set forth in the then current Prospectus of the Growth and Income Fund. Upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. (h) Net Asset Value. The net asset value per Share of the Growth and Income Fund at any time shall be the quotient obtained by dividing the value of the net assets of the Growth and Income Fund at such time (being the current value of the assets belonging to the Growth and Income Fund, less its then existing liabilities) by the total number of Shares of the Growth and Income Fund then outstanding, all determined in accordance with the methods and procedures, including without limitation those with respect to rounding, established by the Trustees from time to time. The Trustees may determine to maintain the net asset value per Share of the Growth and Income Fund at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the 1940 Act for the continuing declaration of income attributable to the Growth and Income Fund as dividends payable in additional Shares of the Growth and Income Fund at the designated constant dollar amount and for the handling of any losses attributable to the Growth and Income Fund. Such procedures may provide that in the event of any loss each Shareholder shall be deemed to have contributed to the shares of beneficial interest account of the 4 Certificate of Designation Growth and Income Fund Growth and Income Fund his pro rata portion of the total number of Shares required to be canceled in order to permit the net asset value per share of the Growth and Income Fund to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Growth and Income Fund shall be deemed to have expressly agreed, by his investment in the Growth and Income Fund, to make the contribution referred to in the preceding sentence in the event of any such loss. (i) Transfer. All Shares of the Growth and Income Fund shall be transferable, but transfers of Shares of the Growth and Income Fund will be recorded on the Share transfer records of the Trust applicable to the Growth and Income Fund only at such times as Shareholders shall have the right to require the Trust to redeem Shares of the Growth and Income Fund and at such other times as may be permitted by the Trustees. (j) Equality. All Shares of the Growth and Income Fund shall represent an equal proportionate interest in the assets belonging to the Growth and Income Fund (subject to the liabilities of the Growth and Income Fund), and each Share of the Growth and Income Fund shall be equal to each other Share thereof; but the provisions of this sentence shall not restrict any distinctions permissible under subsection (c) hereof that may exist with respect to dividends and distributions on Shares of the Growth and Income Fund. The Trustees may from time to time divide or combine the Shares of the Growth and Income Fund into a greater or lesser number of Shares of the Growth and Income Fund without thereby changing the proportionate beneficial interest in the assets belonging to the Growth and Income Fund or in any way affecting the rights of the holders of Shares of any other Fund. (k) Rights of Fractional Shares. Any fractional Share of the Growth and Income Fund shall carry proportionately all the rights and obligations of a whole Share of the Growth and Income Fund, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust or of the Growth and Income Fund. (l) Conversion Rights. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that holders of Shares of the Growth and Income Fund shall have the right to convert said Shares into Shares of one or more other Funds in accordance with such requirements and procedures as the Trustees may establish. (m) Amendment, etc. Subject to the provisions and limitations of Section 9.3 of the Declaration of Trust and applicable law, this Certificate of Designation may be amended by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a 5 Certificate of Designation Growth and Income Fund Majority of the Trustees), provided that, if any amendment adversely affects the rights of the Shareholders of the Growth and Income Fund, such amendment may be adopted by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees) when authorized to do so by the vote in accordance with Section 7.1 of the Declaration of Trust of the holders of a majority of all the Shares of the Growth and Income Fund outstanding and entitled to vote. (n) Incorporation of Defined Terms. All capitalized terms which are not defined herein shall have the same meanings as are assigned to those terms in the Declaration of Trust filed with the Secretary of State of the Commonwealth of Massachusetts. The Trustees further direct that, upon the execution of this Certificate of Designation, the Trust take all necessary action to file a copy of this Certificate of Designation with the Secretary of State of The Commonwealth of Massachusetts and at any other place required by law or by the Declaration of Trust. IN WITNESS WHEREOF, the undersigned has set her hand and seal this 28th day of February, 1991. /s/ Janice M. Teague Janice M. Teague, Secretary 6 ACKNOWLEDGMENT STATE OF COLORADO ) CITY AND : COUNTY OF DENVER ) On this 28th day of February, 1991, before me personally came Janice M. Teague, Secretary of Janus Investment Fund, to me known, and known to me to be the person described in and who executed the foregoing instrument, and acknowledged that she had executed the same as her free act and deed. Witness my hand and official seal. /s/ Diane M. Austin Notary Public My commission expires __________________ My Commission Expires 11/14/92 ------------------------------ 7 EX-99 4 EX 1(C)-CERT/DESIG JANUS WORLDWIDE FUND EXHIBIT 1(c) JANUS INVESTMENT FUND CERTIFICATE OF DESIGNATION FOR JANUS WORLDWIDE FUND The undersigned, being the Secretary of Janus Investment Fund (hereinafter referred to as the "Trust"), a trust with transferable shares of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that, pursuant to the authority conferred upon the Trustees of the Trust by Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated February 11, 1986, and by the affirmative vote of a Majority of the Trustees at a meeting duly called and held on November 2, 1990 and adjourned to December 3, 1990, the Declaration of Trust is amended as follows: There is hereby established and designated the Janus Worldwide Fund (hereinafter referred to as the "Worldwide Fund"). The beneficial interest in the Worldwide Fund shall be divided into Shares having a nominal or par value of one cent ($.01) per Share, of which an unlimited number may be issued, which Shares shall represent interests only in the Worldwide Fund. The Shares of the Worldwide Fund shall have the following rights and preferences: (a) Assets Belonging to the Worldwide Fund. Any portion of the Trust Property allocated to the Worldwide Fund, and all consideration received by the Trust for the issue or sale of Shares of the Worldwide Fund, together with all assets in which such consideration is invested or reinvested, all interest, dividends, income, earnings, profits and gains therefrom, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held by the Trustees in trust for the benefit of the holders of Shares of the Worldwide Fund and shall irrevocably belong to the Worldwide Fund for all purposes, and shall be so recorded upon the books of account of the Trust, and the Shareholders of any other Fund who are not Shareholders of the Worldwide Fund shall not have, and shall be conclusively deemed to have waived, any claims to the assets of the Worldwide Fund. Such consideration, assets, interest, dividends, income, earnings, profits, gains and proceeds, together with any General Items allocated to the Worldwide Fund -1- Certificate of Designation Janus Worldwide Fund as provided in the following sentence, are herein referred to collectively as "Fund Assets" of the Worldwide Fund, and as assets "belonging to" the Worldwide Fund. In the event that there are any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Fund (collectively "General Items"), the Trustees shall allocate such General Items to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable; and any General Items so allocated to the Worldwide Fund shall belong to and be part of the Fund Assets of the Worldwide Fund. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all the Funds for all purposes. (b) Liabilities of the Worldwide Fund. The assets belonging to the Worldwide Fund shall be charged with the liabilities in respect of the Worldwide Fund and all expenses, costs, charges and reserves attributable to the Worldwide Fund, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as pertaining to any particular Fund shall be allocated and charged by the Trustees to and among any one or more of the Funds established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The indebtedness, expenses, costs, charges and reserves allocated and so charged to the Worldwide Fund are herein referred to as "liabilities of" the Worldwide Fund. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all the Funds for all purposes. Any creditor of the Worldwide Fund may look only to the assets of the Worldwide Fund to satisfy such creditor's debt. (c) Dividends. Dividends and distributions on Shares of the Worldwide Fund may be paid with such frequency as the Trustees may determine, which may be daily or otherwise pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine, to the Shareholders of the Worldwide Fund, from such of the income, accrued or realized, and capital gains, realized or unrealized, and out of the assets belonging to the Worldwide Fund, as the Trustees may determine, after providing for actual and accrued liabilities of the Worldwide Fund. All dividends and distributions on Shares of the Worldwide Fund shall be distributed pro rata to the Shareholders of the Worldwide Fund in proportion to the number of such Shares held by such holders at the date and time of record established for the payment of such dividends or distributions, except that in connection with any dividend or distribution program or procedure the Trustees may determine that no dividend or distribution shall be payable -2- Certificate of Designation Janus Worldwide Fund on Shares as to which the Shareholder's purchase order and/or payment have not been received by the time or times established by the Trustees under such program or procedure, or that dividends or distributions shall be payable on Shares which have been tendered by the holder thereof for redemption or repurchase, but the redemption or repurchase proceeds of which have not yet been paid to such Shareholder. Such dividends and distributions may be made in cash or Shares of the Worldwide Fund or a combination thereof as determined by the Trustees, or pursuant to any program that the Trustees may have in effect at the time for the election by each Shareholder of the mode of the making of such dividend or distribution to that Shareholder. Any such dividend or distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with subsection (h) hereof. (d) Liquidation. In the event of the liquidation or dissolution of the Trust, the Shareholders of the Worldwide Fund shall be entitled to receive, when and as declared by the Trustees, the excess of the Fund Assets over the liabilities of the Worldwide Fund. The assets so distributable to the Shareholders of the Worldwide Fund shall be distributed among such Shareholders in proportion to the number of Shares of the Worldwide Fund held by them and recorded on the books of the Trust. The liquidation of the Worldwide Fund may be authorized by vote of a Majority of the Trustees, subject to the affirmative vote of "a majority of the outstanding voting securities" of the Worldwide Fund, as the quoted phrase is defined in the 1940 Act, determined in accordance with clause (iii) of the definition of "Majority Shareholder Vote" in Section 1.4 of the Declaration of Trust. (e) Voting. The Shareholders shall have the voting rights set forth in or determined under Article 7 of the Declaration of Trust. (f) Redemption by Shareholder. Each holder of Shares of the Worldwide Fund shall have the right at such times as may be permitted by the Trust, but no less frequently than once each week, to require the Trust to redeem all or any part of his Shares of the Worldwide Fund at a redemption price equal to the net asset value per Share of the Worldwide Fund next determined in accordance with subsection (h) hereof after the Shares are properly tendered for redemption; provided, that the Trustees may from time to time, in their discretion, determine and impose a fee for such redemption. Payment of the redemption price shall be in cash; provided, however, that if the Trustees determine, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Trust may make payment wholly or partly in Securities or other assets belonging to the Worldwide Fund at -3- Certificate of Designation Janus Worldwide Fund the value of such Securities or assets used in such determination of net asset value. Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares of the Worldwide Fund to require the Trust to redeem Shares of the Worldwide Fund during any period or at any time when and to the extent permissible under the 1940 Act. (g) Redemption at the Option of the Trust. Each Share of the Worldwide Fund shall be subject to redemption at the option of the Trust at the redemption price which would be applicable if such Share were then being redeemed by the Shareholder pursuant to subsection (f) hereof: (i) at any time, if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the Shares of the Trust or of any Fund, or (ii) upon such other conditions with respect to maintenance of Shareholder accounts of a minimum amount as may from time to time be determined by the Trustees and set forth in the then current Prospectus of the Worldwide Fund. Upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. (h) Net Asset Value. The net asset value per Share of the Worldwide Fund at any time shall be the quotient obtained by dividing the value of the net assets of the Worldwide Fund at such time (being the current value of the assets belonging to the Worldwide Fund, less its then existing liabilities) by the total number of Shares of the Worldwide Fund then outstanding, all determined in accordance with the methods and procedures, including without limitation those with respect to rounding, established by the Trustees from time to time. The Trustees may determine to maintain the net asset value per Share of the Worldwide Fund at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the 1940 Act for the continuing declaration of income attributable to the Worldwide Fund as dividends payable in additional Shares of the Worldwide Fund at the designated constant dollar amount and for the handling of any losses attributable to the Worldwide Fund. Such procedures may provide that in the event of any loss each Shareholder shall be deemed to have contributed to the shares of beneficial interest account of the Worldwide Fund his pro rata portion of the total number of Shares required to be canceled in order to permit the net asset value per share of the Worldwide Fund to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Worldwide Fund shall be deemed to have expressly agreed, by his investment in the Worldwide Fund, to make the contribution referred to in the preceding sentence in the event of any such loss. -4- Certificate of Designation Janus Worldwide Fund (i) Transfer. All Shares of the Worldwide Fund shall be transferable, but transfers of Shares of the Worldwide Fund will be recorded on the Share transfer records of the Trust applicable to the Worldwide Fund only at such times as Shareholders shall have the right to require the Trust to redeem Shares of the Worldwide Fund and at such other times as may be permitted by the Trustees. (j) Equality. All Shares of the Worldwide Fund shall represent an equal proportionate interest in the assets belonging to the Worldwide Fund (subject to the liabilities of the Worldwide Fund), and each Share of the Worldwide Fund shall be equal to each other Share thereof; but the provisions of this sentence shall not restrict any distinctions permissible under subsection (c) hereof that may exist with respect to dividends and distributions on Shares of the Worldwide Fund. The Trustees may from time to time divide or combine the Shares of the Worldwide Fund into a greater or lesser number of Shares of the Worldwide Fund without thereby changing the proportionate beneficial interest in the assets belonging to the Worldwide Fund or in any way affecting the rights of the holders of Shares of any other Fund. (k) Rights of Fractional Shares. Any fractional Share of the Worldwide Fund shall carry proportionately all the rights and obligations of a whole Share of the Worldwide Fund, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Shares, and liquidation of the Trust or of the Worldwide Fund. (l) Conversion Rights. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that holders of Shares of the Worldwide Fund shall have the right to convert said Shares into Shares of one or more other Funds in accordance with such requirements and procedures as the Trustees may establish. (m) Amendment, etc. Subject to the provisions and limitations of Section 9.3 of the Declaration of Trust and applicable law, this Certificate of Designation may be amended by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees), provided that, if any amendment adversely affects the rights of the Shareholders of the Worldwide Fund, such amendment may be adopted by an instrument in writing signed by a Majority of the Trustees (or by an officer of the Trust pursuant to the vote of a Majority of the Trustees) when authorized to do so by the vote in accordance with Section 7.1 of the Declaration of Trust of the holders of a majority of all the Shares of the Worldwide Fund outstanding and entitled to vote. -5- Certificate of Designation Janus Worldwide Fund (n) Incorporation of Defined Terms. All capitalized terms which are not defined herein shall have the same meanings as are assigned to those terms in the Declaration of Trust filed with the Secretary of State of the Commonwealth of Massachusetts. The Trustees further direct that, upon the execution of this Certificate of Designation, the Trust take all necessary action to file a copy of this Certificate of Designation with the Secretary of State of The Commonwealth of Massachusetts and at any other place required by law or by the Declaration of Trust. IN WITNESS WHEREOF, the undersigned has set her hand and seal this 28th day of February, 1991. /s/ Janice M. Teague Janice M. Teague, Secretary -6- ACKNOWLEDGMENT STATE OF COLORADO ) CITY AND : COUNTY OF DENVER ) On this 28th day of February, 1991, before me personally came Janice M. Teague, Secretary of Janus Investment Fund, to me known, and known to me to be the person described in and who executed the foregoing instrument, and acknowledged that she had executed the same as her free act and deed. Witness my hand and official seal. /s/ Diane M. Austin Notary Public My commission expires 11/14/92 -7- EX-99 5 EX 4(A)-SPECIMEN STOCK CERT JANUS FUND EXHIBIT 4(a) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) JANUS FUND SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that SPECIMEN CUSIP 471023 10 1 SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the JANUS FUND series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund properly endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the JANUS FUND series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Janice M. Teague /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED INVESTORS FIDUCIARY TRUST COMPANY (KANSAS CITY MISSOURI) TRANSFER AGENT BY JANUS SERVICE CORPORATION (DENVER COLORADO) SUBTRANSFER AGENT AUTHORIZED SIGNATURE NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY A NATIONAL OR STATE BANK, A FEDERAL SAVINGS AND LOAN ASSOCIATION, A TRUST COMPANY OR A MEMBER FIRM OF A DOMESTIC STOCK EXCHANGE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _____________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________________________________________________________ EX-99 6 EX 4(B)-SPECIMEN STOCK CERT JANUS G&I FUND EXHIBIT 4(b) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) JANUS GROWTH AND INCOME FUND SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that SPECIMEN CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the JANUS GROWTH AND INCOME FUND series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund properly endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the JANUS GROWTH AND INCOME FUND series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Janice M. Teague /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED INVESTORS FIDUCIARY TRUST COMPANY (KANSAS CITY MISSOURI) TRANSFER AGENT BY JANUS SERVICE CORPORATION (DENVER COLORADO) SUBTRANSFER AGENT AUTHORIZED SIGNATURE NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY A NATIONAL OR STATE BANK, A FEDERAL SAVINGS AND LOAN ASSOCIATION, A TRUST COMPANY OR A MEMBER FIRM OF A DOMESTIC STOCK EXCHANGE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _____________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________________________________________________________ EX-99 7 EX 4(C)-SPECIMEN STOCK CERT JANUS WORLDWIDE FUND EXHIBIT 4(c) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) JANUS WORLDWIDE FUND SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that SPECIMEN CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the JANUS WORLDWIDE FUND series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund properly endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the JANUS WORLDWIDE FUND series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Janice M. Teague /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED INVESTORS FIDUCIARY TRUST COMPANY (KANSAS CITY MISSOURI) TRANSFER AGENT BY JANUS SERVICE CORPORATION (DENVER COLORADO) SUBTRANSFER AGENT AUTHORIZED SIGNATURE NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY A NATIONAL OR STATE BANK, A FEDERAL SAVINGS AND LOAN ASSOCIATION, A TRUST COMPANY OR A MEMBER FIRM OF A DOMESTIC STOCK EXCHANGE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act _________________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _____________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________________________________________________________ EX-99 8 EX 4(N)-SPECIMEN STOCK CERT HIGH-YIELD/OLYMPUS EXHIBIT 4(n) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the Janus High-Yield Fund series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund property endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Janus High-Yield Fund series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Kelley Abbott Howes /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED BY JANUS SERVICE CORPORATION (DENVER COLORADO) TRANSFER AGENT AUTHORIZED SIGNATURE NOTICE. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATIONS, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION IN ACCORDANCE WITH FUND POLICIES. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act ______________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ___________________________________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________ EXHIBIT 4(n) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the Janus Olympus Fund series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund property endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Janus Olympus Fund series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Kelley Abbott Howes /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED BY JANUS SERVICE CORPORATION (DENVER COLORADO) TRANSFER AGENT AUTHORIZED SIGNATURE NOTICE. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATIONS, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION IN ACCORDANCE WITH FUND POLICIES. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act ______________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ___________________________________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________ EX-99 9 EX 4(O)-SPECIMEN STOCK CERT JANUS EQUITY INCOME EXHIBIT 4(o) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) JANUS EQUITY INCOME FUND SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the Janus Equity Income Fund series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund property endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Janus Equity Income Fund series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Kelley Abbott Howes /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED BY JANUS SERVICE CORPORATION (DENVER COLORADO) TRANSFER AGENT AUTHORIZED SIGNATURE NOTICE. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATIONS, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION IN ACCORDANCE WITH FUND POLICIES. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act _________________________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ____________________________________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________________________________________ _________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ____________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ________________________________ EX-99 10 EX 4(P)-SPECIMEN STOCK CERT SPECIAL SITUATIONS EXHIBIT 4(p) [LOGO] JANUS INVESTMENT FUND (A Massachusetts Business Trust) JANUS SPECIAL SITUATIONS FUND SHARES OF BENEFICIAL INTEREST ACCOUNT NO. THIS CERTIFIES that CUSIP SEE REVERSE FOR CERTAIN DEFINITIONS Is the owner of ________________ shares of beneficial interest in the Janus Special Situations Fund series of Janus Investment Fund (the "Fund"), fully paid and nonassessable, the said shares being issued and held subject to the provisions of the Agreement and Declaration of Trust of the Fund, and all amendments thereto, copies of which are on file with the Secretary of The Commonwealth of Massachusetts. The said owner by accepting this certificate agrees to and is bound by all of the said provisions. The shares represented hereby are transferable in writing by the owner thereof in person or by attorney upon surrender of this certificate to the Fund property endorsed for transfer (see the reverse side hereof). This certificate is executed on behalf of the Trustees of the Fund as Trustees and not individually and the obligations hereof are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Janus Special Situations Fund series of Janus Investment Fund. This certificate is not valid unless countersigned by the Transfer Agent. Witness the facsimile seal of the Fund and the facsimile signatures of its duly authorized officers. Dated: /s/ Kelley Abbott Howes /s/ Thomas H. Bailey SECRETARY PRESIDENT [SEAL] COUNTERSIGNED BY JANUS SERVICE CORPORATION (DENVER COLORADO) TRANSFER AGENT AUTHORIZED SIGNATURE NOTICE. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATIONS, ENLARGEMENT, OR ANY CHANGE WHATEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION IN ACCORDANCE WITH FUND POLICIES. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT. _____ Custodian _____ (Cust) (Minor) Under Uniform Gifts to Minors Act ______________________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _____________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ ___________________________________________________________________________ ___________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ______________________________________________________________________ Shares of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________________ ________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Fund with full power of substitution in the premises. Dated, ______________________ ___________________________________ Owner ___________________________________ Signature of Co-Owner, if any IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH NOTICE PRINTED ABOVE. Signature(s) guaranteed by: ______________________________ EX-99 11 EX 5(A)-RESTATED INV ADV AGMT JANUS FUND EXHIBIT 5(a) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 10th day of July, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonablypracticable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 12 EX 5(B)-RESTATED INV ADV AGMT JANUS G&I FUND EXHIBIT 5(b) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS GROWTH AND INCOME FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 1st day of April, 1991, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Growth and Income Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1992, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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 Trust (as that phrase is defined in Section 2(a)(42) of the 1940 Act). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. -5- 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EXHIBIT 5(b) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS WORLDWIDE FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 1st day of April, 1991, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Worldwide Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1992, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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 Trust (as that phrase is defined in Section 2(a)(42) of the 1940 Act). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 13 EX 5(C)-RESTATED INV ADV AGMT JANUS TWENTY FUND EXHIBIT 5(c) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS TWENTY FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Twenty Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EXHIBIT 5(c) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS VENTURE FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Venture Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 14 EX 5(D)-RESTATED INV ADV AGMT JANUS FLEX INCOME EXHIBIT 5(d) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS FLEXIBLE INCOME FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Flexible Income Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 .65% of the first $300,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.55% of the daily closing net asset value of the Fund in excess of $300,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 15 EX 5(E)-RESTATED INV ADV AGMT JANUS ENTERPRISE EXHIBIT 5(e) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS ENTERPRISE FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Enterprise Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EXHIBIT 5(e) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS BALANCED FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Balanced Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EXHIBIT 5(e) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS SHORT-TERM BOND FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 7th day of August, 1992, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Short-Term Bond Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Board of Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Board of Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Board of Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trust's Board of Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Board of Trustees, to furnish such other services as the Adviser shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 .65% of the first $300,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.55% of the daily closing net asset value of the Fund in excess of $300,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees (the "Trustees"), except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the Investment Company Act of 1940 and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Board of Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the -4- name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1993, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Board of Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than sixty (60) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6 EX-99 16 EX 5(F)-RESTATED INV ADV AGMT JANUS FEDERAL TAX-EX EXHIBIT 5(f) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS FEDERAL TAX-EXEMPT FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 1st day of April, 1993, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Federal Tax-Exempt Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Trustees, to furnish such other services as JCC shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 0.60% of the first $300,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.55% of the daily closing net asset value in excess of $300,000,000. The fee shall be paid monthly. 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, -2- JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees, except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, -3- or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the 1940 Act and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the name "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. -4- 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1994, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than ninety (90) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. -5- 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EXHIBIT 5(f) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS MERCURY FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 1st day of April, 1993, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Mercury Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Trustees, to furnish such other services as JCC shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees, except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the 1940 Act and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the name -4- "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1994, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than ninety (90) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understoodthat trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 17 EX 5(G)-RESTATED INV ADV AGMT JANUS OVERSEAS FUND EXHIBIT 5(g) JANUS INVESTMENT FUND RESTATED INVESTMENT ADVISORY AGREEMENT JANUS OVERSEAS FUND THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this 10th day of February, 1994, as restated this 21st day of May, 1996, between JANUS INVESTMENT FUND, a Massachusetts business trust (the "Trust"), and JANUS CAPITAL CORPORATION, a Colorado corporation ("JCC"). W I T N E S S E T H: WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares for public offering under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust is authorized to create separate funds, each with its own separate investment portfolio of which the beneficial interests are represented by a separate series of shares; one of such funds created by the Trust being designated as the Janus Overseas Fund (the "Fund"); and WHEREAS, the Trust and JCC deem it mutually advantageous that JCC should assist the Trustees and officers of the Trust in the management of the securities portfolio of the Fund. NOW, THEREFORE, the parties agree as follows: 1. Investment Advisory Services. JCC shall furnish continuous advice and recommendations to the Fund as to the acquisition, holding, or disposition of any or all of the securities or other assets which the Fund may own or contemplate acquiring from time to time. JCC shall give due consideration to the investment policies and restrictions and the other statements concerning the Fund in the Trust's declaration of trust, bylaws, and registration statements under the 1940 Act and the 1933 Act, and to the provisions of the Internal Revenue Code, as amended from time to time, applicable to the Fund as a regulated investment company. In addition, JCC shall cause its officers to attend meetings and furnish oral or written reports, as the Trust may reasonably require, in order to keep the Trustees and appropriate officers of the Trust fully informed as to the condition of the investment portfolio of the Fund, the investment recommendations of JCC, and the investment considerations which have given rise to those recommendations. JCC shall supervise the purchase and sale of securities as directed by the appropriate officers of the Trust. -1- 2. Other Services. JCC is hereby authorized (to the extent the Trust has not otherwise contracted) but not obligated (to the extent it so notifies the Trustees at least 60 days in advance), to perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Fund. JCC is specifically authorized, on behalf of the Trust, to conduct relations with custodians, depositories, transfer and pricing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed by JCC to be necessary or desirable. JCC shall generally monitor and report to Fund officers the Fund's compliance with investment policies and restrictions as set forth in the currently effective prospectus and statement of additional information relating to the shares of the Fund under the Securities Act of 1933, as amended. JCC shall make reports to the Trustees of its performance of services hereunder upon request therefor and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable. JCC is also authorized, subject to review by the Trustees, to furnish such other services as JCC shall from time to time determine to be necessary or useful to perform the services contemplated by this Agreement. 3. Obligations of Trust. The Trust shall have the following obligations under this Agreement: (a) to keep JCC continuously and fully informed as to the composition of its investment portfolio and the nature of all of its assets and liabilities from time to time; (b) to furnish JCC with a certified copy of any financial statement or report prepared for it by certified or independent public accountants and with copies of any financial statements or reports made to its shareholders or to any governmental body or securities exchange; (c) to furnish JCC with any further materials or information which JCC may reasonably request to enable it to perform its function under this Agreement; and (d) to compensate JCC for its services and reimburse JCC for its expenses incurred hereunder in accordance with the provisions hereof. 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 1% of the first $30,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.75% of the next $270,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.70% of the next $200,000,000 of the daily closing net asset value of the Fund, plus 1/365 of 0.65% of the daily closing net asset value of the Fund in excess of $500,000,000. The fee shall be paid monthly. -2- 5. Expenses Borne by JCC. In addition to the expenses which JCC may incur in the performance of its investment advisory functions under this Agreement, and the expenses which it may expressly undertake to incur and pay under other agreements with the Trust or otherwise, JCC shall incur and pay the following expenses relating to the Fund's operations without reimbursement from the Fund: (a) Reasonable compensation, fees and related expenses of the Trust's officers and its Trustees, except for such Trustees who are not interested persons of JCC; (b) Rental of offices of the Trust; and (c) All expenses of promoting the sale of shares of the Fund, other than expenses incurred in complying with federal and state laws and the law of any foreign country or territory or other jurisdiction applicable to the issue, offer or sale of shares of the Fund including without limitation registration fees and costs, the costs of preparing the Fund's registration statement and amendments thereto, and the costs and expenses of preparing, printing, and mailing prospectuses (and statements of additional information) to persons other than shareholders of the Fund. 6. Expenses Borne by the Trust. The Trust assumes and shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by JCC pursuant to Sections 2 and 5 hereof, including, but not limited to, investment adviser fees; any compensation, fees, or reimbursements which the Trust pays to its Trustees who are not interested persons of JCC; compensation of the Fund's custodian, transfer agent, registrar and dividend disbursing agent; legal, accounting, audit and printing expenses; administrative, clerical, recordkeeping and bookkeeping expenses; brokerage commissions and all other expenses in connection with execution of portfolio transactions (including any appropriate commissions paid to JCC or its affiliates for effecting exchange listed, over-the-counter or other securities transactions); interest; all federal, state and local taxes (including stamp, excise, income and franchise taxes); costs of stock certificates and expenses of delivering such certificates to the purchaser thereof; expenses of local representation in Massachusetts; expenses of shareholders' meetings and of preparing, printing and distributing proxy statements, notices, and reports to shareholders; expenses of preparing and filing reports and tax returns with federal and state regulatory authorities; all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer, or sale of shares of the Fund, including, but not limited to, all costs involved in the registration or qualification of shares of the Fund for sale in any jurisdiction, the costs of portfolio pricing services and systems for compliance with blue sky laws, and all costs involved in preparing, printing and mailing prospectuses and statements of additional information of the Fund; and all fees, dues and other expenses incurred by the Trust in connection with the membership of the Trust in any trade association or other investment company organization. To the extent that JCC shall perform any of the above -3- described administrative and clerical functions, including transfer agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting and blue sky monitoring and registration functions, and the preparation of reports and returns, the Trust shall pay to JCC compensation for, or reimburse JCC for its expenses incurred in connection with, such services as JCC and the Trust shall agree from time to time, any other provision of this Agreement notwithstanding. 7. Treatment of Investment Advice. The Trust shall treat the investment advice and recommendations of JCC as being advisory only, and shall retain full control over its own investment policies. However, the Trustees may delegate to the appropriate officers of the Trust, or to a committee of the Trustees, the power to authorize purchases, sales or other actions affecting the portfolio of the Fund in the interim between meetings of the Trustees. 8. Brokerage Commissions. For purposes of this Agreement, brokerage commissions paid by the Fund upon the purchase or sale of its portfolio securities shall be considered a cost of securities of the Fund and shall be paid by the Fund. JCC is authorized and directed to place Fund portfolio transactions only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates, provided, however, that JCC may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if JCC determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of either that particular transaction or the overall responsibilities of JCC. JCC is also authorized to consider sales of Trust shares as a factor in selecting broker-dealers to execute Fund portfolio transactions. In placing portfolio business with such broker-dealers, JCC shall seek the best execution of each transaction. Subject to the terms of this Agreement and the applicable requirements and provisions of the law, including the 1940 Act and the Securities Exchange Act of 1934, as amended, and in the event that JCC or an affiliate is registered as a broker-dealer, JCC may select a broker or dealer with which it or the Fund is affiliated. JCC or such affiliated broker-dealer may effect or execute Fund portfolio transactions, whether on a securities exchange or in the over-the-counter market, and receive separate compensation from the Fund therefor. Notwithstanding the foregoing, the Trust shall retain the right to direct the placement of all portfolio transactions, and the Trustees of the Trust may establish policies or guidelines to be followed by JCC in placing portfolio transactions for the Trust pursuant to the foregoing provisions. JCC shall report on the placement of portfolio transactions in the prior fiscal quarter at each quarterly meeting of such Trustees. 9. Termination. This Agreement may be terminated at any time, without penalty, by the Trustees of the Trust, or by the shareholders of the Trust acting by vote of at least a majority of its outstanding voting securities, provided in either case that sixty (60) days advance written notice of termination be given to JCC at its principal place of business. This Agreement may be terminated by JCC at any time, without penalty, by giving sixty (60) days advance written notice of termination to the Trust, addressed to its principal place of business. The Trust agrees that, consistent with the terms of the Trust's Declaration of Trust, the Trust shall cease to use the name -4- "Janus" in connection with the Fund as soon as reasonably practicable following any termination of this Agreement if JCC does not continue to provide investment advice to the Fund after such termination. 10. Assignment. This Agreement shall terminate automatically in the event of any assignment of this Agreement. 11. Term. This Agreement shall continue in effect until June 16, 1995, unless sooner terminated in accordance with its terms, and shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on the approval of the terms of such renewal, and by either the Trustees of the Trust or the affirmative vote of a majority of the outstanding voting securities of the Trust. The annual approvals provided for herein shall be effective to continue this Agreement from year to year if given within a period beginning not more than ninety (90) days prior to June 16 of each applicable year, notwithstanding the fact that more than three hundred sixty-five (365) days may have elapsed since the date on which such approval was last given. 12. Amendments. This Agreement may be amended by the parties only if such amendment is specifically approved (i) by 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). 13. Other Series. The Trustees shall determine the basis for making an appropriate allocation of the Trust's expenses (other than those directly attributable to the Fund) between the Fund and the other series of the Trust. 14. Limitation of Personal Liability. All the parties hereto acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Fund and that no Trustee, officer or holder of shares of beneficial interest of the Trust shall be personally liable for any of the foregoing liabilities. The Trust's Declaration of Trust, as amended from time to time, is on file in the Office of the Secretary of State of the Commonwealth of Massachusetts. Such Declaration of Trust describes in detail the respective responsibilities and limitations on liability of the Trustees, officers and holders of shares of beneficial interest of the Trust. 15. Limitation of Liability of JCC. JCC shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Trust, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties -5- hereunder and except to the extent otherwise provided by law. As used in this Section 15, "JCC" shall include any affiliate of JCC performing services for the Trust contemplated hereunder and directors, officers and employees of JCC and such affiliates. 16. Activities of JCC. The services of JCC to the Trust hereunder are not to be deemed to be exclusive, and JCC and its affiliates are free to render services to other parties. It is understood that trustees, officers and shareholders of the Trust are or may become interested in JCC as directors, officers and shareholders of JCC, that directors, officers, employees and shareholders of JCC are or may become similarly interested in the Trust, and that JCC may become interested in the Trust as a shareholder or otherwise. 17. Certain Definitions. The terms "vote of a majority of the outstanding voting securities", "assignment" and "interested persons" when used herein, shall have the respective meanings specified in the 1940 Act, as now in effect or hereafter amended, and the rules and regulations thereunder, subject to such orders, exemptions and interpretations as may be issued by the Securities and Exchange Commission under said Act and as may be then in effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Restated Investment Advisory Agreement as of this 21st day of May, 1996. JANUS CAPITAL CORPORATION By: /s/ Steven R. Goodbarn Steven R. Goodbarn, Vice President JANUS INVESTMENT FUND By: /s/ Thomas H. Bailey Thomas H. Bailey, President -6- EX-99 18 EX 8(A)-CUSTODIAN CONTRACT W/STATE STREET BANK EXHIBIT 8(a) CUSTODIAN CONTRACT Between JANUS INVESTMENT FUND and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS PAGE 1. Employment of Custodian and Property to be Held By It ...............................................................1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States ......................2 2.1 Holding Securities ..................................................2 2.2 Delivery of Securities ..............................................3 2.3 Registration of Securities ..........................................7 2.4 Bank Accounts .......................................................8 2.5 Investment and Availability of Federal Funds ........................8 2.6 Collection of Income ................................................9 2.7 Payment of Fund Moneys ..............................................9 2.8 Liability for Payment in Advance of Receipt of Securities Purchased ...............................................12 2.9 Appointment of Agents ..............................................12 2.10 Deposit of Securities in Securities System .........................12 2.11 Segregated Account .................................................15 2.12 Ownership Certificates for Tax Purposes ............................16 2.13 Proxies ............................................................17 2.14 Communications Relating to Fund Portfolio Securities ...............................................17 2.15 Reports to Fund By Independent Public Accountants ........................................................18 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States ..............................18 3.1 Appointment of Foreign Sub-Custodians ..............................18 3.2 Assets to be Held ..................................................19 3.3 Foreign Securities Depositories ....................................19 3.4 Segregation of Securities 19 3.5 Agreements with Foreign Banking Institutions 20 3.6 Access of Independent Accountants of the Fund ......................21 3.7 Reports by Custodian ...............................................21 3.8 Transactions in Foreign Custody Account ............................21 3.9 Liability of Foreign Sub-Custodians ................................23 3.10 Liability of Custodian .............................................23 3.11 Monitoring Responsibilities ........................................24 3.12 Branches of U.S. Banks .............................................24 4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund ...................................................25 5. Proper Instructions .....................................................26 6. Actions Permitted Without Express Authority .............................26 7. Evidence of Authority ...................................................27 8. Duties of Custodian with Respect to the Books of Account and Calculations of Net Asset Value and Net Income ...............................................................28 9. Records ..................................................................28 10. Opinion of Fund's Independent Accountant .................................29 11. Compensation of Custodian ................................................29 12. Responsibility of Custodian ..............................................29 13. Effective Period, Termination and Amendment ..............................31 14. Successor Custodian ......................................................32 15. Interpretive and Additional Provisions ...................................34 16. Additional Funds .........................................................34 17. Massachusetts Law to Apply ...............................................34 18. Prior Contracts ..........................................................35 19. Limitation of Liability ..................................................35 CUSTODIAN CONTRACT This Contract between Janus Investment Fund, a business trust organized and existing under the laws of Massachusetts, having its principal place of business at 100 Fillmore Street, Suite 300, Denver, Colorado 80206, hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts corporation, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian", WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund intends to initially offer shares in one series, the Janus Investment Fund (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 16, being herein referred to as the "Fund(s)"); NOW THEREFOR, that in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby employs the Custodian as the custodian of its assets, including securities it desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Declaration of -1- Trust. The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such new or treasury shares of capital stock, $.01 par value, ("Shares") of the Fund as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian. Upon receipt of "Proper Instructions" ("within the meaning of Article 5), the Custodian shall from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees of the Fund, and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodians for the Fund's securities and other assets the foreign banking institutions and foreign securities depositories designated in Schedule "A" hereto but only in accordance with the provisions of Article 3. 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES. 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, to be held by it in the United States, including all -2- domestic securities owned by the Fund, other than securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System". 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by the Fund held by the Custodian or in a Securities System account of the Custodian only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such -3- case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; PROVIDED that, in any such case, the new securities are to be delivered to the Custodian; 7) To the broker selling the same for examination in accordance with the "street delivery" custom; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of -4- such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Fund, BUT ONLY against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, BUT ONLY against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a -5- member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the Fund's currently effective prospectus and statement of additional information ("prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and -6- 15) For any other proper corporate purpose, BUT ONLY upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, UNLESS the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub- custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. -7- 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board of Trustees of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions, make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the -8- amount of checks received in payment for Shares of the Fund which are deposited into the Fund's account. 2.6 COLLECTION OF INCOME. The Custodian shall collect on a timely basis all income and other payments with respect to Domestic registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to Domestic bearer securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on Domestic securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 2.7 PAYMENT OF FUND MONEYS. Upon receipt of Proper Instructions, which may be continuing instructions when -9- deemed appropriate by the parties, the Custodian shall pay out moneys of the Fund in the following cases only: 1) Upon the purchase of domestic securities, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities, or evidence of title to futures contracts or operations on futures contracts, to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof or (c) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase -10- by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund; 2) In connection with the conversion, exchange or surrender of securities owned by the Fund and in the case of warrants, rights, or similar securities, as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Fund as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper purpose, BUT ONLY upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary -11- or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In any and every case where payment for purchase of domestic securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for securities to the same extent as if the securities had been received by the Custodian. 2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; PROVIDED, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 DEPOSIT OF SECURITIES IN SECURITIES SYSTEMS. The Custodian may deposit and/or maintain domestic securities owned by the Fund in a clearing agency registered with the Securities and -12- Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep domestic securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to domestic securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Custodian shall pay for domestic securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian -13- shall transfer domestic securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of domestic securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund. 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding domestic securities deposited in the Securities System; 5) The Custodian shall have received the initial or annual certificate, as the case may be, required by Article 13 hereof; -14- 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange -15- Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.12 OWNERSHIP CERTIFICATE FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with -16- receipt of income or other payments with respect to domestic securities of the Fund held by it and in connection with transfers of such securities. 2.13 PROXIES. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 2.14 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the domestic securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the domestic securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take -17- action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 2.15 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including domestic securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE OF THE UNITED STATES 3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Custodian is authorized and instructed to employ as sub-custodians for the Fund's securities and other assets maintained outside of the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of Proper -18- Instructions, together with a certified resolution of the Fund's Board of Trustees, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodians. Upon receipt of Proper Instructions from the Fund the Custodian shall cease the employment of any one or more of such sub-custodians for maintaining custody of the Fund's assets. 3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c) (1) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Fund's foreign securities transactions. 3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Fund shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. 3.4 SEGREGATION OF SECURITIES. The Custodian shall identify on its books as belonging to the Fund, the foreign securities of the Fund held by each foreign sub-custodian. Each -19- agreement pursuant to which the Custodian employs a foreign banking institution shall require that such institution establish a custody account for the Custodian on behalf of the Fund and physically segregate in that account, securities and other assets of the Fund, and, in the event that such institution deposits the Fund's securities in a foreign securities depository, that it shall identify on its books as belonging to the Custodian, as agent for the Fund, the securities so deposited (all collectively referred to as the "Account"). 3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that : (a) the Fund's assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institutions or its creditors, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the Fund's assets will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to the Fund; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books -20- and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Fund held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institutions under its agreement with the Custodian. 3.7 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Fund held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Fund's securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of the Fund indicating, as to securities acquired for the Fund, the identity of the entity having physical possession of such securities. 3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall -21- make or cause its foreign sub-custodian to transfer, exchange or deliver foreign securities owned by the Fund, but except to the extent explicitly provided herein only in any of the cases specified in Section 2.2 (b) Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties the Custodian shall pay out or cause its foreign sub-custodians to pay out monies of the Fund, but except to the extent explicitly provided herein only in any of the cases specified in Section 2.7. (c) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of the Fund and delivery of securities maintained for the account of the Fund may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (d) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract and the Fund agrees to hold any such nominee -22- harmless from any liability as a holder of record of such securities. 3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for any loss, -23- damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody or any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism. 3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the Fund, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or is notified by a foreign banking institution employed as a foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles). 3.12 BRANCHES OF U.S. BANKS. Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of the Fund assets maintained in a foreign branch of a banking institution which is a "bank" as defined -24- by Section 2(a) (5) of the Investment Company Act of 1940 which meets the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by Article 1 of this Contract. 4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES OF THE FUND From such funds as may be available for the purpose but subject to the limitations of the Declaration of Trust and any applicable votes of the Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. The Custodian shall receive from the distributor for the Fund's Shares or from the Transfer Agent of the Fund and deposit into the Fund's account such payments as are received for Shares -25- of the Fund issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund and the Transfer Agent of any receipt by it of payments for Shares of the Fund. 5. PROPER INSTRUCTIONS Proper Instructions as used herein means a writing signed or initialled by two or more person or 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 believes 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. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Trustees of the Fund accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Trustees and the Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its discretion, without express authority from the Fund: -26- 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, PROVIDED that all such payments shall be accounted for to the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Trustees of the Fund. 7. EVIDENCE OF AUTHORITY The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Trustees of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Trustees pursuant to the Declaration of Trust as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. -27- 8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME. The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees of the Fund to keep the books of account of the Fund and/or compute the net asset value per share of the outstanding shares of the Fund or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Fund as described in the Fund's currently effective prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of the Fund shall be made at the time or times described from time to time in the Fund's currently effective prospectus. 9. RECORDS The Custodian shall create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and any other law or administrative rules or procedures which may be applicable to the -28- Fund. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 11. COMPENSATION OF CUSTODIAN The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian. 12. RESPONSIBILITY OF CUSTODIAN So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of -29- title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Notwithstanding the foregoing, the responsibility of the Custodian with respect to redemptions effected by check shall be in accordance with a separate Agreement entered into between the Custodian and the Fund. If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian to advance cash or securities for any purpose or in the event that the Custodian or -30- its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement. 13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; PROVIDED, however that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees of the Fund have approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Trustees have reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended; PROVIDED FURTHER, -31- however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Declaration of Trust, and further provided, that the Fund may at any time by action of its Board of Trustees (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 14. SUCCESSOR CUSTODIAN If a successor custodian shall be appointed by the Board of Trustees of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees of the Fund, deliver at the -32- office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Contract and to transfer to an account of such successor custodian all of the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to -33- the duties and obligations of the Custodian shall remain in full force and effect. 15. INTERPRETIVE AND ADDITIONAL PROVISIONS In connection with the operation of this Contract, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional or additional provisions shall contravene any applicable federal or state regulations or any provision of the Declaration of Trust of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 16. ADDITIONAL FUNDS In the event that the Fund establishes one or more series of Shares in addition to Janus Investment Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Fund hereunder. 17. MASSACHUSETTS LAW TO APPLY This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. -34- 18. PRIOR CONTRACTS This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund and the Custodian relating to the custody of the Fund's assets. 19. LIMITATION OF LIABILITY A copy of the Fund's Agreement and Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this Contract is executed on behalf of the Trustees of the Fund as Trustees of the Fund and not individually, and that the obligations under this Contract are not binding upon any of the Trustees, officers, shareholders, agents or employees of the Fund individually, but binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 31st day of July, 1986. ATTEST JANUS INVESTMENT FUND /s/ Susan R. Hughes By /s/ James P. Craig, III Assistant Secretary Executive Vice President ATTEST State Street Bank and Trust Company /s/ Kim Kulurd By /s/ E. D. Hawkes, Jr. Assistant Secretary Vice President -35- Schedule A The following foreign banking institutions and foreign securities depositories have been approved by the Board of Trustees of Janus Investment Fund for use as sub-custodians for the Fund's securities and other assets: (Insert banks and securities depositories) -36- EX-99 19 EX 8(B)-AMENDMENT TO CUSTODIAN CONTRACT EXHIBIT 8(b) AMENDMENT The Custodian Contract dated July 31, 1986 between Janus Investment Fund (the "Fund") and State Street Bank and Trust Company (the "Custodian") is hereby amended as follows: I. Section 2.1 is amended to read as follows: "HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, including all securities owned by the Fund, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10.A." II. Section 2.2 is amended to read, in relevant part as follows: "DELIVERY OF SECURITIES. The Custodian shall release and deliver securities owned by the Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: -1- 1) . . . . . . . 15) . . . ." III. Section 2.7(1) is amended to read in relevant part as follows: "PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only: 1) Upon the purchase of securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts, to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in -2- proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof or (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A; or (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Funds of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Section 5;" IV. Following Section 2.10, there is inserted a new Section 2.10.A to read as follows: 2.10.A "FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may deposit and/or maintain securities owned by the Fund in the Direct Paper system of the Custodian subject to the following provisions: -3- 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions; 2) The Custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Fund; 4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of -4- Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transaction in the Securities System for the account of the Fund; 6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time." V. Section 13 is hereby amended to read as follows: "EFFECTIVE PERIOD, TERMINATION AND AMENDMENT This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; PROVIDED, however that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not act under Section 2.10.A hereof in the absence -5- of receipt of an initial certificate of the Secretary of an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of the Direct Paper System; PROVIDED FURTHER, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements." Except as otherwise expressly amended and modified herein, the provisions of the Custodian Contract shall remain in full force and effect. -6- IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and on its behalf by its duly authorized representatives and its Seal to be hereto affixed as of the 25th day of April, 1990. ATTEST: JANUS INVESTMENT FUND /s/ Janice M. Teague By: /s/ Jack R. Thompson Secretary Vice President ATTEST: STATE STREET BANK AND TRUST COMPANY /s/ Eric Greene By: /s/ E. D. Hawkes, Jr. Assistent Secretary Vice President -7- EX-99 20 EX 8(C)-LTR AGMT DATED 02/01/91 EXHIBIT 8(c) February 1, 1991 FEDERAL EXPRESS State Street Bank and Trust Company P.O. Box 1713 Boston, Mass. 02105 Attention: Wendy LaBonte RE: CUSTODIAN CONTRACT Dear Wendy: In accordance with our recent discussions regarding State Street's continued custody of only our Funds' foreign securities, I propose that, effective upon the conversion of the Funds' domestic securities to Investors Fiduciary Trust Company, the first paragraph of Section 1 of the Custodian Contract with each of Janus Investment Fund, Janus Twenty Fund, Inc., Janus Venture Fund, Inc. and Janus Income Series be amended as follows: "The Fund hereby employs the Custodian as the custodian of its securities it desires to be held outside the United States and cash or cash equivalents incidental thereto ("foreign securities") pursuant to the provisions of the Declaration of Trust [Articles of Incorporation]. The Fund agrees to deliver to the Custodian all foreign securities owned by it from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian." Please indicate State Street's agreement to the foregoing by returning to me a copy of this letter executed by the appropriate person in the space provided below. Very truly yours, Janus Investment Fund Janus Twenty Fund, Inc. Janus Venture Fund, Inc. Janus Income Series by /s/ Jack R. Thompson Vice President Acknowledged and agreed to this ___ day of February, 1991. State Street Bank and Trust Company by /s/ Wendy M. LaBonte Title: Vice President EX-23 21 EX 10(A)-OPINION & CONSENT OF DG&S EXHIBIT 10(a) June 13, 1986 Janus Investment Fund 100 Fillmore Street, Suite 300 Denver, Colorado 80206 Re: Shares of Janus Fund Series of JANUS INVESTMENT FUND Gentlemen: We have acted as counsel for Janus Investment Fund, a Massachusetts business trust (the "Trust"), in connection with a plan to reorganize Janus Fund, Inc. (the "Corporation") from a Maryland corporation into the Trust. This plan is set forth in an Agreement and Plan of Reorganization and Liquidation, dated February 12, 1986, by and between the Corporation and the Trust (the "Agreement"). Pursuant to the Agreement, at 5:00 p.m., Eastern time, on June 16, 1986 (the "Effective Time of the Reorganization"), the Corporation will transfer all of its business and assets, and assign all of its liabilities, to the Trust, and the Trust shall acquire all such business and assets, and shall assume all such liabilities, in exchange for delivery to the Corporation of a number of shares (both full and fractional) of the Janus Fund series of the Trust equivalent to the number of shares of capital stock of the Corporation outstanding immediately prior to the Effective Time of the Reorganization. (The shares of the Janus Fund series of the Trust, par value $.01 per share, hereinafter shall be referred to as the "Shares.") The Shares received by the Corporation thereupon will be distributed to the shareholders of the Corporation of record as of the Effective Time of the Reorganization in exchange for their capital stock in the Corporation on a share-for-share basis. Thereafter, Shares are proposed to be offered and sold to the public by the Trust. Post-Effective Amendment No. 30 to Registration Statement No. 2-34393 (the "Registration Statement") with respect to the Shares was filed with the Securities and Exchange Commission on April 17, 1986, and Post-Effective Amendment No. 31 to the Registration Statement is to be filed on or about June 16, 1986. We have examined originals or copies, certified or otherwise identified to our satisfaction, of certain records, instruments, certificates and other documents, have made such inquiries as to questions of fact of officers and representatives of the Corporation and of the Trust, and have made such examinations of law as we have deemed appropriate for purposes of giving the opinion hereinafter expressed. We have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to authentic or original documents of all documents submitted to us as certified, conformed or photostatic copies, Janus Investment Fund June 13, 1986 Page 2 and the execution by duly authorized corporate officers, directors or trustees of all documents reviewed by us in connection with the opinions set forth herein. We are attorneys in the State of Colorado and accordingly express no opinion as to the laws of any jurisdiction other than the State of Colorado and the United States of America, except that we do express certain opinions as to the laws of the State of Massachusetts, but do so solely in reliance on the opinion of Sullivan & Worcester of Boston, Massachusetts to our firm dated June 12, 1986. Based on the foregoing, it is our opinion that the Shares have been duly authorized and, either when issued and delivered to the stockholders of the Corporation pursuant to the Agreement, or when issued and sold pursuant to the Registration Statement, will be validly issued and fully paid and will be nonassessable by the Trust. With respect to the opinions stated above, we wish to point out that the shareholders of a Massachusetts business trust may, under some circumstances, be subject to assessment at the instance of creditors to pay the obligations of such trust in the event that its assets are insufficient for the purpose. We hereby consent to the use of this opinion as an Exhibit to the Registration Statement. Very truly yours, / s / Davis, Graham & Stubbs DAVIS, GRAHAM & STUBBS EX-23 22 EX 10(B)-OPINION & CONSENT OF FUND COUNSEL EXHIBIT 10(b) February 27, 1991 Janus Investment Fund 100 Fillmore Street, Suite 300 Denver, CO 80206-9916 RE: PUBLIC OFFERING OF JANUS GROWTH AND INCOME FUND SHARES AND JANUS WORLDWIDE FUND SHARES OF JANUS INVESTMENT FUND Gentlemen: I have acted as counsel for Janus Investment Fund (the "Trust"), a Massachusetts Business Trust, in connection with the filing with the Securities and Exchange Commission of a post-effective amendment to the Registration Statement with respect to the proposed sale of shares of beneficial interest, $0.01 par value (the "Shares"), of the Janus Growth and Income Fund and Janus Worldwide series of the Trust. I have examined the Trust's Agreement and Declaration of Trust and Bylaws, as amended, the proceedings of its Trustees relating to the authorization, issuance and proposed sale of the Shares, and such other records and documents as I have deemed relevant. Based upon such examination, it is my opinion that upon the issuance and sale of the Shares in the manner contemplated by the aforesaid Registration Statement, such Shares will be legally issued, fully paid and nonassessable. I hereby consent to the filing of this opinion as an Exhibit to the Registration Statement referred to above. This opinion is for the exclusive use of the Trust in connection with the filing of the Registration Statement referred to above with the Securities and Exchange Commission (and certain state securities commissions) and is not to be used, circulated, quoted, relied upon or otherwise referred to by any other person or for any other purpose. This opinion is given as of the date hereof and I render no opinion and disclaim any obligation to revise or supplement this opinion based upon any change in applicable law or any factual matter that occurs or comes to my attention after the date hereof. Very truly yours, /s/ David C. Tucker Vice President and General Counsel DCT:jc EX-23 23 EX 11 CONSENT OF INDEP. ACCOUNTANTS EXHIBIT 11 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 79 to the registration statement on Form N-1A (the "Registration Statement") of our reports dated November 30, 1995, relating to the financial statements and financial highlights appearing in the October 31, 1995 Annual Reports to Shareholders of Janus Investment Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectus and under the heading "Independent Accountants" in the Statement of Additional Information. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Denver, Colorado December 17, 1996 -----END PRIVACY-ENHANCED MESSAGE-----