Certified Semi-Annual Shareholder Report of a Management Investment Company — Form N-CSR Filing Table of Contents
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N-CSRS — Certified Semi-Annual Shareholder Report of a Management Investment Company Document Table of Contents
PORTFOLIO SNAPSHOT We believe a dynamic
approach to asset allocation that leverages our
bottom-up,
fundamental equity and fixed income research will allow us to
outperform our benchmark and peers over time. Our integrated
equity and fixed income research team seeks an optimal balance
of asset class opportunities across market cycles.
Marc Pinto
co-portfolio manager
Gibson Smith
co-portfolio manager
PERFORMANCE
SUMMARY
Janus Aspen Balanced Portfolio’s Institutional Shares and
Service Shares returned 4.94% and 4.84%, respectively, for the
six-month period ended June 30, 2014. That compares with
7.14% for the Portfolio’s primary benchmark, the
S&P 500 Index, and 3.93% for the Portfolio’s
secondary benchmark, the Barclays U.S. Aggregate Bond
Index. The Balanced Index, an internally calculated benchmark
composed of a 55% weighting in the S&P 500 Index and a
45% weighting in the Barclays U.S. Aggregate Bond Index,
returned 5.74%.
INVESTMENT
ENVIRONMENT
The equities market started 2014 on weak footing amid concerns
about when the Federal Reserve (Fed) would start to hike rates
as well as anxiety over slowing growth in China. The market
started rebounding on reassurance that the Fed would continue
its accommodative monetary policies and emerging stability in
China’s growth. The rebound in equities gathered momentum
in the second quarter amid generally favorable economic
developments in the U.S. despite a sharp downward revision
to first quarter gross domestic product and a hint of inflation
near period end.
On the fixed income front, the yield of the
10-year
Treasury note started the year at around 3.00%. It promptly
began to decline in January as emerging market volatility drove
safe haven buying. The decline in the bellwether note’s
yield continued as the U.S. recovery faltered amid a
winter-related slowdown. In the second quarter, the
10-year
yield dipped briefly below 2.50%; it was otherwise range bound.
The Fed acknowledged improved economic conditions during the
second quarter and continued to taper its quantitative easing
(QE) program. While inflation moved to the Fed’s 2% target,
policymakers seem to be looking for improving trends in economic
data to strengthen even further. The central bank signaled that
the first rate hike won’t be until 2015. Amid low rates,
investors continued to reach for yield and returns. This has
created stretched valuations in the fixed income market. Credit
and mortgage-backed securities spreads tightened.
PERFORMANCE
DISCUSSION
Our equity and fixed income allocations during the six-month
period did not vary significantly. We began the period with a
54% weighting to equities and 45% to debt. We ended the period
with a 51% weighting in equities and a 47% weighting in debt.
The decline in our equity exposure was driven primarily by
selling stocks that, in our view, were more fully valued. We
were holding the proceeds in cash until we could find
investments that were in keeping with our focus on risk-adjusted
returns and capital preservation. The slight allocation tilt
toward equities reflects our belief that there are more
opportunities in equities than in fixed income given valuations
in both markets.
The equity sleeve underperformed the S&P 500 Index
during the period, as stock selection and weightings within
certain sectors weighed on relative performance. Specifically,
stock selection within the information technology and consumer
discretionary sectors as well as our underweight in energy and
overweight in consumer discretionary detracted from relative
returns. Sector contributors were led by health care, where our
stock selection and sector overweight both benefited relative
performance.
Individual stock detractors were led by toy maker Mattel. The
company reported first quarter earnings that disappointed and
followed weak reports in the most recent quarters. Mattel is
still working on inventory reduction and stabilizing its market
share after weak sales during 2013’s holiday season.
Another stock detractor was CIT Group, Inc. The lender to
mid-size businesses reported quarterly earnings that were
beneath analyst expectations. We had liked CIT for its
restructuring potential, however we have since exited the
position.
Credit card solutions company MasterCard, Inc. detracted as well
amid concern about its growth abroad, particularly in Russia.
Equity contributors were led by two specialty pharmaceutical
firms primarily because of acquisition bids they received during
the period. First was Ireland-based Shire PLC. Shire received an
acquisition bid from
U.S.-based
AbbVie in a proposed tax-favored deal. It initially rejected the
offer. Shire’s drug therapies have a strong position within
the attention deficit and hyperactivity disorder market as well
as in certain rare disease markets. We believe the stock to be
more fully valued after rallying on the takeover offer. We have
reduced our position in the stock.
Specialty drug maker Allergan, Inc. was also a top contributor
after receiving an acquisition bid from Canadian firm Valeant
Pharmaceuticals. Allergan’s prospects are strong given its
dominant market share in ophthalmology and in aesthetics,
through its Botox product, which we think will grow through new
indications. While Allergan has, thus far, rejected the bid it
has received, the bid’s premium drove up its stock price,
and we now believe it is more fully valued. We have reduced our
position.
Chemicals and refining company LyondellBasell Industries was
another top contributor. The company benefited from better
performance by its refining business and signs that the
restructuring of its European business is paying off. Moreover,
the company announced a share buyback program and increased its
dividend.
Meanwhile, our fixed income sleeve underperformed the Barclays
U.S. Aggregate Bond Index, largely due to our yield curve
positioning. As was the case when the period began, the sleeve
was short duration versus its benchmark; however, we shortened
duration slightly more during the six months as risks toward
higher rates in the longer term increased. As rates mostly fell
in the period itself, this positioning worked against us. Our
Treasurys allocation, where we have a slight overweight versus
the index, was our largest relative detractor by asset class as
our yield curve positioning worked against us.
Individual credit selection within our corporate segment offset
the yield curve effect there, and largely made our allocation to
corporate credit the largest relative contributor to returns.
The performance of our corporate credit segment reflects our
bottom-up,
fundamentally driven process. The Portfolio’s significant
overweight in corporates versus the index is driven by our
belief that credit offers the greatest opportunity for solid
risk-adjusted returns in fixed income. Our overweight to higher
yielding credit was also additive. An improving
U.S. economy and an increased focus by the corporate sector
on balance sheet strength underpins our overweight in this
credit segment.
From a credit sector standpoint, top contributors were led by
banking, pharmaceutical and utility pipeline companies. Top
detractors included electric utility, media cable and retailing
companies.
We were underweight mortgage-backed securities (MBS) during the
period as we believe corporates offer better risk-adjusted
return opportunities. Our yield curve positioning and individual
security selection within our MBS allocation made it a relative
detractor.
As part of its QE wind-down, the Fed is reducing purchases of
mainly lower-coupon MBS securities. We believe being higher in
the coupon stack and in more prepayment-resistant tranches
should provide defensive characteristics against any resultant
volatility from the Fed’s QE tapering. This positioning has
helped give our MBS exposure a more stable cash-flow profile,
which we believe could benefit the overall portfolio when rates
are volatile. On the other hand, if Treasury yields drift lower
and within a tight range, our positioning can work against us,
which was the case in the second half of the period.
Please see the Derivative Instruments section in the “Notes
to Financial Statements” for derivatives used by the
Portfolio.
OUTLOOK
The gradual improvement in the economy and the current
accommodative Federal Reserve policy should lead to a good
environment for stocks, particularly given the lack of other
attractive investment alternatives. We believe equity valuations
are reasonable and justifiable, but given the significant moves
higher in equity markets, we are being increasingly selective in
our buying decisions. Moreover, our overall constructive
scenario for equities could change if interest rates move
materially higher, if the economy takes a turn for the worst, or
if inflation appears to be more systemic than it does now.
We would add that many companies are deploying their cash back
into the market through merger and acquisition activity, share
buybacks and dividends. While these actions are shareholder
friendly, it is less so for bondholders as this activity drains
cash and can result in balance sheet leverage. Indeed, we take
this as another reason to be increasingly selective in our fixed
income sleeve. Also, the low-rate environment has prompted a
reach for yield and
returns that has in turn resulted in stretched valuations in the
fixed income market.
While we are still bullish on credit in general and tend to
favor high yield, we believe security avoidance may be just as
important as security selection going forward. Both involve a
bottom-up,
fundamentally driven process and require in-depth research on
companies with a view toward recognizing what is worth owning
and, more importantly, what is not. That said, we continue to
believe that credit will produce some of the best risk-adjusted
returns in the fixed income market during 2014.
Finally, given the risks toward an upward rise in rates longer
term, we believe that managing duration and yield curve risk
will be important to success in this market. While using the
long end of the Treasury yield curve to provide some protection
for investors is still applicable, we think the “new
defensive” will be more about being opportunistic as it
relates to rates, with a bias toward being short in duration,
particularly in credit.
Thank you for investing in Janus Aspen Balanced Portfolio.
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard (“GICS”) codes, which are the
exclusive property and a service mark of MSCI Inc. and Standard
& Poor’s.
Morningstar Ranking – based on total returns for
Moderate Allocation Funds
–
368/872
313/727
16/590
10/262
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Fixed income securities are subject to interest rate,
inflation, credit and default risk. The bond market is volatile.
As interest rates rise, bond prices usually fall, and vice
versa. The return of principal is not guaranteed, and prices may
decline if an issuer fails to make timely payments or its credit
strength weakens.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to
December 31, 1999 are derived from the historical
performance of Institutional Shares, adjusted to reflect the
higher operating expenses of Service Shares.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,049.40
$
2.95
$
1,000.00
$
1,021.92
$
2.91
0.58%
Service Shares
$
1,000.00
$
1,048.40
$
4.22
$
1,000.00
$
1,020.68
$
4.16
0.83%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Balanced Index
A hypothetical combination of
unmanaged indices. This internally calculated index combines the
total returns from the S&P
500®
Index (55%) and the Barclays U.S. Aggregate Bond Index
(45%). Prior to July 1, 2009, the index was calculated
using the Barclays U.S. Government/Credit Bond Index instead of
the Barclays U.S. Aggregate Bond Index.
Barclays U.S. Aggregate Bond
Index
Made up of the Barclays U.S.
Government/Corporate Bond Index, Mortgage-Backed Securities
Index, and Asset-Backed Securities Index, including securities
that are of investment grade quality or better, have at least
one year to maturity, and have an outstanding par value of at
least $100 million.
S&P
500®
Index
A commonly recognized,
market-capitalization weighted index of 500 widely held equity
securities, designed to measure broad U.S. equity
performance.
ADR
American Depositary Receipt
LP
Limited Partnership
LLC
Limited Liability Company
PLC
Public Limited Company
ULC
Unlimited Liability Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
144A
Securities sold under Rule 144A of the Securities Act of 1933,
as amended, are subject to legal
and/or
contractual restrictions on resale and may not be publicly sold
without registration under the 1933 Act. These securities have
been determined to be liquid under guidelines established by the
Board of Trustees. The total value of 144A securities as of the
period ended June 30, 2014 is indicated in the table below:
Value as a %
Portfolio
Value
of Net Assets
Janus Aspen Balanced Portfolio
$
94,974,691
6.3
%
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Portfolio
Aggregate Value
Janus Aspen Balanced Portfolio
$
12,646,500
‡
The interest rate on floating rate notes is based on an index or
market interest rates and is subject to change. Rate in the
security description is as of period end.
This variable rate security is a perpetual bond. Perpetual bonds
have no contractual maturity date, are not redeemable, and pay
an indefinite stream of interest. The coupon rate shown
represents the current interest rate.
§
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Balanced Portfolio
Colony American Homes Holdings III LP – Private
Placement
1/30/13
$
6,407,653
$
7,039,594
0.5
%
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20
4/29/13
1,065,886
1,095,485
0.1
%
$
7,473,539
$
8,135,079
0.6
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Balanced Portfolio
Janus Cash Liquidity Fund LLC
10,478,159
317,958,186
(300,086,544)
28,349,801
$
–
$
7,190
$
28,349,801
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include futures, forward currency,
written options, and swap contracts. Forward currency contracts
and swap contracts are reported at their unrealized
appreciation/(depreciation) at measurement date, which
represents the change in the contract’s value from trade
date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Balanced Portfolio (the “Portfolio”) is a
series fund. The Portfolio is part of Janus Aspen Series (the
“Trust”), which is organized as a Delaware statutory
trust and is registered under the Investment Company Act of
1940, as amended (the “1940 Act”), as an open-end
management investment company, and therefore has applied the
specialized accounting and reporting guidance in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946. The Trust
offers twelve Portfolios which include multiple series of
shares, with differing investment objectives and policies. The
Portfolio invests in a combination of equity securities selected
for growth potential and securities selected for income
potential. The Portfolio is classified as diversified, as
defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net
assets represented by each class as a percentage of total net
assets.
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
Notes to
Financial Statements (unaudited)
(continued)
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
For restricted equity securities and private placements where
observable inputs are limited, assumptions about market activity
and risk are used in employing valuation techniques such as the
market approach, the income approach, or the cost approach, as
defined under the FASB Guidance. These are categorized as
Level 3 in the hierarchy.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3
securities as of June 30, 2014.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a result, the
use of derivatives may expose the Portfolio to additional risks
that it would not be subject to if it invested
directly in the securities underlying those derivatives. The use
of derivatives may result in larger losses or smaller gains than
otherwise would be the case. Derivatives can be volatile and may
involve significant risks, including, but not limited to,
counterparty risk, credit risk, currency risk, equity risk,
index risk, interest rate risk, leverage risk, and liquidity
risk, as described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC, the
Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A forward foreign currency exchange contract (“forward
currency contract”) is an obligation to buy or sell a
specified currency at a future date at a negotiated rate (which
may be U.S. dollars or a foreign currency). The Portfolio
may enter into forward currency contracts for hedging purposes,
including, but not limited to, reducing exposure to changes in
foreign currency exchange rates on foreign portfolio holdings
and locking in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in or exposed to
foreign currencies. The Portfolio may also invest in forward
currency contracts for nonhedging purposes such as seeking to
enhance returns. The Portfolio is subject to currency risk in
the normal course of pursuing its investment objective through
its investments in forward currency contracts.
The gain or loss arising from the difference between the
U.S. dollar cost of the original contract and the value of
the foreign currency in U.S. dollars upon closing a
contract is included in “Net realized gain/(loss) from
investment and foreign currency transactions” on the
Statement of Operations.
Notes to
Financial Statements (unaudited)
(continued)
During the period, the Portfolio entered into forward contracts
with the obligation to sell foreign currencies in the future at
an agreed upon rate in order to decrease exposure to currency
risk associated with foreign currency denominated securities
held by the Portfolio.
The following table provides average ending monthly contract
amounts on sold forward contracts during the period ended
June 30, 2014.
Portfolio
Sold
Janus Aspen Balanced Portfolio
$
11,432,143
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
Fair Value of Derivative Instruments as of June 30,2014
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
The Portfolio may be invested in lower-rated debt securities
that have a higher risk of default or loss of value since these
securities may be sensitive to economic changes, political
changes or adverse developments specific to the issuer.
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands
federal oversight in the financial sector, including the
investment management industry. Many provisions of the
Dodd-Frank Act remain pending and will be implemented through
future rulemaking. Therefore, the ultimate impact of the
Dodd-Frank Act and the regulations under the Dodd-Frank Act on
the Portfolio and the investment management industry as a whole,
is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Loans
The Portfolio may invest in various commercial loans, including
bank loans, bridge loans,
debtor-in-possession
(“DIP”) loans, mezzanine loans, and other fixed and
floating rate loans. These loans may be acquired through loan
participations and assignments or on a when-issued basis.
Commercial loans will comprise no more than 20% of the
Portfolio’s total assets. Below are descriptions of the
types of loans held by the Portfolio as of June 30, 2014.
•
Bank Loans – Bank loans are obligations of
companies or other entities entered into in connection with
recapitalizations, acquisitions, and refinancings. A
Portfolio’s investments in bank loans are generally
acquired as a participation interest in, or assignment of, loans
originated by a lender or other financial institution. These
investments may include institutionally-traded floating and
fixed-rate debt securities.
•
Floating Rate Loans – Floating rate loans are debt
securities that have floating interest rates, that adjust
periodically, and are tied to a benchmark lending rate, such as
the London Interbank Offered Rate (“LIBOR”). In other
cases, the lending rate could be tied to the prime rate offered
by one or more major U.S. banks or the rate paid on large
certificates of deposit traded in the secondary markets. If the
benchmark lending rate changes, the rate payable to lenders
under the loan will change at the next scheduled adjustment date
specified in the loan agreement. Floating rate loans are
typically issued to companies (“borrowers”) in
connection with recapitalizations, acquisitions, and
refinancings. Floating rate loan investments are
Notes to
Financial Statements (unaudited)
(continued)
generally below investment grade. Senior floating rate loans are
secured by specific collateral of a borrower and are senior in
the borrower’s capital structure. The senior position in
the borrower’s capital structure generally gives holders of
senior loans a claim on certain of the borrower’s assets
that is senior to subordinated debt and preferred and common
stock in the case of a borrower’s default. Floating rate
loan investments may involve foreign borrowers, and investments
may be denominated in foreign currencies. Floating rate loans
often involve borrowers whose financial condition is troubled or
uncertain and companies that are highly leveraged. The Portfolio
may invest in obligations of borrowers who are in bankruptcy
proceedings. While the Portfolio generally expects to invest in
fully funded term loans, certain of the loans in which the
Portfolio may invest include revolving loans, bridge loans, and
delayed draw term loans.
Purchasers of floating rate loans may pay
and/or
receive certain fees. The Portfolio may receive fees such as
covenant waiver fees or prepayment penalty fees. The Portfolio
may pay fees such as facility fees. Such fees may affect the
Portfolio’s return.
•
Mezzanine Loans – Mezzanine loans are secured
by the stock of the company that owns the assets. Mezzanine
loans are a hybrid of debt and equity financing that is
typically used to fund the expansion of existing companies. A
mezzanine loan is composed of debt capital that gives the lender
the right to convert to an ownership or equity interest in the
company if the loan is not paid back in time and in full.
Mezzanine loans typically are the most subordinated debt
obligation in an issuer’s capital structure.
Mortgage- and
Asset-Backed Securities
The Portfolio may purchase fixed or variable rate
mortgage-backed securities issued by the Government National
Mortgage Association (“Ginnie Mae”), the Federal
National Mortgage Association (“Fannie Mae”), the
Federal Home Loan Mortgage Corporation (“Freddie
Mac”), or other governmental or government-related
entities. Ginnie Mae’s guarantees are backed by the full
faith and credit of the U.S. Government. Historically,
Fannie Maes and Freddie Macs were not backed by the full faith
and credit of the U.S. Government, and may not be in the
future. In September 2008, the Federal Housing Finance Agency
(“FHFA”), an agency of the U.S. Government,
placed Fannie Mae and Freddie Mac under conservatorship. Under
the conservatorship, the management of Fannie Mae and Freddie
Mac was replaced. Since 2008, Fannie Mae and Freddie Mac have
received capital support through U.S. Treasury preferred
stock purchases, and Treasury and Federal Reserve purchases of
their mortgage-backed securities. The FHFA and the
U.S. Treasury have imposed strict limits on the size of
these entities’ mortgage portfolios. The FHFA has the power
to cancel any contract entered into by Fannie Mae and Freddie
Mac prior to FHFA’s appointment as conservator or receiver,
including the guarantee obligations of Fannie Mae and Freddie
Mac.
The Portfolio may purchase other mortgage- and asset-backed
securities through single- and multi-seller conduits,
collateralized debt obligations, structured investment vehicles,
and other similar securities. Asset-backed securities may be
backed by automobile loans, equipment leases, credit card
receivables, or other collateral. In the event the underlying
assets fail to perform, these investment vehicles could be
forced to sell the assets and recognize losses on such assets,
which could impact the Portfolio’s yield and your return.
Unlike traditional debt instruments, payments on these
securities include both interest and a partial payment of
principal. Prepayment risk, which results from prepayments of
the principal of underlying loans at a faster pace than
expected, may shorten the effective maturities of these
securities and may result in the Portfolio having to reinvest
proceeds at a lower interest rate.
In addition to prepayment risk, investments in mortgage-backed
securities, including those comprised of subprime mortgages, and
investments in other asset-backed securities comprised of
under-performing assets may be subject to a higher degree of
credit risk, valuation risk, and liquidity risk. Additionally,
although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantee
and/or
insurance, there is no assurance that private guarantors or
insurers will meet their obligations.
Mortgage- and asset-backed securities are also subject to
extension risk, which is the risk that rising interest rates
could cause mortgages or other obligations underlying these
securities to be paid more slowly than expected, increasing the
Portfolio’s sensitivity to interest rate changes and
causing its price to decline.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated
counterparty, regardless of whether the transactions are
actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Liabilities
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
26,321
$
–
$
–
$
26,321
HSBC Securities (USA), Inc.
53,491
–
–
53,491
JPMorgan Chase & Co.
105,959
–
–
105,959
RBC Capital Markets Corp.
23,675
–
–
23,675
Total
$
209,446
$
–
$
–
$
209,446
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure requirements
and initial margin requirements. Collateral amounts are
monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater than the risk
of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions
may result in the inability of the Portfolio to sell a security
at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets
exist.
Notes to
Financial Statements (unaudited)
(continued)
Sovereign
Debt
The Portfolio may invest in U.S. and foreign government
debt securities (“sovereign debt”). Investments in
U.S. sovereign debt are considered low risk. However,
investments in
non-U.S. sovereign
debt can involve a high degree of risk, including the risk that
the governmental entity that controls the repayment of sovereign
debt may not be willing or able to repay the principal
and/or to
pay the interest on its sovereign debt in a timely manner. A
sovereign debtor’s willingness or ability to satisfy its
debt obligation may be affected by various factors, including
its cash flow situation, the extent of its foreign currency
reserves, the availability of foreign exchange when a payment is
due, the relative size of its debt position in relation to its
economy as a whole, the sovereign debtor’s policy toward
international lenders, and local political constraints to which
the governmental entity may be subject. Sovereign debtors may
also be dependent on expected disbursements from foreign
governments, multilateral agencies, and other entities. The
failure of a sovereign debtor to implement economic reforms,
achieve specified levels of economic performance, or repay
principal or interest when due may result in the cancellation of
third party commitments to lend funds to the sovereign debtor,
which may further impair such debtor’s ability or
willingness to timely service its debts. The Portfolio may be
requested to participate in the rescheduling of such sovereign
debt and to extend further loans to governmental entities, which
may adversely affect the Portfolio’s holdings. In the event
of default, there may be limited or no legal remedies for
collecting sovereign debt and there may be no bankruptcy
proceedings through which the Portfolio may collect all or part
of the sovereign debt that a governmental entity has not repaid.
When-Issued and
Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued
or delayed delivery basis. When-issued and delayed delivery
securities in which the Portfolio may invest include
U.S. Treasury Securities, municipal bonds, bank loans, and
other similar instruments. The price of the underlying
securities and date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the
securities or from the inability of counterparties to meet the
terms of the contract. In connection with such purchases, the
Portfolio may hold liquid assets as collateral with the
Portfolio’s custodian sufficient to cover the purchase
price.
4.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average Daily
Investment
Net Assets
Advisory Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Balanced Portfolio
All Asset Levels
0.55
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the
Statement of Assets and Liabilities as an asset,
“Non-interested Trustees’ deferred compensation,”
and a liability, “Non-interested Trustees’ deferred
compensation fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals and investments in partnerships.
Notes to
Financial Statements (unaudited)
(continued)
6.
Capital Share
Transactions
For the period ended June 30 (unaudited)
Janus Aspen Balanced Portfolio
and the year ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
343,471
874,843
Reinvested dividends and distributions
589,708
1,195,907
Shares repurchased
(1,009,919)
(2,407,466)
Net Increase/(Decrease) in Portfolio Shares
(76,740)
(336,716)
Shares Outstanding, Beginning of Period
15,698,085
16,034,801
Shares Outstanding, End of Period
15,621,345
15,698,085
Transactions in Portfolio Shares – Service Shares
Shares sold
5,183,545
11,870,431
Reinvested dividends and distributions
1,102,239
1,347,765
Shares repurchased
(1,703,985)
(3,414,318)
Net Increase/(Decrease) in Portfolio Shares
4,581,799
9,803,878
Shares Outstanding, Beginning of Period
27,214,141
17,410,263
Shares Outstanding, End of Period
31,795,940
27,214,141
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
7.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Balanced Portfolio
$
232,227,331
$
239,873,164
$
322,591,406
$
228,799,371
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s managers as well as
statistical information to help you understand how your
Portfolio’s performance and characteristics stack up
against those of comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
managers may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio managers. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT We believe that
investing in companies with sustainable growth and high return
on invested capital can drive consistent returns and allow us to
outperform our benchmark and peers over time with moderate risk.
We seek to identify mid-cap companies with high-quality
management teams that wisely allocate capital to fund and drive
growth over time.
Brian Demain
portfolio manager
PERFORMANCE
OVERVIEW
During the six months ended June 30, 2014, Janus Aspen
Enterprise Portfolio’s Institutional Shares and Service
Shares returned 5.23% and 5.12%, respectively. Meanwhile, the
Portfolio’s benchmark, the Russell Midcap Growth Index,
returned 6.51%.
INVESTMENT
ENVIRONMENT
Mid-cap equities enjoyed solid returns in the first six months
of 2014, but the period can be broadly characterized as one in
which the market didn’t reward steady, proven growth.
Instead, throughout much of the period, momentum continued to
drive up stocks that are tied to attractive, hyper-growth
industries that we believe have unproven business models and
negative earnings. These stocks generally outperformed stocks of
companies with more stable earnings growth early in the year.
The trend began to reverse itself in the middle of the period
and those stocks fell off broadly when momentum waned in March
and April, but then bounced back again in May and June.
STRATEGY
OVERVIEW
The Portfolio had positive returns but underperformed its
benchmark, the Russell Midcap Growth Index, during the period.
We were not surprised to trail the benchmark, as it was not our
most ideal investment environment for relative outperformance.
Our investment process focuses on finding companies we believe
have more predictable business models, recurring revenue streams
and strong competitive positioning that can allow the companies
to take market share and experience sustainable, long-term
growth. We believe this focus should help the Portfolio
outperform when markets are down and drive relative
outperformance over full market cycles. As part of that
investment process, we have avoided many of the stocks in
hyper-growth industries that we believe trade at unreasonably
high valuations. Many of these companies, particularly in the
cloud computing industry, have unproven business models and have
yet to produce positive earnings. While we selectively own a few
companies within those industries where we feel the company has
the potential to justify such high valuations, we tend to prefer
companies with more steady and proven track records for earnings
growth. In market environments favoring companies with high
momentum but without a steadier business model or more
predictable source of revenue growth, we would not always expect
to outperform. We also had stocks that fell during the period
and detracted from our performance.
Vistaprint was our largest detractor. The stock fell after
reporting weak quarterly results. The company uses its scale and
high-volume printing presses to manage and produce small-volume
printing orders of marketing collateral and business cards for a
wide range of small businesses and consumers. The company is in
the middle of a transition as it tries to create more uniform
pricing for the products it offers across different marketing
channels. We believe the transition will result in better
pricing, higher margins and more customer value created by
Vistaprint, but in the meantime the move away from discounting
select items has alienated some customers, and that showed up in
the most recent quarterly results. We continue to think the
company is undervalued, and believe its ability to use
large-scale printing techniques to produce a wide range of small
printing orders profitably is a competitive advantage that would
be hard for a competitor to replicate.
Wolverine World Wide was also a detractor during the period. The
company owns a number of shoe brands, and in our view it has a
proven track record of acquiring and improving management of
those brands, then increasing sales as Wolverine pushes those
brands through its global distribution network. The stock fell
during the period due to concern about a slowdown in its Sperry
shoe brand, but sales were being compared to a period of
extremely high sales growth the year before. We think Sperry has
many elements similar to many other American lifestyle brands
that have gained traction internationally, and as such, the
brand will be a key beneficiary of Wolverine’s global
distribution network. We would expect revenue from
Sperry to increase in 2015. Meanwhile, we are encouraged by the
growth potential of many of Wolverine’s other brands.
Verisk Analytics was another detractor during the period, but we
continue to have high conviction in the long-term growth
potential of the company. The risk assessment company provides
services to the insurance industry through detailed actuarial
and underwriting data for property and casualty companies, as
well as predictive analytics to help underwriters model their
risks. Innovation, analytics and data management are at the core
of the company, and management continues to find ways to expand
its business by providing more services for new and existing
customers. Recently, we have been excited with the potential for
Verisk to grow its business serving the health care industry.
While the aforementioned stocks detracted from performance
during the period, we were pleased by the results of many other
companies in our Portfolio. Sensata Technologies, for example,
was a top contributor to performance and demonstrates many of
the characteristics we tend to look for in growth companies.
Sensata creates sensors and controls that go into a number of
durable goods, including automobiles. The sensors are a
relatively low-cost part but provide a lot of value to auto
manufacturers that use the products in the engine or for safety
features within the car. This gives Sensata considerable pricing
power, in our view. Once a sensor is designed into a car, it is
also unlikely to be replaced in future models. We believe the
company has a long runway for growth as the amount of electronic
content on automobiles continues to grow over the next decade.
The stock rose during the period due to increased confidence
about Sensata’s ability to grow content on automobiles,
particularly in Europe.
Cadence Design Systems was another top contributor. The company
provides software to the semiconductor industry to help them
design microchips. We believe Cadence is one of the few
companies tied to the semiconductor industry with considerable
pricing power. In our view, Cadence is one of only two companies
that semiconductor manufacturers can use to design chips. Going
forward, we think both competitors will benefit from growth in
the number of semiconductor engineers, who depend on design
software to function. The stock was up during the period as the
company started returning more cash to shareholders. An
improving environment for semiconductor manufacturers also
helped lift the stock.
TE Connectivity was also a top contributor to performance during
the period. We think the industry structure for connector
manufacturers such as TE Connectivity is much more favorable
than the industry structure for semiconductor manufacturers.
There are fewer suppliers making connectors, which creates less
downward pressure on pricing. Compared to semiconductors,
connectors also tend to make up a much smaller percentage of
costs for the products they go into, which ultimately means the
end customer using the connector is less likely to push back on
prices. While we like the industry structure for companies
making components, we like TE Connectivity specifically because
its connectors are typically used in products with longer life
cycles. When the end products using the connectors are
redesigned less frequently, it presents a more stable, recurring
revenue stream for the connector manufacturer. The stock was up
this period due to signs that global demand for connectors
improved, particularly in the auto and industrials sectors.
Strong financial results and positive guidance announced in the
first quarter also helped lift the stock.
Please see the Derivative Instruments section in the “Notes
to Financial Statements” for a discussion of derivatives
used by the Portfolio.
OUTLOOK
At a broad level, we do not believe mid-cap stocks are
overvalued, and we continue to find opportunities with
reasonably valued, sustainable growth companies. However, as we
have discussed in previous commentaries, we are concerned about
a few distortions in the market. We feel there are expensively
valued pockets of the market, namely with stocks tied to cloud
computing, biotech and social media. Momentum around these
stocks waned early this quarter but then quickly rebounded.
Multiples for many of these companies make us question whether
the market is appropriately valuing the risks in their business
models. A few of these companies will grow to be extremely
successful, and we own a few stocks from these industries in our
portfolio. However, many of these other young companies will
stumble along the way or face stiff competition and fail to
achieve the growth rates implied in their valuations.
We also have concerns about the IPO market. Many of the
companies going public in recent months have highly levered
capital structures and are benefiting from access to cheap debt.
Equity value for these companies is at risk if economic growth
slows or interest rates start rising.
We have largely avoided the highly levered IPOs and momentum
driven pockets of the market in favor of sustainable growth
companies that trade at more
reasonable valuations. Steadier, sustainable growth companies
have been out of favor in recent months, but a slow-growth
economic environment should actually provide a nice backdrop for
these higher-quality companies to differentiate themselves.
Thank you for your investment in Janus Aspen Enterprise
Portfolio.
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard codes, which are the exclusive property
and a service mark of MSCI Inc. and Standard & Poor’s.
Morningstar Ranking – based on total returns for
Mid-Cap Growth Funds
–
348/762
115/687
46/608
74/226
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to
December 31, 1999 are derived from the historical
performance of Institutional Shares, adjusted to reflect the
higher operating expenses of Service Shares.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,052.30
$
3.46
$
1,000.00
$
1,021.42
$
3.41
0.68%
Service Shares
$
1,000.00
$
1,051.20
$
4.73
$
1,000.00
$
1,020.18
$
4.66
0.93%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Russell
Midcap®
Growth Index
Measures the performance of those
Russell
Midcap®
Index companies with higher
price-to-book
ratios and higher forecasted growth values.
ADR
American Depositary Receipt
LLC
Limited Liability Company
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Loaned security; a portion or all of the security is on loan at
June 30, 2014.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Enterprise Portfolio
Janus Cash Collateral Fund LLC
–
124,606,483
(95,081,223)
29,525,260
$
–
$
48,720(1)
$
29,525,260
Janus Cash Liquidity Fund LLC
5,999,739
51,122,144
(50,647,000)
6,474,883
–
2,862
6,474,883
Total
$
–
$
51,582
$
36,000,143
(1)
Net of income paid to the
securities lending agent and rebates paid to the borrowing
counterparties.
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include futures, forward currency,
written options, and swap contracts. Forward currency contracts
and swap contracts are reported at their unrealized
appreciation/(depreciation) at measurement date, which
represents the change in the contract’s value from trade
date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Enterprise Portfolio (the “Portfolio”) is
a series fund. The Portfolio is part of Janus Aspen Series (the
“Trust”), which is organized as a Delaware statutory
trust and is registered under the Investment Company Act of
1940, as amended (the “1940 Act”), as an open-end
management investment company, and therefore has applied the
specialized accounting and reporting guidance in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946. The Trust
offers twelve Portfolios which include multiple series of
shares, with differing investment objectives and policies. The
Portfolio invests primarily in common stocks. The Portfolio is
classified as diversified, as defined in the 1940 Act. The
Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
Notes to
Financial Statements (unaudited)
(continued)
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a result, the
use of derivatives may expose the Portfolio to additional risks
that it would not be subject to if it invested directly in the
securities underlying those derivatives. The use of derivatives
may result in larger losses or smaller gains than otherwise
would be the case. Derivatives can be volatile and may involve
significant risks, including, but not limited to, counterparty
risk, credit risk, currency risk, equity risk, index risk,
interest rate risk, leverage risk, and liquidity risk, as
described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC,
the Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A forward foreign currency exchange contract (“forward
currency contract”) is an obligation to buy or sell a
specified currency at a future date at a negotiated rate (which
may be U.S. dollars or a foreign currency). The Portfolio
may enter into forward currency contracts for hedging purposes,
including, but not limited to, reducing exposure to changes in
foreign currency exchange rates on foreign portfolio holdings
and locking in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in or exposed to
foreign currencies. The Portfolio may also invest in forward
currency contracts for nonhedging purposes such as seeking to
enhance returns. The Portfolio is subject to currency risk in
the normal course of pursuing its investment objective through
its investments in forward currency contracts.
The gain or loss arising from the difference between the
U.S. dollar cost of the original contract and the value of
the foreign currency in U.S. dollars upon closing a
contract is included in “Net realized gain/(loss) from
investment and foreign currency transactions” on the
Statement of Operations.
During the period, the Portfolio entered into forward contracts
with the obligation to sell foreign currencies in the future at
an agreed upon rate in order to decrease exposure to currency
risk associated with foreign currency denominated securities
held by the Portfolio.
The following table provides average ending monthly contract
amounts on sold forward contracts during the period ended
June 30, 2014.
Portfolio
Sold
Janus Aspen Enterprise Portfolio
$
23,159,286
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other
weather-related phenomena. Such disasters, and the resulting
physical or economic damage, could have a severe and negative
impact on the Portfolio’s investment portfolio and, in the
longer term, could impair the ability of issuers in which the
Portfolio invests to conduct their businesses as they would
under normal conditions. Adverse weather conditions may also
have a particularly significant negative effect on issuers in
the agricultural sector and on insurance companies that insure
against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Assets and Derivative Assets
Notes to
Financial Statements (unaudited)
(continued)
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts in the
Gross Amounts
Statement of
Counterparty
of Recognized Liabilities
Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
158,857
$
–
$
–
$
158,857
HSBC Securities (USA), Inc.
141,133
–
–
141,133
JPMorgan Chase & Co.
22,943
–
–
22,943
RBC Capital Markets Corp.
71,425
–
–
71,425
Total
$
394,358
$
–
$
–
$
394,358
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
Deutsche Bank AG acts as securities lending agent and a limited
purpose custodian or subcustodian to receive and disburse cash
balances and cash collateral, hold short-term investments, hold
collateral, and perform other custodian functions. Securities on
loan will be continuously secured by collateral which may
consist of cash, U.S. Government securities, domestic and
foreign short-term debt instruments, letters of credit, time
deposits, repurchase agreements, money market mutual funds or
other money market accounts, or such other collateral as
permitted by the SEC. The value of the collateral must be at
least 102% of the market value of the loaned securities that are
denominated in U.S. dollars and 105% of the market value of
the loaned securities that are not denominated in
U.S. dollars. Upon receipt of cash collateral, Janus
Capital intends to invest the cash collateral in a cash
management vehicle for which Janus Capital serves as investment
adviser, Janus Cash Collateral Fund LLC. Loaned securities
and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure requirements
and initial margin requirements. Collateral amounts are
monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Securities
Lending
Under procedures adopted by the Trustees, the Portfolio may seek
to earn additional income by lending securities to qualified
parties. Deutsche Bank AG acts as securities lending agent and a
limited purpose custodian or subcustodian to receive and
disburse cash balances and cash collateral, hold short-term
investments, hold collateral, and perform other custodian
functions. The Portfolio may lend portfolio securities in an
amount equal to up to 1/3 of its total assets as determined at
the time of the loan origination. There is the risk of delay in
recovering a loaned security or the risk of loss in collateral
rights if the borrower fails financially. In addition, Janus
Capital makes efforts to balance the benefits and risks from
granting such loans. All loans will be continuously secured by
collateral which may consist of cash, U.S. Government
securities, domestic and foreign short-term debt instruments,
letters of credit, time deposits, repurchase agreements, money
market mutual funds or other money market accounts, or such
other collateral as permitted by the SEC. If the Portfolio is
unable to recover a security on loan, the Portfolio may use the
collateral to purchase replacement securities in the market.
There is a risk that the value of the collateral could decrease
below
the cost of the replacement security by the time the replacement
investment is made, resulting in a loss to the Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in
affiliated or non-affiliated cash management vehicles, whether
registered or unregistered entities, as permitted by the 1940
Act and rules promulgated thereunder. Janus Capital currently
intends to invest the cash collateral in a cash management
vehicle for which Janus Capital serves as investment adviser,
Janus Cash Collateral Fund LLC. An investment in Janus Cash
Collateral Fund LLC is generally subject to the same risks
that shareholders experience when investing in similarly
structured vehicles, such as the potential for significant
fluctuations in assets as a result of the purchase and
redemption activity of the securities lending program, a decline
in the value of the collateral, and possible liquidity issues.
Such risks may delay the return of the cash collateral and cause
the Portfolio to violate its agreement to return the cash
collateral to a borrower in a timely manner. As adviser to the
Portfolio and Janus Cash Collateral Fund LLC, Janus Capital
has an inherent conflict of interest as a result of its
fiduciary duties to both the Portfolio and Janus Cash Collateral
Fund LLC. Additionally, Janus Capital receives an
investment advisory fee of 0.05% for managing Janus Cash
Collateral Fund LLC, but it may not receive a fee for
managing certain other affiliated cash management vehicles in
which the Portfolio may invest, and therefore may have an
incentive to allocate preferred investment opportunities to
investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market
value of the loaned securities that are denominated in
U.S. dollars and 105% of the market value of the loaned
securities that are not denominated in U.S. dollars. Loaned
securities and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The cash collateral invested by Janus Capital is disclosed in
the Schedule of Investments. Income earned from the investment
of the cash collateral, net of rebates paid to, or fees paid by,
borrowers and less the fees paid to the lending agent are
included as “Affiliated securities lending income,
net” on the Statement of Operations.
4.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average Daily
Investment
Net Assets
Advisory Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Enterprise Portfolio
All Asset Levels
0.64
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the
Notes to
Financial Statements (unaudited)
(continued)
Statement of Assets and Liabilities as an asset,
“Non-interested Trustees’ deferred compensation,”
and a liability, “Non-interested Trustees’ deferred
compensation fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary difference between book and tax
appreciation or depreciation of investments is wash sale loss
deferrals.
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
172,190
443,879
Reinvested dividends and distributions
487,573
37,218
Shares repurchased
(533,726)
(1,209,318)
Net Increase/(Decrease) in Portfolio Shares
126,037
(728,221)
Shares Outstanding, Beginning of Period
6,904,386
7,632,607
Shares Outstanding, End of Period
7,030,423
6,904,386
Transactions in Portfolio Shares – Service Shares
Shares sold
388,703
736,333
Reinvested dividends and distributions
337,825
17,658
Shares repurchased
(567,793)
(1,096,972)
Net Increase/(Decrease) in Portfolio Shares
158,735
(342,981)
Shares Outstanding, Beginning of Period
4,589,034
4,932,015
Shares Outstanding, End of Period
4,747,769
4,589,034
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
7.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Enterprise Portfolio
$
51,204,680
$
81,925,213
$
–
$
–
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT We believe a
bottom-up,
fundamentally driven investment process that focuses on
credit-oriented investments can generate risk-adjusted returns
and capital preservation. Our comprehensive
bottom-up
view drives decision-making at a macro level, enabling us to
make informed sector and risk allocation decisions.
Gibson Smith
co-portfolio manager
Darrell Watters
co-portfolio manager
PERFORMANCE
SUMMARY
During the six-month period ended June 30, 2014, Janus
Aspen Flexible Bond Portfolio’s Institutional Shares and
Service Shares returned 4.17% and 4.07%, respectively, compared
with a 3.93% return for the Portfolio’s benchmark, the
Barclays U.S. Aggregate Bond Index.
INVESTMENT
ENVIRONMENT
The 10-year
Treasury yield fell from around 3.00% to 2.53% for the six-month
period. The decline occurred in the face of a second quarter
economic rebound in the U.S. from a winter-related slowdown
in the first quarter. The Federal Reserve (Fed) acknowledged
improved economic conditions and signaled that it will be
exiting its accommodative monetary policy by continuing to taper
its quantitative easing (QE) program. That said, while inflation
moved to the Fed’s 2% target during the period,
policymakers seemed to be looking for already improving trends
in economic data to strengthen even further. The central bank
signaled that the first rate hike won’t be until 2015.
This, coupled with safe haven buying of Treasurys due to
conflicts in Ukraine and Iraq, drove most Treasury yields lower.
Amid low rates globally, investors continued to seek
higher-yielding securities. Spreads of investment-grade and
high-yield corporate bonds tightened to levels not seen since
before the financial crisis. Spreads of mortgage-backed
securities (MBS) also remained tight.
PERFORMANCE
DISCUSSION
The Portfolio outperformed its benchmark, the Barclays
U.S. Aggregate Bond Index, largely on the strength of our
security selection in corporate credit, where we have a
significant overweight versus the benchmark. The performance of
our credit allocation reflects our
bottom-up,
fundamentally driven process. Our focus on higher yielding
securities also helped make spread carry, or the excess yield
that holdings generated compared with those in the benchmark,
additive.
From a credit sector standpoint, top contributors included
banking, life insurance and pharmaceuticals. Relative sector
detractors were led by electric utilities, media cable and
food & beverages.
Given our concern about the risk of higher rates longer term, we
maintained a duration that was shorter than the
benchmark’s. The shorter duration, which was mainly
expressed within our credit exposure, made our yield curve
positioning a relative detractor for the Portfolio as rates fell
during the six-month period.
Our MBS exposure was also a relative detractor. We have a
material underweight to the benchmark as we believe credit
offers better risk-adjusted return opportunities overall. We
have also sought to avoid the type of MBS that may be most
affected by the Fed’s tapering of its QE program. Still, we
believe the shrinking supply of these securities and consistent
demand for them will keep MBS spread levels tight, and we kept
our MBS exposure generally steady throughout the period.
Specifically for MBS, we believe the more prepayment-resistant,
higher-coupon stacks should provide more defensive
characteristics against any resultant volatility from Fed
tapering. This has helped give our MBS exposure a more stable
cash-flow profile, which should benefit the overall portfolio
should rates enter a more volatile period, in our view. On the
other hand, if Treasury yields drift lower and within a tight
range, our positioning can work against us, which was the case
in the second half of the period.
Our Treasurys exposure, where we are underweight the index, was
a relative contributor to returns as was our small exposure to
preferred securities.
OUTLOOK
The U.S. economic recovery from the financial crisis is
shaping up to look like a moderate one overall. Within that,
however, the economic rebound that began in the spring after the
winter slowdown is gathering momentum. Job growth trends are
strengthening, and inflation has picked
up. While the Fed indicated during the period that rate hikes
will not come until 2015, its post-policy-meeting statements are
aimed at preparing the market for an exit from loose monetary
conditions. All these factors could put upward pressure on
rates; thus, we remain cautious.
Meanwhile, the recovery in Europe and Japan continues to be
tepid, with the risks more toward deflation. Aggressive monetary
stimulus that Japan has in place and the one that the European
Central Bank announced in the second quarter are somewhat
offsetting the market impact of the later economic and monetary
cycles of the U.S. Thus, rates in the developed world
remain historically low. This global dynamic helps create
dueling risks of higher and lower rates in the U.S. that
could continue to be with us for the time being.
Consequently, we believe that managing duration and yield curve
risk will be important to success in this market. While using
the long end of the Treasury yield curve to provide some
protection for investors is still applicable, we think the
“new defensive” will be more about being opportunistic
as it relates to rates, with a bias toward being short in
duration, particularly in credit. Generally, shorter duration
credit reduces our interest rate risk while still providing
opportunity to gain in a spread tightening environment, in our
view.
The enduring low rate environment continues to fuel a reach for
yield and returns, stretching valuations in the investment grade
and high yield markets. We still expect that credit will offer
the best risk-adjusted returns of any fixed-income sector, and
we tend to favor high yield. Given the environment, however, we
believe security avoidance may be just as important as security
selection going forward. Both involve a
bottom-up,
fundamental process with a view toward recognizing what is worth
owning and, more importantly, what is not.
This is particularly true in an environment of
shareholder-friendly activity, including dividends and share
buybacks. Given the massive deleveraging following the 2008
financial crisis and the enormous cash balances that some
companies have accumulated, it makes sense that this activity
will continue. We would also note the resurgence of merger and
acquisition activity as companies take advantage of cheap
financing. All these activities can involve a re-leveraging of
capital structures, and bondholders need to be leery of them.
We’re often asked by our clients: What should we do in this
environment? Where do we go? We always turn back to our core
tenet: Seeking risk-adjusted returns and capital preservation.
While valuations require being increasingly selective, we see
significant opportunities in the second half of 2014, including
those that buck the consensus – an area where we have
expertise through our fundamental,
bottom-up
approach. We intend to take advantage of these opportunities as
we stick to our core tenet of seeking risk-adjusted returns and
capital preservation.
On behalf of every member of our investment team, thank you for
your investment in Janus Aspen Flexible Bond Portfolio. We
appreciate your entrusting your assets with us, and we look
forward to continuing to serve your investment needs.
Credit ratings provided by Standard & Poor’s
(S&P), an independent credit rating agency. Credit ratings
range from AAA (highest) to D (lowest) based on S&P’s
measures. Further information on S&P’s rating
methodology may be found at www.standardandpoors.com. Other
rating agencies may rate the same securities differently.
Ratings are relative and subjective and are not absolute
standards of quality. Credit quality does not remove market risk
and is subject to change. “Not Rated” securities are
not rated by S&P, but may be rated by other rating agencies
and do not necessarily indicate low quality. “Other”
includes cash equivalents, equity securities, and certain
derivative instruments.
Significant Areas
of Investment –
(%
of Net Assets)
Janus Aspen Flexible Bond Portfolio – Institutional
Shares
4.17%
5.74%
6.99%
6.34%
7.08%
0.56%
Janus Aspen Flexible Bond Portfolio – Service Shares
4.07%
5.50%
6.74%
6.08%
6.86%
0.81%
Barclays U.S. Aggregate Bond Index
3.93%
4.37%
4.85%
4.93%
5.69%
Morningstar Quartile – Institutional Shares
–
2nd
2nd
1st
1st
Morningstar Ranking – based on total returns for
Intermediate-Term Bond Funds
–
347/1,078
243/951
42/840
4/416
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent
month–end performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Fixed income securities are subject to interest rate,
inflation, credit and default risk. The bond market is volatile.
As interest rates rise, bond prices usually fall, and vice
versa. The return of principal is not guaranteed, and prices may
decline if an issuer fails to make timely payments or its credit
strength weakens.
High-yield/high-risk bonds, also known as “junk”
bonds, involve a greater risk of default and price volatility
than investment grade bonds. High-yield/high-risk bonds can
experience sudden and sharp price swings which will affect net
asset value.
The Portfolio will normally invest at least 80% of its net
assets, measured at the time of purchase, in the type of
securities described by its name.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Performance for Service Shares prior to December 31, 1999
reflects the performance of Institutional Shares, adjusted to
reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may
have different performance characteristics. When an expense
waiver is in effect, it may have a material effect on the total
return or yield, and therefore the ranking for the period.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,041.70
$
2.83
$
1,000.00
$
1,022.02
$
2.81
0.56%
Service Shares
$
1,000.00
$
1,040.70
$
4.10
$
1,000.00
$
1,020.78
$
4.06
0.81%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Barclays U.S. Aggregate Bond
Index
Made up of the Barclays U.S.
Government/Corporate Bond Index, Mortgage-Backed Securities
Index, and Asset-Backed Securities Index, including securities
that are of investment grade quality or better, have at least
one year to maturity, and have an outstanding par value of at
least $100 million.
LP
Limited Partnership
LLC
Limited Liability Company
PLC
Public Limited Company
ULC
Unlimited Liability Company
144A
Securities sold under Rule 144A of the Securities Act of 1933,
as amended, are subject to legal
and/or
contractual restrictions on resale and may not be publicly sold
without registration under the 1933 Act. These securities have
been determined to be liquid under guidelines established by the
Board of Trustees. The total value of 144A securities as of the
period ended June 30, 2014 is indicated in the table below:
Value as a %
Portfolio
Value
of Net Assets
Janus Aspen Flexible Bond Portfolio
$
82,401,839
17.1
%
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Portfolio
Aggregate Value
Janus Aspen Flexible Bond Portfolio
$
5,994,138
‡
The interest rate on floating rate notes is based on an index or
market interest rates and is subject to change. Rate in the
security description is as of period end.
This variable rate security is a perpetual bond. Perpetual bonds
have no contractual maturity date, are not redeemable, and pay
an indefinite stream of interest. The coupon rate shown
represents the current interest rate.
§
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Flexible Bond Portfolio
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20
4/29/13
$
1,309,457
$
1,345,820
0.3
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Flexible Bond Portfolio (the “Portfolio”)
is a series fund. The Portfolio is part of Janus Aspen Series
(the “Trust”), which is organized as a Delaware
statutory trust and is registered under the Investment Company
Act of 1940, as amended (the “1940 Act”), as an
open-end management investment company, and therefore has
applied the specialized accounting and reporting guidance in
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 946.
The Trust offers twelve Portfolios which include multiple series
of shares, with differing investment objectives and policies.
The Portfolio invests primarily in income-producing securities.
The Portfolio is classified as diversified, as defined in the
1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
Notes to
Financial Statements (unaudited)
(continued)
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Other Investments
and Strategies
Additional
Investment Risk
The Portfolio may be invested in lower-rated debt securities
that have a higher risk of default or loss of value since these
securities may be sensitive to economic changes, political
changes or adverse developments specific to the issuer.
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and
liquidity. Responses to these financial problems by European
governments, central banks, and others, including austerity
measures and reforms, may not work, may result in social unrest,
and may limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Loans
The Portfolio may invest in various commercial loans, including
bank loans, bridge loans,
debtor-in-possession
(“DIP”) loans, mezzanine loans, and other fixed and
floating rate loans. These loans may be acquired through loan
participations and assignments or on a when-issued basis.
Commercial loans will comprise no more than 20% of the
Portfolio’s total assets. Below are descriptions of the
types of loans held by the Portfolio as of June 30, 2014.
•
Bank Loans – Bank loans are obligations of
companies or other entities entered into in connection with
recapitalizations, acquisitions, and refinancings. A
Portfolio’s investments in bank loans are generally
acquired as a participation interest in, or assignment of, loans
originated by a lender or other financial institution. These
investments may include institutionally-traded floating and
fixed-rate debt securities.
•
Floating Rate Loans – Floating rate loans are debt
securities that have floating interest rates, that adjust
periodically, and are tied to a benchmark lending rate, such as
the London Interbank Offered Rate (“LIBOR”). In other
cases, the lending rate could be tied to the prime rate offered
by one or more major U.S. banks or the rate paid on large
certificates of deposit traded in the secondary markets. If the
benchmark lending rate changes, the rate payable to lenders
under the loan will change at the next scheduled adjustment date
specified in the loan agreement. Floating rate loans are
typically issued to companies (“borrowers”) in
connection with recapitalizations, acquisitions, and
refinancings. Floating rate loan investments are generally below
investment grade. Senior floating rate loans are secured by
specific collateral of a borrower and are senior in the
borrower’s capital structure. The senior position in the
borrower’s capital structure generally gives holders of
senior loans a claim on certain of the borrower’s assets
that is senior to subordinated debt and preferred and common
stock in the case of a borrower’s default. Floating rate
loan investments may involve foreign borrowers, and investments
may be denominated in foreign currencies. Floating rate loans
often involve borrowers whose financial
Notes to
Financial Statements (unaudited)
(continued)
condition is troubled or uncertain and companies that are highly
leveraged. The Portfolio may invest in obligations of borrowers
who are in bankruptcy proceedings. While the Portfolio generally
expects to invest in fully funded term loans, certain of the
loans in which the Portfolio may invest include revolving loans,
bridge loans, and delayed draw term loans.
Purchasers of floating rate loans may pay
and/or
receive certain fees. The Portfolio may receive fees such as
covenant waiver fees or prepayment penalty fees. The Portfolio
may pay fees such as facility fees. Such fees may affect the
Portfolio’s return.
•
Mezzanine Loans – Mezzanine loans are secured
by the stock of the company that owns the assets. Mezzanine
loans are a hybrid of debt and equity financing that is
typically used to fund the expansion of existing companies. A
mezzanine loan is composed of debt capital that gives the lender
the right to convert to an ownership or equity interest in the
company if the loan is not paid back in time and in full.
Mezzanine loans typically are the most subordinated debt
obligation in an issuer’s capital structure.
Mortgage- and
Asset-Backed Securities
The Portfolio may purchase fixed or variable rate
mortgage-backed securities issued by the Government National
Mortgage Association (“Ginnie Mae”), the Federal
National Mortgage Association (“Fannie Mae”), the
Federal Home Loan Mortgage Corporation (“Freddie
Mac”), or other governmental or government-related
entities. Ginnie Mae’s guarantees are backed by the full
faith and credit of the U.S. Government. Historically,
Fannie Maes and Freddie Macs were not backed by the full faith
and credit of the U.S. Government, and may not be in the
future. In September 2008, the Federal Housing Finance Agency
(“FHFA”), an agency of the U.S. Government,
placed Fannie Mae and Freddie Mac under conservatorship. Under
the conservatorship, the management of Fannie Mae and Freddie
Mac was replaced. Since 2008, Fannie Mae and Freddie Mac have
received capital support through U.S. Treasury preferred
stock purchases, and Treasury and Federal Reserve purchases of
their mortgage-backed securities. The FHFA and the
U.S. Treasury have imposed strict limits on the size of
these entities’ mortgage portfolios. The FHFA has the power
to cancel any contract entered into by Fannie Mae and Freddie
Mac prior to FHFA’s appointment as conservator or receiver,
including the guarantee obligations of Fannie Mae and Freddie
Mac.
The Portfolio may purchase other mortgage- and asset-backed
securities through single- and multi-seller conduits,
collateralized debt obligations, structured investment vehicles,
and other similar securities. Asset-backed securities may be
backed by automobile loans, equipment leases, credit card
receivables, or other collateral. In the event the underlying
assets fail to perform, these investment vehicles could be
forced to sell the assets and recognize losses on such assets,
which could impact the Portfolio’s yield and your return.
Unlike traditional debt instruments, payments on these
securities include both interest and a partial payment of
principal. Prepayment risk, which results from prepayments of
the principal of underlying loans at a faster pace than
expected, may shorten the effective maturities of these
securities and may result in the Portfolio having to reinvest
proceeds at a lower interest rate.
In addition to prepayment risk, investments in mortgage-backed
securities, including those comprised of subprime mortgages, and
investments in other asset-backed securities comprised of
under-performing assets may be subject to a higher degree of
credit risk, valuation risk, and liquidity risk. Additionally,
although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantee
and/or
insurance, there is no assurance that private guarantors or
insurers will meet their obligations.
Mortgage- and asset-backed securities are also subject to
extension risk, which is the risk that rising interest rates
could cause mortgages or other obligations underlying these
securities to be paid more slowly than expected, increasing the
Portfolio’s sensitivity to interest rate changes and
causing its price to decline.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include corporate bonds, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater
than the risk of investing in the securities of widely held,
publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of the Portfolio to
sell a security at a fair price and may substantially delay the
sale of the security. In addition, these securities may exhibit
greater price volatility than securities for which secondary
markets exist.
Sovereign
Debt
The Portfolio may invest in U.S. and foreign government
debt securities (“sovereign debt”). Investments in
U.S. sovereign debt are considered low risk. However,
investments in
non-U.S. sovereign
debt can involve a high degree of risk, including the risk that
the governmental entity that controls the repayment of sovereign
debt may not be willing or able to repay the principal
and/or to
pay the interest on its sovereign debt in a timely manner. A
sovereign debtor’s willingness or ability to satisfy its
debt obligation may be affected by various factors, including
its cash flow situation, the extent of its foreign currency
reserves, the availability of foreign exchange when a payment is
due, the relative size of its debt position in relation to its
economy as a whole, the sovereign debtor’s policy toward
international lenders, and local political constraints to which
the governmental entity may be subject. Sovereign debtors may
also be dependent on expected disbursements from foreign
governments, multilateral agencies, and other entities. The
failure of a sovereign debtor to implement economic reforms,
achieve specified levels of economic performance, or repay
principal or interest when due may result in the cancellation of
third party commitments to lend funds to the sovereign debtor,
which may further impair such debtor’s ability or
willingness to timely service its debts. The Portfolio may be
requested to participate in the rescheduling of such sovereign
debt and to extend further loans to governmental entities, which
may adversely affect the Portfolio’s holdings. In the event
of default, there may be limited or no legal remedies for
collecting sovereign debt and there may be no bankruptcy
proceedings through which the Portfolio may collect all or part
of the sovereign debt that a governmental entity has not repaid.
When-Issued and
Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued
or delayed delivery basis. When-issued and delayed delivery
securities in which the Portfolio may invest include
U.S. Treasury Securities, municipal bonds, bank loans, and
other similar instruments. The price of the underlying
securities and date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the
securities or from the inability of counterparties to meet the
terms of the contract. In connection with such purchases, the
Portfolio may hold liquid assets as collateral with the
Portfolio’s custodian sufficient to cover the purchase
price.
3.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average Daily
Investment
Net Assets
Advisory Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Flexible Bond Portfolio
First $
300 Million
0.55
Over $
300 Million
0.45
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that the Portfolio’s normal
operating expenses in any fiscal year, including the investment
advisory fee, but excluding the distribution and shareholder
servicing fees (applicable to Service Shares), administrative
services fees payable pursuant to the Transfer Agency Agreement,
brokerage commissions, interest, dividends, taxes, acquired fund
fees and expenses, and extraordinary expenses, exceed the annual
rate shown below. Janus Capital has agreed to continue the
waiver until at least May 1, 2015. If applicable, amounts
reimbursed to the Portfolio by Janus Capital are disclosed as
“Excess Expense Reimbursement” on the Statement of
Operations.
Portfolio
Expense Limit (%)
Janus Aspen Flexible Bond Portfolio
0.65(1)
(1)
Effective May 1, 2014, the expense limit increased from 0.55% to
0.65%.
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to
Notes to
Financial Statements (unaudited)
(continued)
make payments to Janus Distributors for remittance to insurance
companies and qualified plan service providers as compensation
for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
4.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals and investments in partnerships.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Flexible Bond Portfolio
$
467,635,376
$
14,778,600
$
(878,846)
$
13,899,754
Accumulated capital losses noted below represent net capital
loss carryovers, as of December 31, 2013, that may be
available to offset future realized capital gains and thereby
reduce future taxable gains distributions. The following table
shows these capital loss carryovers.
Capital Loss
Carryover Schedule
For the year ended December 31, 2013
No Expiration
Portfolio
Short-Term
Long-Term
Accumulated Capital Losses
Janus Aspen Flexible Bond Portfolio
$
(1,631,922)
$
–
$
(1,631,922)
5.
Capital Share
Transactions
Janus Aspen Flexible Bond Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
1,311,111
2,499,240
Reinvested dividends and distributions
575,893
1,855,828
Shares repurchased
(2,626,377)
(5,550,107)
Net Increase/(Decrease) in Portfolio Shares
(739,373)
(1,195,039)
Shares Outstanding, Beginning of Period
29,103,307
30,298,346
Shares Outstanding, End of Period
28,363,934
29,103,307
Transactions in Portfolio Shares – Service Shares
Shares sold
2,620,273
2,173,579
Reinvested dividends and distributions
179,938
526,497
Shares repurchased
(1,418,590)
(2,990,786)
Net Increase/(Decrease) in Portfolio Shares
1,381,621
(290,710)
Shares Outstanding, Beginning of Period
9,197,938
9,488,648
Shares Outstanding, End of Period
10,579,559
9,197,938
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
Notes to
Financial Statements (unaudited)
(continued)
6.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Flexible Bond Portfolio
$
94,438,884
$
107,025,275
$
179,935,332
$
155,103,827
7.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s managers as well as
statistical information to help you understand how your
Portfolio’s performance and characteristics stack up
against those of comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
managers may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio managers. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT We believe that
constructing a concentrated portfolio of quality growth
companies will allow us to outperform our benchmark over time.
We define quality as companies that enjoy sustainable
“moats” around their businesses, potentially allowing
companies to grow faster, with higher returns, than their
competitors. We believe the market often underestimates these
companies’ sustainable, competitive advantage periods.
Doug Rao
portfolio manager
PERFORMANCE
OVERVIEW
For the six-month period ended June 30, 2014, the
Portfolio’s Institutional Shares and Service Shares
returned
-0.21% and
-0.33%,
respectively, versus a return of 6.31% for the Portfolio’s
primary benchmark, the Russell 1000 Growth Index. The
Portfolio’s secondary benchmark, the S&P 500
Index, returned 7.14% for the period.
INVESTMENT
ENVIRONMENT
U.S. large-cap growth equities posted gains during the
period, lifted in part by evidence the economy was on stable
footing and also confirmation that the Federal Reserve would be
cautious in unwinding accommodative monetary policies supporting
a stable but slow-growing economy.
OVERVIEW
We have focused on building a portfolio of companies that are
well positioned to grow market share within their respective
industries and that have built clear and sustainable competitive
advantages around their businesses. Important competitive
advantages could include a strong brand, network effects from a
product or service that would be hard for a competitor to
replicate, a lower cost structure than competitors in the
industry, a distribution advantage or patent protection over
valuable intellectual property. We think focusing on such
sustainable competitive advantages can be a meaningful driver of
outperformance over long time horizons because the market may
underestimate the duration of growth for these companies and the
long-term potential return to shareholders. During the recent
period, we were pleased to see a number of the companies we own
continue to work hard to widen their competitive moats and find
opportunities to grow in excess of the market. However, we also
held stocks that fell during the period and negatively impacted
performance. For most of the stocks that were large detractors
from performance, we view the issues that affected their
performance as short term in nature, and believe the competitive
advantages held by these companies remain firmly in place.
Amazon, for example, was our largest detractor. The stock fell
after it reported revenue growth below consensus expectations
during the first quarter. This does not change our long-term
outlook, however. We believe the company’s size, scale and
efficiency has allowed it to be a disruptive force. The company
has completely rewritten the rules for retail shopping and we
believe it will continue to gain consumers’ wallet share as
more shopping moves from physical stores to online and mobile
purchases. Meanwhile, the company’s cloud business, Amazon
Web Services, has come to market with scale and a disruptive
pricing model for businesses seeking cloud-based services.
TJX Companies, the parent company of T.J. Maxx and Marshalls,
was another large detractor from performance. Like Amazon, the
stock fell due to earnings results that were below market
expectations. We believe the disappointing results were due
largely to weaker in-store traffic caused by bad weather during
the first quarter. We have generally avoided traditional, brick
and mortar retail companies in our portfolio because we think
e-commerce
growth is a headwind for these companies. Growth in
e-commerce
creates more price transparency and also makes it harder for
retailers to manage inventory. However, as an off-price
retailer, T.J. Maxx is a beneficiary when other retailers
struggle with excess inventory. The company buys the excess
inventory at a discount from other retailers and is able to
distribute it quickly across its stores. Selling that inventory
at a discount also makes the company less affected by the threat
of greater price transparency posed by
e-commerce
growth. The fact that the company has had negative same-store
sales growth only once in the last 32 years speaks to its
long-term growth potential, in our view.
MasterCard was another detractor. Over the long term, we believe
payments companies such as MasterCard are poised to benefit as
consumers and businesses switch from cash and check to plastic
and electronic payments.
Among payments companies, we think MasterCard is particularly
well positioned to benefit from this shift because a majority of
its revenues are generated outside the U.S., where many markets
have a lower penetration of card and electronic payments and are
experiencing significantly faster electronic purchase volume
growth. The stock fell during the first quarter after the
company announced earnings that were below consensus estimates,
but we believe the trend toward more plastic and electronic
payments that will support MasterCard’s long-term growth is
firmly in place.
While the aforementioned stocks detracted from performance, we
were pleased by the results of many other companies in our
Portfolio. Canadian Pacific Railway was our largest contributor
to performance. A new CEO took over the firm in 2012, and has
transformed the company by focusing on three key points: better
service and reliability to customers, improved profitability
through operating efficiency and new revenue opportunities.
Since then, the CEO has put a fully capable team in place to
execute on each of the above points, and success in each
category has driven the outperformance we are seeing. Service
metrics such as on-time deliveries and velocity have improved,
operating margins have increased dramatically with more
opportunity to expand, and the company has driven new revenues
from such markets as domestic Canada container traffic, grain
and crude by rail. Most recently, a new CFO has joined the
company and had a positive impact on driving better capital
allocation decisions, including commencing a share repurchase
program that further benefits shareholders.
Delphi Automotive was another top contributor this period. Like
many holdings in our Portfolio, we believe the company has
several competitive advantages that allow for a long duration of
growth. The auto parts supplier has benefited from some of the
enduring megatrends improving today’s automobiles. Many of
Delphi’s products either make the car more safe, more
environmentally friendly (fuel efficient), or help connect the
automobile to the world around it. An example of the latter
trend would be infotainment systems in the dashboard of a car.
While Delphi has benefited from these long-term tailwinds, it
also has a distribution advantage with a global platform
enabling the company to serve clients in China, North America
and Europe. Finally, the company also emerged from bankruptcy
with minimal liabilities and has located its workforce in lower
cost centers, which gives it a cost advantage over its
competitors. That cost advantage has increased margins, and
allowed Delphi to reinvest profits and work as a partner with
its clients to develop new content in vehicles.
Valeant Pharmaceuticals was another top contributor. For the
past decade, the company has run a different playbook than much
of the pharmaceutical industry when it comes to new drug
development. High research and development costs have been value
destructive for many pharmaceutical companies, but Valeant has
largely avoided high R&D spending by making a series of
value accretive acquisitions of pharmaceutical companies with
lower product risk. Valeant then takes many of the costs out of
those companies and essentially acts as a distributor of a
number of valuable drugs, rather than a company dependent on new
drug discovery for growth. Going forward, the Canadian-domiciled
company can use its lower tax rate as an advantage when it
competes against U.S. private equity firms that may also
try to acquire pharmaceutical companies. Valeant can potentially
pay a premium for an acquisition target in a deal that is still
accretive to Valeant because it can move the acquired company
into a lower tax structure.
OUTLOOK
After a weak start to the year due primarily to poor weather,
the U.S. economy appears to be reaccelerating. We believe
economic growth in other parts of the globe will remain fairly
choppy, but given a backdrop of slow growth we expect
accommodative monetary policies across most developed nations to
continue. We believe the U.S. market is anticipating higher
interest rates, but as long as a gradual rise in rates is
accompanied by a strengthening economy, we do not believe it
will derail equities.
On a broad basis, we believe large-cap equities are reasonably
valued. However, after considerable multiple expansion in the
back half of 2013 and early 2014, we believe companies will need
to demonstrate earnings growth to achieve further stock price
appreciation. We believe our portfolio is well positioned for
this type of market environment, as we own companies with strong
secular growth trends that should demonstrate above-market
earnings growth over longer time horizons.
Thank you for your investment in Janus Aspen Forty Portfolio.
Valeant Pharmaceuticals International, Inc. (U.S. Shares)
0.32%
Gilead Sciences, Inc.
0.30%
Monsanto Co.
0.29%
5 Bottom
Performers – Holdings
Contribution
Amazon.com, Inc.
–0.59%
TJX Cos., Inc.
–0.50%
MasterCard, Inc. – Class A
–0.43%
L Brands, Inc.
–0.35%
Panera Bread Co. – Class A
–0.27%
5 Top
Performers – Sectors*
Portfolio Weighting
Russell
1000®
Portfolio Contribution
(Average % of Equity)
Growth Index Weighting
Industrials
0.39%
11.87%
12.37%
Consumer Staples
–0.02%
0.18%
11.78%
Utilities
–0.03%
0.00%
0.15%
Materials
–0.04%
3.66%
4.55%
Other**
–0.06%
1.47%
0.00%
5 Bottom
Performers – Sectors*
Portfolio Weighting
Russell
1000®
Portfolio Contribution
(Average % of Equity)
Growth Index Weighting
Information Technology
–2.27%
23.24%
26.94%
Consumer Discretionary
–1.53%
27.40%
19.19%
Health Care
–0.98%
20.30%
12.58%
Financials
–0.88%
9.84%
5.47%
Energy
–0.82%
0.00%
4.80%
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard (“GICS”) codes, which are the
exclusive property and a service mark of MSCI Inc. and Standard
& Poor’s.
Morningstar Ranking – based on total returns for Large
Growth Funds
–
1,601/1,762
1,485/1,546
152/1,357
32/815
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
This Portfolio has a performance-based management fee that may
adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to
December 31, 1999 are derived from the historical
performance of Institutional Shares, adjusted to reflect the
higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may
have different performance characteristics.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
997.90
$
2.82
$
1,000.00
$
1,021.97
$
2.86
0.57%
Service Shares
$
1,000.00
$
996.70
$
4.06
$
1,000.00
$
1,020.73
$
4.11
0.82%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Forty Portfolio
Janus Cash Liquidity Fund LLC
13,728,000
152,792,514
(153,692,563)
12,827,951
$
–
$
3,193
$
12,827,951
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Forty Portfolio (the “Portfolio”) is a
series fund. The Portfolio is part of Janus Aspen Series (the
“Trust”), which is organized as a Delaware statutory
trust and is registered under the Investment Company Act of
1940, as amended (the “1940 Act”), as an open-end
management investment company, and therefore has applied the
specialized accounting and reporting guidance in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946. The Trust
offers twelve Portfolios which include multiple series of
shares, with differing investment objectives and policies. The
Portfolio invests primarily in common stocks. The Portfolio is
classified as nondiversified, as defined in the 1940 Act. The
Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Notes to
Financial Statements (unaudited)
(continued)
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
Notes to
Financial Statements (unaudited)
(continued)
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
3.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s “base” fee rate prior to
any performance adjustment (expressed as an annual rate).
Base Fee
Rate (%)
Portfolio
(annual rate)
Janus Aspen Forty Portfolio
0.64
For the Portfolio, the investment advisory fee rate is
determined by calculating a base fee and applying a performance
adjustment. The base fee rate is the same as the contractual
investment advisory fee rate shown in the table above. The
performance adjustment either increases or decreases the base
fee depending on how well the Portfolio has performed relative
to its benchmark index, as shown below:
Portfolio
Benchmark Index
Janus Aspen Forty Portfolio
Russell
1000®
Growth Index
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance
Adjustment
The investment advisory fee rate paid to Janus Capital by the
Portfolio consists of two components: (1) a base fee
calculated by applying the contractual fixed rate of the
advisory fee to the Portfolio’s average daily net assets
during the previous month (“Base Fee Rate”), plus or
minus (2) a performance-fee adjustment (“Performance
Adjustment”) calculated by applying a variable rate of up
to 0.15% (positive or negative) to the Portfolio’s average
daily net assets during the applicable performance measurement
period. The performance measurement period generally is the
previous 36 months, although no Performance Adjustment is
made until the Portfolio’s
performance-based fee structure has been in effect for at least
18 months. When the Portfolio’s performance-based fee
structure has been in effect for at least 18 months, but
less than 36 months, the performance measurement period
will be equal to the time that has elapsed since the
performance-based fee structure took effect. The Performance
Adjustment began January 2012 for the Portfolio.
No Performance Adjustment is applied unless the difference
between the Portfolio’s investment performance and the
cumulative investment record of the Portfolio’s benchmark
index is 0.50% or greater (positive or negative) during the
applicable performance measurement period. The Base Fee Rate is
subject to an upward or downward Performance Adjustment for
every full 0.50% increment by which the Portfolio outperforms or
underperforms its benchmark index. Because the Performance
Adjustment is tied to the Portfolio’s relative performance
compared to its benchmark index (and not its absolute
performance), the Performance Adjustment could increase Janus
Capital’s fee even if the Portfolio’s Shares lose
value during the performance measurement period and could
decrease Janus Capital’s fee even if the Portfolio’s
Shares increase in value during the performance measurement
period. For purposes of computing the Base Fee Rate and the
Performance Adjustment, net assets are averaged over different
periods (average daily net assets during the previous month for
the Base Fee Rate, versus average daily net assets during the
performance measurement period for the Performance Adjustment).
Performance of the Portfolio is calculated net of expenses,
whereas the Portfolio’s benchmark index does not have any
fees or expenses. Reinvestment of dividends and distributions is
included in calculating both the performance of the Portfolio
and the Portfolio’s benchmark index. The Base Fee Rate is
calculated and accrued daily. The Performance Adjustment is
calculated monthly in arrears and is accrued throughout the
month. The investment fee is paid monthly in arrears. Under
extreme circumstances involving underperformance by a rapidly
shrinking Portfolio, the dollar amount of the Performance
Adjustment could be more than the dollar amount of the Base Fee
Rate. In such circumstances, Janus Capital would reimburse the
Portfolio.
The investment performance of the Portfolio’s Service
Shares for the performance measurement period is used to
calculate the Performance Adjustment. After Janus Capital
determines whether the Portfolio’s performance was above or
below its benchmark index by comparing the investment
performance of the Portfolio’s Service Shares against the
cumulative investment record of the Portfolio’s benchmark
index, Janus Capital applies the same Performance Adjustment
(positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance
Adjustment on future overall compensation to Janus Capital since
it depends on the performance of the Portfolio relative to the
record of the Portfolio’s benchmark index and future
changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional
information contain additional information about
performance-based fees. The amount shown as advisory fees on the
Statement of Operations reflects the Base Fee Rate plus/minus
any Performance Adjustment. During the period ended
June 30, 2014, the Portfolio recorded a Performance
Adjustment of $(517,291).
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the
Notes to
Financial Statements (unaudited)
(continued)
Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
4.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary difference between book and tax
appreciation or depreciation of investments is wash sale loss
deferrals.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Forty Portfolio
$
624,609,539
$
172,748,349
$
(7,459,771)
$
165,288,578
5.
Capital Share
Transactions
Janus Aspen Forty Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
205,214
909,273
Reinvested dividends and distributions
2,552,786
80,463
Shares repurchased
(1,103,819)
(6,252,548)
Net Increase/(Decrease) in Portfolio Shares
1,654,181
(5,262,812)
Shares Outstanding, Beginning of Period
6,663,852
11,926,664
Shares Outstanding, End of Period
8,318,033
6,663,852
Transactions in Portfolio Shares – Service Shares
Shares sold
286,734
726,178
Reinvested dividends and distributions
4,268,286
65,591
Shares repurchased
(916,715)
(2,428,486)
Net Increase/(Decrease) in Portfolio Shares
3,638,305
(1,636,717)
Shares Outstanding, Beginning of Period
10,056,404
11,693,121
Shares Outstanding, End of Period
13,694,709
10,056,404
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
6.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Forty Portfolio
$
238,696,496
$
334,984,726
$
–
$
–
7.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Janus Aspen
Global Allocation Portfolio - Moderate
(unaudited)
PORTFOLIO SNAPSHOT Broad global
diversification allows flexibility to capture the best
performing asset classes regardless of geographies. In addition,
we seek to dampen the portfolio’s overall volatility
through the use of alternatives. This coupled with access to
Janus Capital Group’s innovative investment expertise and
solutions should provide superior risk-adjusted returns over the
long term.
Enrique Chang
co-portfolio manager
Dan Scherman
co-portfolio manager
PERFORMANCE
OVERVIEW
Janus Aspen Global Allocation Portfolio –
Moderate’s Institutional Shares and Service Shares returned
5.35% and 5.22%, respectively, for the six-month period ended
June 30, 2014. This compares with a return of 6.18% for its
primary benchmark, the MSCI All Country World Index, and a 5.73%
return for its secondary benchmark, the Global Moderate
Allocation Index, an internally calculated, hypothetical
combination of total returns from the MSCI All Country World
Index (60%) and the Barclays Global Aggregate Bond Index (40%).
MARKET
ENVIRONMENT
The global economy continued its long, slow recovery during the
period, led modestly by the U.S., which appeared to overcome a
winter weather-impaired first quarter with improving economic
metrics. Europe’s economy, meanwhile, remained fragile but
positive. Equity and fixed income markets responded well to the
European Central Bank’s move to negative real interest
rates in an effort to combat deflation, weak sentiment and soft
manufacturing data in the euro zone. Geopolitical events also
remained at the forefront, led by sectarian conflict in Iraq
that contributed to a spike in oil prices. There also appeared
to be growing investor concerns that the long-lasting equity
rally can’t persist, although markets moved higher almost
universally. Emerging markets rebounded from relative weakness
to developed markets, led by India, where the landslide election
victory of a pro-business party prompted hopes for economic
progress. A rebound in emerging market currencies, which
benefited from easing global liquidity, also helped fuel the
gains. Meanwhile, fixed income markets performed well as
10-year and
30-year
Treasury yields fell during the period.
PERFORMANCE
DISCUSSION
Janus Aspen Global Allocation Portfolio – Moderate
invests across a broad set of Janus, INTECH and Perkins funds
that span a wide range of global asset categories with a base
allocation of 45% to 65% equity investments, 30% to 45% fixed
income investments and 5% to 20% alternative investments that
are rebalanced quarterly. The Portfolio is structured as a
“fund of funds” portfolio that provides investors with
broad, diversified exposure to various types of investments with
an emphasis on managing investment risk.
The Portfolio’s exposure to fixed income and alternatives
contributed to its underperformance relative to its primary
benchmark. Individual detractors were led by Janus Diversified
Alternatives Fund, Janus Forty Fund and Janus Twenty Fund.
Contributors were led by Janus Global Bond Fund, INTECH
U.S. Value Fund and Janus International Equity Fund. The
latter three benefited in part from their large position sizes.
OUTLOOK
We are concerned about the resilience and duration of the equity
markets’ rally, but we are also eyeing fixed income
positioning in anticipation of a less benign interest rate
environment. We believe a moderate underweight to fixed income
is appropriate at this time.
Eventually, we anticipate inflation will return and interest
rates will rise, causing bonds to fall. Equity market volatility
is also likely to return at some point. If both happen
simultaneously, it would be a difficult environment for even an
asset diversified portfolio such as ours. Therefore,
non-correlated assets, such as the Janus Diversified
Alternatives Fund among others, could play an increased role.
Thank you for investing in Janus Aspen Global Allocation
Portfolio – Moderate.
Janus Aspen Global Allocation Portfolio –
Moderate – Institutional Shares
5.35%
16.79%
12.41%
3.73%
1.05%
Janus Aspen Global Allocation Portfolio –
Moderate – Service Shares
5.22%
16.55%
12.26%
3.23%
1.22%
MSCI All Country World
IndexSM
6.18%
22.95%
14.56%
Global Moderate Allocation Index
5.73%
16.59%
9.35%
Morningstar Quartile – Institutional Shares
–
2nd
1st
Morningstar Ranking – based on total returns for World
Allocation Funds
–
182/496
50/372
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus
Capital has contractually agreed to through May 1, 2015.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
portfolio holdings and other details.
Performance of the Janus Global Allocation Portfolio depends
on that of the underlying funds. They are subject to the
volatility of the financial markets. Because Janus Capital is
the adviser to the Fund and to the underlying affiliated funds
held within the Fund, it is subject to certain potential
conflicts of interest.
Until three years from inception, Janus Capital may recover
expenses previously waived or reimbursed if the expense ratio
falls below certain limits.
Janus Aspen
Global Allocation Portfolio - Moderate
(unaudited)
Returns shown do not represent actual returns since they do not
include insurance charges. Returns shown would have been lower
had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may
have different performance characteristics. When an expense
waiver is in effect, it may have a material effect on the total
return, and therefore the ranking for the period.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
The Portfolio’s holdings may differ significantly from the
securities held in the indices. The indices are unmanaged and
are not available for direct investment; therefore, their
performance does not reflect the expenses associated with the
active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective January 17, 2014, Enrique Chang and Dan Scherman
are Co-Portfolio Managers of the Portfolio.
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)††
Institutional Shares
$
1,000.00
$
1,053.50
$
2.04
$
1,000.00
$
1,022.81
$
2.01
0.40%
Service Shares
$
1,000.00
$
1,052.20
$
2.85
$
1,000.00
$
1,022.02
$
2.81
0.56%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
††
Ratios do not include indirect expenses of the underlying funds
and/or investment companies in which the Portfolio invests.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Barclays Global Aggregate Bond
Index
Provides a broad-based measure of
the global investment grade fixed-rate debt markets. It is
comprised of the U.S. Aggregate, Pan-European Aggregate,
and the Asian-Pacific Aggregate Indexes. It also includes a wide
range of standard and customized subindices by liquidity
constraint, sector, quality and maturity.
Global Moderate Allocation Index
An internally calculated,
hypothetical combination of total returns from the MSCI All
Country World
IndexSM
(60%) and Barclays Global Aggregate Bond Index (40%).
MSCI All Country World
IndexSM
An unmanaged, free float-adjusted
market capitalization weighted index composed of stocks of
companies located in countries throughout the world. It is
designed to measure equity market performance in global
developed and emerging markets. The index includes reinvestment
of dividends, net of foreign withholding taxes.
*
Non-income producing security.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014..
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Global Allocation Portfolio –
Moderate
INTECH International Fund- Class I Shares
85,176
15,870
(9,835)
91,211
$
8,293
$
–
$
878,361
INTECH U.S. Growth Fund – Class I Shares
21,345
3,667
(1,649)
23,363
1,803
–
491,315
INTECH U.S. Value Fund – Class I Shares
64,536
12,532
(5,661)
71,407
(8,933)
–
946,138
Janus Asia Equity Fund – Class I Shares
–
3,617
(386)
3,231
–
–
32,144
Janus Aspen Global Research Portfolio – Institutional
Shares
8,018
1,653
(718)
8,953
315
2,481
367,260
Janus Contrarian Fund – Class I Shares
5,228
956
(431)
5,753
233
–
132,444
Janus Diversified Alternatives Fund – Class N
Shares
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Per share amounts are calculated based on average shares
outstanding during the period.
(3)
Ratios do not include indirect expenses of the underlying funds
and/or investment companies in which the Portfolio invests.
(4)
Pursuant to a contractual agreement, Janus waived certain fees
and expenses during the period. The Ratio of Net Expenses (After
Waivers and Expense Offsets) to Average Net Assets would be
1.25% without the waiver of these fees and expenses.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Global Allocation Portfolio – Moderate (the
“Portfolio”) is a series fund. The Portfolio operates
as a “fund of funds,” meaning substantially all of the
Portfolio’s assets will be invested in other Janus funds
(the “underlying funds”). The Portfolio is part of
Janus Aspen Series (the “Trust”), which is organized
as a Delaware statutory trust and is registered under the
Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio is classified
as diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
Underlying
Funds
The Portfolio invests in a variety of underlying funds to pursue
its target allocation of equity investments, fixed-income
securities, and alternative investments and may also invest in
money market instruments or cash/cash equivalents. The Portfolio
has a target allocation, which is how the Portfolio’s
investments generally will be allocated among the major asset
classes over the long term, as well as normal ranges, under
normal market conditions, within which the Portfolio’s
asset class allocations generally will vary over short-term
periods. The Portfolio’s long-term expected average asset
allocation is as follows: 55% to equity investments, 35% to
fixed-income securities and money market instruments, and 10% to
alternative investments. Additional details and descriptions of
the investment objectives and strategies of each of the
underlying funds are available in the Portfolio’s and
underlying funds’ prospectuses. The Trustees of the
underlying Janus funds may change the investment objectives or
strategies of the underlying funds at any time without prior
notice to fund shareholders.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
The Portfolio’s net asset value (“NAV”) is
calculated based upon the NAV of each of the underlying funds in
which the Portfolio invests on the day of valuation. The NAV for
each class of the underlying funds is computed by dividing the
total value of securities and other assets allocated to the
class, less liabilities allocated to that class, by the total
number of shares outstanding for the class.
Securities held by the underlying funds are valued in accordance
with policies and procedures established by and under the
supervision of the Trustees (the “Valuation
Procedures”). Equity securities traded on a domestic
securities exchange are generally valued at the closing prices
on the primary market or exchange on which they trade. If such
price is lacking for the trading period immediately preceding
the time of determination, such securities are valued at their
current bid price. Equity securities that are traded on a
foreign exchange are generally valued at the closing prices on
such markets. In the event that there is no current trading
volume on a particular security in such foreign exchange, the
bid price from the primary exchange is generally used to value
the security. Securities that are traded on the over-the-counter
(“OTC”) markets are generally valued at their closing
or latest bid prices as available. Foreign securities and
currencies are converted to U.S. dollars using the
applicable exchange rate in effect at the close of the New York
Stock Exchange (“NYSE”). Each Portfolio will determine
the market value of individual securities held by it by using
prices provided by one or more professional pricing services
which may provide market prices to other funds or, as needed, by
obtaining market quotations from independent broker-dealers.
Short-term securities maturing within 60 days or less are
valued on an amortized cost basis. Debt securities with a
remaining maturity of greater than 60 days are valued in
accordance with the evaluated bid price supplied by the pricing
service that is intended to reflect market value. The evaluated
bid price supplied by the pricing service is an evaluation that
may consider factors such as security prices, yields, maturities
and ratings. Securities for which market quotations or evaluated
prices are not readily available or deemed unreliable are valued
at fair value determined in good faith under the Valuation
Procedures. Circumstances
in which fair value pricing may be utilized include, but are not
limited to: (i) a significant event that may affect the
securities of a single issuer, such as a merger, bankruptcy, or
significant issuer-specific development; (ii) an event that
may affect an entire market, such as a natural disaster or
significant governmental action; (iii) a nonsignificant
event such as a market closing early or not opening, or a
security trading halt; and (iv) pricing of a nonvalued
security and a restricted or nonpublic security. The underlying
funds use systematic fair valuation models provided by
independent third parties to value international equity
securities in order to adjust for stale pricing, which may occur
between the close of certain foreign exchanges and the close of
the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
held by the underlying funds will be recorded as soon as the
Trust is informed of the dividend, if such information is
obtained subsequent to the ex-dividend date. Dividends from
foreign securities may be subject to withholding taxes in
foreign jurisdictions. Interest income of the underlying funds
is recorded on the accrual basis and includes amortization of
premiums and accretion of discounts. Gains and losses are
determined on the identified cost basis, which is the same basis
used for federal income tax purposes. Income, as well as gains
and losses, both realized and unrealized, are allocated daily to
each class of shares based upon the ratio of net assets
represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Additionally, the
Portfolio, as a shareholder in the underlying funds, will also
indirectly bear its pro rata share of the expenses incurred by
the underlying funds. Each class of shares bears a portion of
general expenses, which are allocated daily to each class of
shares based upon the ratio of net assets represented by each
class as a percentage of total net assets. Expenses directly
attributable to a specific class of shares are charged against
the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The underlying funds may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
underlying funds distribute such amounts, such distributions
could constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would
Notes to
Financial Statements (unaudited)
(continued)
use in pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
The Portfolio classifies each of its investments in underlying
funds as Level 1, without consideration as to the
classification level of the specific investments held by the
underlying funds.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year except that the Portfolio now
classifies each of its investments in underlying funds as
Level 1. Previously, the Portfolio classified each of its
investments in underlying funds as Level 2.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The following table shows the amounts of transfers between
Level 1, Level 2 and Level 3 of the fair value
hierarchy during the period. The Portfolio recognizes transfers
between the levels as of the beginning of the fiscal year.
Transfers Out
of Level 2
Portfolio
to Level 1
Janus Aspen Global Allocation Portfolio - Moderate
$
9,893,950
2.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average
Investment
Daily Net
Advisory
Assets
Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Global Allocation Portfolio - Moderate
All Asset Levels
0.05
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s and the
underlying funds’ transfer agent. In addition, Janus
Services provides or arranges for the provision of certain other
administrative, recordkeeping, and shareholder relations
services for the Portfolio. Janus Services is not compensated
for its services related to the shares, except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that
the Portfolio’s normal operating expenses in any fiscal
year, including the investment advisory fee, but excluding any
expenses of an underlying fund (acquired fund fees and
expenses), the distribution and shareholder servicing fees
(applicable to Service Shares), administrative services fees
payable pursuant to the Transfer Agency Agreement, brokerage
commissions, interest, dividends, taxes, and extraordinary
expenses, exceed the annual rate noted below. Janus Capital has
agreed to continue the waiver until at least May 1, 2015.
If applicable, amounts reimbursed to the Portfolio by Janus
Capital are disclosed as “Excess Expense
Reimbursement” on the Statement of Operations.
Expense
Portfolio
Limit (%)
Janus Aspen Global Allocation Portfolio - Moderate
0.14(1)
(1)
Effective May 1, 2014, the expense limit decreased from 0.39% to
0.14%.
For a period of three years subsequent to the Portfolio’s
commencement of operations, Janus Capital may recover from the
Portfolio fees and expenses previously waived or reimbursed,
which could be then considered a deferral, if the
Portfolio’s expense ratio, including recovered expenses,
fails below the expense limit. The recoupment for such
reimbursement expires August 31, 2014. For the period ended
June 30, 2014, total reimbursement by Janus Capital was
$37,892 for the Portfolio. For the period ended June 30,2014, Janus Capital recovered $0 from the Portfolio. As of
June 30, 2014, the aggregate amount of recoupment that may
potentially be made to Janus Capital is $298,563.
Effective March 1, 2014, Wilshire Associates Inc.
(“Wilshire”), a global investment technology,
investment consulting, and investment management firm, no longer
acts as a consultant to Janus Capital. Wilshire provided
research and advice regarding asset allocation methodologies,
which Janus Capital may have used when determining asset class
allocations for the Portfolio. For its consulting services,
Janus Capital paid Wilshire an annual fee, payable monthly, that
was comprised of a combination of an initial program
establishment fee, fixed fee, and an asset-based fee.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to each
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
As of June 30, 2014, shares of the Portfolio were owned by
Janus Capital
and/or other
funds advised by Janus Capital, as indicated in the table below:
% of
% of
Class
Portfolio
Portfolio
Owned
Owned
Janus Aspen Global Allocation Portfolio - Moderate -
Institutional Shares
100
%
2
%
Janus Aspen Global Allocation Portfolio - Moderate - Service
Shares
Notes to
Financial Statements (unaudited)
(continued)
3.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary difference between book and tax
appreciation or depreciation of investments is wash sale loss
deferrals.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Global Allocation Portfolio - Moderate
$
10,835,106
$
807,852
$
(15,453)
$
792,399
4.
Capital Share
Transactions
Janus Aspen Global
Allocation Portfolio- Moderate
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional
Shares:
Shares sold
–
–
Reinvested dividends and distributions
273
383
Shares repurchased
–
–
Net Increase/(Decrease) in Portfolio Shares
273
383
Shares Outstanding, Beginning of Period
13,473
13,090
Shares Outstanding, End of Period
13,746
13,473
Transactions in Portfolio Shares – Service Shares:
Shares sold
166,142
778,006
Reinvested dividends and distributions
17,461
18,883
Shares repurchased
(73,527)
(62,764)
Net Increase/(Decrease) in Portfolio Shares
110,076
734,125
Shares Outstanding, Beginning of Period
789,092
54,967
Shares Outstanding, End of Period
899,168
789,092
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
5.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Global Allocation Portfolio - Moderate
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT We are
bottom-up,
fundamental investors. We believe a deep, independent research
process and high-conviction investing will deliver exceptional
results.
Team-Based Approach
Led by Jim Goff,
Director of Research
PERFORMANCE
OVERVIEW
Janus Aspen Global Research Portfolio’s Institutional
Shares and Service Shares returned 5.92% and 5.78%,
respectively, over the six-month period ended June 30,2014, while its primary benchmark, the MSCI World Index, and its
secondary benchmark, the MSCI All Country World Index, returned
6.18% and 6.18%, respectively.
MARKET
ENVIRONMENT
After recovering from volatility in late March and early April
due to selling pressure on momentum stocks and geopolitical
tensions between Russia and Ukraine, global equities rebounded
to post healthy gains. Among catalysts were an interest rate cut
by the European Central Bank and its other measures designed to
boost inflation and economic growth in the euro zone. Stronger
investor confidence in European peripheral countries was
reflected in some of their sovereign bond yields dipping below
3%. Emerging markets also showed notable improvement, led
primarily by India, where investors warmed to a pro-business
party winning a national election. A spike in oil prices due to
a sectarian conflict in Iraq weighed on sentiment briefly, but
was later offset by Federal Reserve Chairwoman Janet
Yellen’s positive outlook for the U.S. economy.
Meanwhile, a strengthening yen and lack of progress on Prime
Minister Shinzo Abe’s economic reforms weighed on Japanese
stocks.
PERFORMANCE
DISCUSSION
Our seven global sector teams employ a
bottom-up,
fundamental approach to identify what we consider the best
global opportunities. Our analysts take a long-term view of
companies with a focus on value creation and duration of growth,
which lead to high returns on invested capital. The Portfolio
directly captures the insights of our teams through their
highest-conviction ideas. In building a diversified portfolio,
we seek to minimize macroeconomic risks while generating
superior performance over longer periods.
Our financial holdings, led lower by Sberbank of Russia and
Deutsche Bank, were the most significant relative detractors
during the period. Sberbank, Russia’s largest bank,
suffered as a proxy for the broader Russian market, which sold
off over the Ukraine crisis. We reduced our position, but
continued to hold shares based on its historical ability to
generate high returns on equity despite the environment and that
its stock traded at a significant discount to global peers at
period end. We believe the discount should slowly diminish
longer term as geopolitical tensions ease.
Deutsche Bank, another detractor, was seen as being exposed to
higher litigation costs in the U.S. after French bank BNP
Paribas, which is also held in the Portfolio, agreed to an
$8.9 billion settlement regarding U.S. sanction
violations against Sudan, Iran and other countries. The fact
that market expectations for the settlement rose from
$1 billion to $8.9 billion within a month indicated
the fines were difficult to quantify. Deutsche Bank also traded
lower following an unexpected equity issuance. Additionally,
trading volumes in its best business segment, fixed income,
remained depressed. Despite these concerns, we believe Deutsche
Bank’s cost-restructuring efforts will reward shareholders
longer term.
Within our U.S. holdings and for the Portfolio overall,
Whole Foods Market weighed the most on performance. The natural
and organic foods grocery operator declined on disappointing
long-term guidance due to increased competitive pressures. We
believe Whole Foods will continue to gain market share and will
be aggressive in acquiring store sites and consumers from
competitors to grow long term, but we recognize that effort will
also lead to slower earnings growth over the
short-to-intermediate
term. We are continuing to analyze the competitive environment
to assess whether that will restrict the long-term growth we
anticipate for Whole Foods.
Our industrials holdings, led by Canadian Pacific Railway, were
our largest relative contributors. Canadian Pacific, the
Portfolio’s largest holding, benefited from increased
investor appreciation for its ongoing cost improvements under
new management. Consistent with our approach, we invested in
Canadian Pacific because of management’s focus on improving
shareholder returns. The company reported
better-than-expected
earnings in April despite difficult winter weather conditions
and began a stock repurchase program. Management also reaffirmed
guidance regardless of the lower volumes in the first quarter.
Subsequently, freight volumes increased as the economy recovered
from the first quarter slowdown.
Shire led the strong relative performance of our health care
holdings. The Ireland-based specialty pharmaceutical firm
rebuffed buyout attempts from
U.S.-based
AbbVie, citing undervaluation, during the period. However, it
subsequently accepted a higher bid from AbbVie. We favor Shire
for its dominant position in the attention deficit and
hyperactivity disorder (ADHD) market as well as its portfolio of
drugs for rare diseases.
EOG Resources also aided performance. The exploration and
production oil and gas company benefited from a strong earnings
report and significantly
higher-than-expected
production volume. We think the company’s intense focus on
finding more oil-directed shale opportunities and ability to
recover more oil from its wells will lead to higher value than
peers.
OUTLOOK
In what we consider a not-cheap, not-expensive market, stock
selection is paramount. Overall, it’s hard to argue for
broader multiple expansions or massive shifts in risk tolerance.
What we can see, however, is a differentiation at the company
level. Today, large-cap multiples are clustered around the
average to as great an extent as seen in at least 20 years.
If businesses are priced alike but perform differently,
investors have the opportunity to make money on the companies
that outperform their competitors. That is why we see
stock-picking opportunities.
Risk levels are down. Statistics tell us that, but so do
headlines. While investors ran for cover when Cyprus twitched in
2013, the conflicts in Iraq and Ukraine hardly slowed the rally.
The quarter started with a shift away from momentum stocks and
saw downward pressure, but the concern was short-lived and
sharpest in the sectors with loftier valuations. With Spanish
sovereign debt trading near the levels of U.S. Treasurys,
it is clear the market’s euro-obsession is a thing of the
past. The sharp re-rating in India following a pro-business
election result also shows how a little confidence boosts
markets.
As macro concerns in Europe dissipate, the focus turns to which
companies can do more with less. Economic growth remains slow in
Europe, but businesses there have room to expand margins through
efficiency improvements. U.S. margins have recovered from
the global financial crisis while European margins lag.
Naturally, not all businesses have the ability or determination
to drive margin expansion. It is important to pick those that
can.
In the global environment of slow but improving economic growth,
companies with strong competitive advantages and ones that can
create growth internally can do well. Investors are willing to
pay more for these businesses, which encourages us, as markets
do not seem to be differentiating among companies. The investors
we speak of include companies with flush balance sheets looking
for major acquisitions.
To us, little says more about the mix of low growth, risk
tolerance and company differentiation than the flurry of merger
and acquisition transactions this year. Deal levels in the
U.S. are up from recent years. While some transactions,
especially in health care, reflect an effort to lower tax rates,
the buyouts broadly reflect that businesses are more optimistic
and willing to spend money to grow. The market is rewarding the
acquired and the acquirer. We would expect to see more deals,
including more trans-Atlantic acquisitions outside of health
care driven by tax planning. It should be a boon to equity
markets.
Thank you for your investment in Janus Aspen Global Research
Portfolio.
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
The sectors listed above reflect those covered by the seven
analyst teams who comprise the Janus Research Team.
Janus Aspen Global Research Portfolio – Institutional
Shares
5.92%
25.06%
14.54%
6.33%
8.60%
0.53%
Janus Aspen Global Research Portfolio – Service Shares
5.78%
24.75%
14.25%
6.06%
8.32%
0.78%
MSCI World
IndexSM
6.18%
24.05%
14.99%
7.25%
7.12%
MSCI All Country World
IndexSM
6.18%
22.95%
14.28%
7.46%
N/A**
Morningstar Quartile – Institutional Shares
–
2nd
3rd
4th
3rd
Morningstar Ranking – based on total returns for World
Stock Funds
–
290/1,127
432/777
376/480
107/202
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
This Portfolio has a performance-based management fee that may
adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to
December 31, 1999 are derived from the historical
performance of Institutional Shares, adjusted to reflect the
higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may
have different performance characteristics.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Since inception return is not shown for the index because the
index’s inception date differs significantly from the
Portfolio’s inception date.
Expense
Examples
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,059.20
$
2.76
$
1,000.00
$
1,022.12
$
2.71
0.54%
Service Shares
$
1,000.00
$
1,057.80
$
4.03
$
1,000.00
$
1,020.88
$
3.96
0.79%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
MSCI All Country World
IndexSM
An unmanaged, free float-adjusted
market capitalization weighted index composed of stocks of
companies located in countries throughout the world. It is
designed to measure equity market performance in global
developed and emerging markets. The index includes reinvestment
of dividends, net of foreign withholding taxes.
MSCI World
IndexSM
A free float-adjusted market
capitalization weighted index that is designed to measure the
equity market performance of developed market countries in North
America, Europe, and the Asia/Pacific Region. The index includes
reinvestment of dividends, net of foreign withholding taxes.
ADR
American Depositary Receipt
LP
Limited Partnership
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Portfolio
Aggregate Value
Janus Aspen Global Research Portfolio
$
11,987,072
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Global Research Portfolio
Janus Cash Liquidity Fund LLC
2,815,221
32,253,542
(35,068,763)
–
$
–
$
633
$
–
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Global Research Portfolio (the
“Portfolio”) is a series fund. The Portfolio is part
of Janus Aspen Series (the “Trust”), which is
organized as a Delaware statutory trust and is registered under
the Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio invests
primarily in equity securities. The Portfolio is classified as
diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Notes to
Financial Statements (unaudited)
(continued)
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between
the close of certain foreign exchanges and the close of the
NYSE. These are generally categorized as Level 2 in the
hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss
Notes to
Financial Statements (unaudited)
(continued)
to the Portfolio. The Portfolio may be unable to recover its
investment from the counterparty or may obtain a limited
recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Emerging Market
Investing
The Portfolio may invest in securities of issuers or companies
from or with exposure to one or more “developing
countries” or “emerging markets.” Investing in
emerging markets may involve certain risks and considerations
not typically associated with investing in the United States and
imposes risks greater than, or in addition to, the risks
associated with investing in securities of more developed
foreign countries. Emerging markets securities are exposed to a
number of additional risks, which may result from less
government supervision and regulation of business and industry
practices (including the potential lack of strict finance and
accounting controls and standards), stock exchanges, brokers,
and listed companies, making these investments potentially more
volatile in price and less liquid than investments in developed
securities markets, resulting in greater risk to investors.
There is a risk in developing countries that a future economic
or political crisis could lead to price controls, forced mergers
of companies, expropriation or confiscatory taxation, imposition
or enforcement of foreign ownership limits, seizure,
nationalization, sanctions or imposition of restrictions by
various governmental entities on investment and trading, or
creation of government monopolies, any of which may have a
detrimental effect on the Portfolio’s investments. In
addition, the Portfolio’s investments may be denominated in
foreign currencies and therefore, changes in the value of a
country’s currency compared to the U.S. dollar may
affect the value of the Portfolio’s investments. To the
extent that the Portfolio invests a significant portion of its
assets in the securities of issuers in or companies of a single
country or region, it is more likely to be impacted by events or
conditions affecting that country or region, which could have a
negative impact on the Portfolio’s performance.
Additionally, foreign and emerging market risks, including but
not limited to price controls, expropriation or confiscatory
taxation, imposition or enforcement of foreign ownership limits,
nationalization, and restrictions on repatriation of assets may
be heightened to the extent the Portfolio invests in Chinese
local market securities (also known as “A Shares”).
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
3.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s “base” fee rate prior to
any performance adjustment (expressed as an annual rate).
Base Fee
Rate (%)
Portfolio
(annual rate)
Janus Aspen Global Research Portfolio
0.60
For the Portfolio, the investment advisory fee rate is
determined by calculating a base fee and applying a performance
adjustment. The base fee rate is the same as the contractual
investment advisory fee rate shown in the table above. The
performance adjustment either increases or decreases the base
fee depending on how well the Portfolio has performed relative
to its benchmark index, as shown below:
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance
Adjustment
The investment advisory fee rate paid to Janus Capital by the
Portfolio consists of two components: (1) a base fee
calculated by applying the contractual fixed rate of the
advisory fee to the Portfolio’s average daily net assets
during the previous month (“Base Fee Rate”), plus or
minus (2) a performance-fee adjustment (“Performance
Adjustment”) calculated by applying a variable rate of up
to 0.15% (positive or negative) to the Portfolio’s average
daily net assets during the applicable performance measurement
period. The Performance Adjustment is based on a rolling
36-month
performance measurement period. The Performance Adjustment began
February 2007 for the Portfolio.
No Performance Adjustment is applied unless the difference
between the Portfolio’s investment performance and the
cumulative investment record of the Portfolio’s benchmark
index is 0.50% or greater (positive or negative) during the
applicable performance measurement period. The Base Fee Rate is
subject to an upward or downward Performance Adjustment for
every full 0.50% increment by which the Portfolio outperforms or
underperforms its benchmark index. Because the Performance
Adjustment is tied to the Portfolio’s relative performance
compared to its benchmark index (and not its absolute
performance), the Performance Adjustment could increase Janus
Capital’s fee even if the Portfolio’s Shares lose
value during the performance measurement period and could
decrease Janus Capital’s fee even if the Portfolio’s
Shares increase in value during the performance measurement
period. For purposes of computing the Base Fee Rate and the
Performance Adjustment, net assets are averaged over different
periods (average daily net assets during the previous month for
the Base Fee Rate, versus average daily net assets during the
performance measurement period for the Performance Adjustment).
Performance of the Portfolio is calculated net of expenses,
whereas the Portfolio’s benchmark index does not have any
fees or expenses. Reinvestment of dividends and distributions is
included in calculating both the performance of the Portfolio
and the Portfolio’s benchmark index. The Base Fee Rate is
calculated and accrued daily. The Performance Adjustment is
calculated monthly in arrears and is accrued throughout the
month. The investment fee is paid monthly in arrears. Under
extreme circumstances involving underperformance by a rapidly
shrinking Portfolio, the dollar amount of the Performance
Adjustment could be more than the dollar amount of the Base Fee
Rate. In such circumstances, Janus Capital would reimburse the
Portfolio.
The investment performance of the Portfolio’s Service
Shares for the performance measurement period is used to
calculate the Performance Adjustment. After Janus Capital
determines whether the Portfolio’s performance was above or
below its benchmark index by comparing the investment
performance of the Portfolio’s Service Shares against the
cumulative investment record of the Portfolio’s benchmark
index, Janus Capital applies the same Performance Adjustment
(positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance
Adjustment on future overall compensation to Janus Capital since
it depends on the performance of the Portfolio relative to the
record of the Portfolio’s benchmark index and future
changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional
information contain additional information about
performance-based fees. The amount shown as advisory fees on the
Statement of Operations reflects the Base Fee Rate plus/minus
any Performance Adjustment. During the period ended
June 30, 2014, the Portfolio recorded a Performance
Adjustment of $(391,092).
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
Notes to
Financial Statements (unaudited)
(continued)
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
4.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign
currency translations. The primary differences between book and
tax appreciation or depreciation of investments are wash sale
loss deferrals, investments in partnerships and investments in
passive foreign investment companies.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Global Research Portfolio
$
644,150,494
$
172,567,514
$
(13,893,158)
$
158,674,356
Accumulated capital losses noted below represent net capital
loss carryovers, as of December 31, 2013, that may be
available to offset future realized capital gains and thereby
reduce future taxable gains distributions. Under the Regulated
Investment Company Modernization Act of 2010, the Portfolio is
permitted to carry forward capital losses incurred in taxable
years beginning after December 22, 2010 for an unlimited
period. Losses incurred during those future years will be
required to be utilized prior to the losses incurred in
pre-enactment taxable years. As a result of this ordering rule,
pre-enactment capital loss carryforwards may more likely expire
unused. Also, post-enactment capital losses that are carried
forward will retain their character as either short-term or
long-term capital losses rather than being considered all
short-term as under previous law. The following table shows
these capital loss carryovers.
Capital Loss
Carryover Expiration Schedule
For the year ended December 31, 2013
December 31,
No Expiration
Accumulated
Portfolio
2017
Short-Term
Long-Term
Capital Losses
Janus Aspen Global Research Portfolio
$
(232,005,326)
$
–
$
–
$
(232,005,326)
5.
Capital Share
Transactions
Janus Aspen Global Research Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
123,397
329,792
Reinvested dividends and distributions
97,836
194,916
Shares repurchased
(904,294)
(2,213,254)
Net Increase/(Decrease) in Portfolio Shares
(683,061)
(1,688,546)
Shares Outstanding, Beginning of Period
15,096,348
16,784,894
Shares Outstanding, End of Period
14,413,287
15,096,348
Transactions in Portfolio Shares – Service Shares
Shares sold
355,469
904,243
Reinvested dividends and distributions
32,515
59,891
Shares repurchased
(356,433)
(856,826)
Net Increase/(Decrease) in Portfolio Shares
31,551
107,308
Shares Outstanding, Beginning of Period
5,279,177
5,171,869
Shares Outstanding, End of Period
5,310,728
5,279,177
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
Notes to
Financial Statements (unaudited)
(continued)
6.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Global Research Portfolio
$
134,151,583
$
156,233,562
$
–
$
–
7.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Janus Aspen
Global Technology Portfolio
(unaudited)
PORTFOLIO SNAPSHOT Our mission is to find
companies that benefit from the high pace of change in
technology. We believe technology markets are complex, adaptive
systems that demonstrate emergent properties and inherently
unpredictable changes. We construct a portfolio with special
attention to downside risk that seeks to balance resilience and
optionality. Combined with deep fundamental industry analysis
and thoughtful valuation and scenario analysis we seek to invest
in stocks that have the potential to outperform without relying
on difficult predictions about the future.
Brinton Johns
co-portfolio manager
J. Bradley Slingerlend
co-portfolio manager
PERFORMANCE
OVERVIEW
During the six months ended June 30, 2014, Janus Aspen
Global Technology Portfolio’s Institutional Shares and
Service Shares returned 5.09% and 5.00%, respectively. By
comparison, the Portfolio’s primary and secondary
benchmarks, the S&P 500 Index and the MSCI World
Information Technology Index, returned 7.14% and 7.30%,
respectively.
INVESTMENT
ENVIRONMENT
After a sell-off in some of its highly-valued subsectors in late
March and early April, the information technology sector
rebounded to outperform broader global indices. Driven by sector
heavyweight Apple, the hardware subsector was easily the largest
contributor in the period. A well-received earnings report was a
key factor in Apple’s strong return. Semiconductors were
also important contributors, as they benefited from growing
demand, particularly in their auto and industrial markets. With
inventories low, production lead times lengthened and pricing
firmed. System software was also strong, including gains from
giant Microsoft. Data processing, meanwhile, was among
subsectors with negative returns. Generally, investors moved
away from higher valuation mid-cap and small-cap companies to
those with lower valuations, primarily in legacy IT companies.
PERFORMANCE
DISCUSSION
Since we believe technology markets are complex, we construct a
portfolio with special attention to downside risk that seeks to
balance resilience and optionality. We believe our focus on
less-volatile stocks than the secondary benchmark’s
holdings, and in companies that can benefit from the high pace
of change in technology, can provide superior performance longer
term.
Our underweight in hardware weighed the most on relative
performance, followed by our holdings in semiconductors relative
to our secondary benchmark.
Individually, ARM Holdings was our largest detractor. The UK
semiconductor intellectual property licensing firm suffered from
concerns over the slowing of the high-end smartphone market, its
key market segment. ARM has two other markets it is pursuing,
embedded systems and networking, but those are small compared to
mobile, so it’s unclear if those areas will be sufficient
to pick up the slack. The company also reported results that
were in line with market expectations, although its income from
royalties was somewhat soft. More importantly, the
company’s licensing revenue growth, a leading indicator of
future royalties, remained strong. Additionally, we think its
royalty income will improve later this year based on production
forecasts by semiconductor manufacturers. We believe the company
will continue to benefit from growth in smartphones and revenue
licensing from semiconductor manufacturers.
E-commerce
leader Amazon.com also weighed on performance. The stock
declined early in the period after management reported quarterly
profits and revenue below market estimates and gave relatively
modest revenue guidance. Despite the headline numbers, the
company had improved returns on invested capital, better
international profits and lower capital expenditures, which we
think could position it for higher profitability and strong
free-cash-flow generation going forward. Later in the period,
management lowered its profitability guidance based on continued
investment in its various businesses. We added to our position
based on our belief that the company’s competitive
advantages (including a low overhead cost structure that enables
an aggressive pricing structure and faster shipping) will
continue to cause consumers to shift an increasing amount of
their general merchandise spending toward it.
Janus Aspen
Global Technology Portfolio
(unaudited)
MasterCard also detracted from performance after a strong 2013.
The global card payment network operator disappointed investors
with both its quarterly earnings and net revenue (revenue minus
rebates and incentives) coming in below expectations. Management
also guided its 2014 revenue near the low end of its longer-term
target. We sold our position due to its reduced risk/reward
profile.
Our holdings and underweight in IT consulting as well as our
underweight in data processing were the most significant
contributors to relative performance.
Apple, the Portfolio’s largest holding, was easily the top
contributor for the period. The computer and mobile device maker
reported good quarterly financial results, with
stronger-than-expected
iPhone sales offsetting weaker iPad volumes and driving higher
margins. Sell-through data we track indicates the iPhone has
grown its market share in many key markets, such as the U.S.,
UK, France, Germany, China and Japan. Apple’s iTunes
accounts have also grown significantly over the past year,
indicating strength in its ecosystem that we feel could be
monetized in the future. Additionally, Apple announced it would
significantly increase its stock buyback program. We continue to
appreciate the computer and mobile device maker’s growing
ecosystem and likely significant upgrades to its popular iPhone,
as well as new products and services to drive future growth.
Real estate website operator Zillow was also a top contributor
on strong gains during the period. With more people signing up
to rent, sell or mortgage properties, Zillow reported a surprise
quarterly profit during the period. Because of its network
effect, the operator of the most-visited real estate websites in
the U.S. continues to gain listings and layer on new
businesses. We believe the company has significantly pulled away
from its competition, so its future growth prospects remain
bright.
Microsoft, another top contributor, benefited after management
announced it would launch its Office software on the iPad, which
we think could be a significant growth driver. We appreciate
that Microsoft is moving to a subscription-based business model
and away from licensing its software. We also like the
company’s exposure to the cloud through Exchange and
Enterprise Office 365. There remain vulnerable parts to
Microsoft’s business, but with PCs leveling off we see more
upside opportunity than previously.
Please see the Derivative Instruments section in the “Notes
to Financial Statements” for derivatives used by the
Portfolio.
OUTLOOK
There is a pause in enterprise IT spending because many
architecture decisions are being made as part of the transition
from moving on-premises servers to the cloud. We are therefore
avoiding infrastructure-related hardware and software companies.
However, we think this environment is favorable for
mission-critical software companies, such as Oracle and
Microsoft, two Top 5 holdings in the Portfolio. We also have
considerable confidence in software-as-a-service, cloud-based
software companies as likely winners over the next five years,
but are awaiting valuations to fall to more attractive levels.
Several of those stocks are starting to near levels in which we
think initiating positions make sense.
In consumer IT, the Internet of Things (IoT) as an investment
theme looks promising longer term, but nearer term it’s
difficult to identify actionable ideas that would be direct
beneficiaries. Historically, consumer IT has been a hit-driven
market. Some products like Nest and Dropcam have sold 500,000 to
1 million units, but we would like to see hundreds of those
types of products selling several million units as an indication
the market is taking off. In other areas, smartphones continue
to demonstrate good growth, although tablet computer sales have
continued to disappoint.
While investors are beginning to question the multiyear growth
rate and overall market for tablets, PC sales have improved
somewhat for semiconductor makers. Handset and data center
demand have also been good for the chip stocks. More interesting
has been strong demand in the industrial market, particularly
autos. Industrials are important because they haven’t had
significant orders for three years; they are just now cleaning
out inventory and starting to order again. We own semiconductor
makers and electronic connector makers that would benefit from a
rebound in the industrials market.
With the pace of disruption accelerating, it’s more
important than ever to be vigilant and thoughtful about every
potential technology investment. In our effort to always become
better investors, we like to take a cross-disciplinary approach
to thinking.
Here is a question you might not have thought about before: what
does investing have to do with standup comedy and magic?
There are a couple characteristics that all three disciplines
have in common. To begin with, all of these fields require a
passion for perfection. It requires an enormous amount of
dedication and focus to constantly learn and hone the art of
investing, delivering a knee-slapping, hilarious standup
show, or a mesmerizingly, mind-boggling magic performance. All
of these skills require a near obsession in order to transform a
passion into an art form. The second thing all three art forms
require is presence – the ability to step outside
one’s self-centered world and really focus on what
matters – a sort of vigilance that is hard to develop,
and even harder to perfect. In standup comedy, the comedian must
be ever focused on the vibe of the audience, empathically
sensing their emotions and reactions in order to work the crowd
and involve the audience in the narrative. Magicians must also
focus deeply on their subjects and surroundings in order to
create a convincing alternative reality. Similarly, investors
must be vigilantly focused on every piece of available
information in order to construct the proper circumstances for
winning long term investments and portfolio construction. All
three require an intense observational skill in order to achieve
successful performances over and over again.
Standup comedy specifically shares an attribute with investing
that we call nonlinear thinking. Comedians, at their core,
observe human behavior. In fact, many comics consider themselves
“observational” performers. They are constantly on the
hunt for patterns and correlations that are not obvious to folks
as they go through their everyday life. Then, in pointing out a
non-obvious connection between two things that initially seem
unrelated or glossed over by conventional wisdom, they create a
spark – a spark that turns into a big laugh as the
audience says to themselves, “That’s so funny because
it’s so true!”
Investors likewise are always trying to connect nonobvious
dots – we use the acronym ABCD for “always be
connecting dots.” We see the world as a giant puzzle ready
to be solved if only we can discern which pieces fit together.
Then, when we connect a few seemingly disparate pieces of
information, we find insight which informs our investing. The
things a standup comedian points out, and the ideas we connect
for investment themes are worlds apart, but when we draw those
connections they start to become obvious.
Magicians also share a specific attribute with
investing – leveraging cognitive bias. Cognitive bias
is a term for the way our brains try to trick us. Over time
we’ve been wired for simpler worlds – wake up,
hunt and gather, secure shelter, and enjoy ourselves. But, the
world has become increasingly complex, and our brains have
developed impulsive shortcuts that make us believe one thing is
true, when in fact something completely different explains the
situation. Magicians are the kings at exploiting this misfiring
of the brain – they take advantage of vulnerabilities
in our ability to accurately perceive the world around us.
Likewise, as investors we fall victim to many biases of
impulsive or emotional thinking. For example, we anchor on a
prior cost basis, or we over-emphasize recent information above
more relevant data points. All of these shortcuts work against
superior long-term performance. So while magicians exploit bias,
investors must remain vigilant to never be fooled by impulsive
thinking.
This comparison of the three seemingly unrelated fields largely
comes back to the idea of presence – the hardest thing
we do every day is to simply be in the moment, 100% focused with
vigilance and attention. This is an obsession that all great
investors, standups and magicians are constantly perfecting. If
a standup isn’t paying attention all the time, they will
miss their next great joke opportunity – and if they
fail to follow cues from the audience, they will lose the
reaction. If a magician fails to pull off a trick leveraging the
brain’s built-in biases, the illusion is revealed and the
mystery is lost. The standup and the magician lose their
audiences if they lose focus, much like the investor loses
long-term performance if they fail to connect dots, avoid
cognitive bias, and pay attention. Technology investing is a
dynamic environment with a rising pace of change –
this creates an even higher burden for presence and the ability
to connect unrelated dots. Using these methods, we are able to
focus on finding the signal in the noise of data points.
Thank you for your investment in Janus Aspen Global Technology
Portfolio.
Janus Aspen
Global Technology Portfolio
(unaudited)
Janus Aspen
Global Technology Portfolio At A Glance
5 Top
Performers – Holdings
Contribution
Apple, Inc.
1.76%
Zillow, Inc. – Class A
0.62%
Microsoft Corp.
0.53%
Cadence Design Systems, Inc.
0.50%
Taiwan Semiconductor Manufacturing Co., Ltd.
0.41%
5 Bottom
Performers – Holdings
Contribution
ARM Holdings PLC
–0.47%
Amazon.com, Inc.
–0.32%
MasterCard, Inc. – Class A
–0.28%
ChannelAdvisor Corp.
–0.25%
ANSYS, Inc.
–0.21%
5 Top
Performers – Sectors*
Portfolio Weighting
Portfolio Contribution
(Average % of Equity)
S&P
500®
Index Weighting
Consumer Discretionary
0.53%
7.79%
12.14%
Financials
0.47%
4.13%
16.17%
Industrials
0.19%
4.18%
10.74%
Consumer Staples
0.08%
0.23%
9.65%
Telecommunication Services
0.04%
0.62%
2.39%
5 Bottom
Performers – Sectors*
Portfolio Weighting
Portfolio Contribution
(Average % of Equity)
S&P
500®
Index Weighting
Information Technology
–1.34%
79.94%
18.71%
Energy
–0.59%
0.00%
10.31%
Health Care
–0.44%
0.89%
13.34%
Utilities
–0.34%
0.00%
3.04%
Materials
–0.05%
0.00%
3.51%
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard codes, which are the exclusive property
and a service mark of MSCI Inc. and Standard & Poor’s.
Janus Aspen Global Technology Portfolio –
Institutional Shares
5.09%
30.77%
19.27%
9.91%
–0.55%
0.77%
Janus Aspen Global Technology Portfolio – Service
Shares
5.00%
30.32%
19.00%
9.65%
–0.80%
1.02%
S&P
500®
Index
7.14%
24.61%
18.83%
7.78%
4.05%
MSCI World Information Technology Index
7.30%
30.29%
16.15%
6.81%
–1.68%**
Morningstar Quartile – Institutional Shares
–
3rd
2nd
2nd
3rd
Morningstar Ranking – based on total returns for
Technology Funds
–
115/203
77/202
62/194
87/141
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Foreign securities have additional risks including exchange
rate changes, political and economic upheaval, the relative lack
of information, relatively low market liquidity and the
potential lack of strict financial and accounting controls and
standards. These risks are magnified in emerging markets. The
prices of foreign securities held by the fund, and therefore a
fund’s performance, may decline in response to such
risks.
The Portfolio will normally invest at least 80% of its net
assets, measured at the time of purchase, in the type of
securities described by its name.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Net dividends reinvested are the dividends that remain to be
reinvested after foreign tax obligations have been met. Such
obligations vary from country to country.
Ranking is for the share class shown only; other classes may
have different performance characteristics. When an expense
waiver is in effect, it may have a material effect on the total
return, and therefore the ranking
and/or
rating for the period.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
The MSCI World Information Technology Index since inception
returns are calculated from January 31, 2000.
Expense
Examples
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,050.90
$
3.92
$
1,000.00
$
1,020.98
$
3.86
0.77%
Service Shares
$
1,000.00
$
1,050.00
$
5.13
$
1,000.00
$
1,019.79
$
5.06
1.01%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
MSCI World Information Technology
Index
A capitalization weighted index
that monitors the performance of information technology stocks
from developed market countries in North America, Europe, and
the Asia/Pacific Region. The index includes reinvestment of
dividends, net of foreign withholding taxes.
S&P
500®
Index
A commonly recognized,
market-capitalization weighted index of 500 widely held equity
securities, designed to measure broad U.S. equity
performance.
ADR
American Depositary Receipt
LLC
Limited Liability Company
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Loaned security; a portion or all of the security is on loan at
June 30, 2014.
§
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Global Technology Portfolio
Apptio, Inc.
5/2/13
$
584,114
$
584,114
0.4
%
Okta, Inc.
5/23/14
612,947
612,947
0.4
Total
$
1,197,061
$
1,197,061
0.8
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Global Technology Portfolio
Janus Cash Collateral Fund LLC
–
24,163,278
(15,902,519)
8,260,759
$
–
$
37,788(1)
$
8,260,759
Janus Cash Liquidity Fund LLC
3,210,971
25,885,681
(28,752,652)
344,000
–
641
344,000
Total
$
–
$
38,429
$
8,604,759
(1)
Net of income paid to the
securities lending agent and rebates paid to the borrowing
counterparties.
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include futures, forward currency,
written options, and swap contracts. Forward currency contracts
and swap contracts are reported at their unrealized
appreciation/(depreciation) at measurement date, which
represents the change in the contract’s value from trade
date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Global Technology Portfolio (the
“Portfolio”) is a series fund. The Portfolio is part
of Janus Aspen Series (the “Trust”), which is
organized as a Delaware statutory trust and is registered under
the Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio invests
primarily in equity securities. The Portfolio is classified as
diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
Notes to
Financial Statements (unaudited)
(continued)
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
For restricted equity securities and private placements where
observable inputs are limited, assumptions about market activity
and risk are used in employing valuation techniques such as the
market approach, the income approach, or the cost approach, as
defined under the FASB Guidance. These are categorized as
Level 3 in the hierarchy.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3
securities as of June 30, 2014.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a result, the
use of derivatives may expose the Portfolio to additional risks
that it would not be subject to if it invested directly in the
securities underlying those derivatives. The use of derivatives
may result in larger losses or smaller gains than otherwise
would be the case. Derivatives can be volatile and may involve
significant risks, including, but not limited to, counterparty
risk, credit risk, currency risk,
equity risk, index risk, interest rate risk, leverage risk, and
liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC, the
Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A forward foreign currency exchange contract (“forward
currency contract”) is an obligation to buy or sell a
specified currency at a future date at a negotiated rate (which
may be U.S. dollars or a foreign currency). The Portfolio
may enter into forward currency contracts for hedging purposes,
including, but not limited to, reducing exposure to changes in
foreign currency exchange rates on foreign portfolio holdings
and locking in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in or exposed to
foreign currencies. The Portfolio may also invest in forward
currency contracts for nonhedging purposes such as seeking to
enhance returns. The Portfolio is subject to currency risk in
the normal course of pursuing its investment objective through
its investments in forward currency contracts.
The gain or loss arising from the difference between the
U.S. dollar cost of the original contract and the value of
the foreign currency in U.S. dollars upon closing a
contract is included in “Net realized gain/(loss) from
investment and foreign currency transactions” on the
Statement of Operations.
During the period, the Portfolio entered into forward contracts
with the obligation to sell foreign currencies in the future at
an agreed upon rate in order to decrease exposure to currency
risk associated with foreign currency denominated securities
held by the Portfolio.
An options contract provides the purchaser with the right, but
not the obligation, to buy (call option) or sell (put option) a
financial instrument at an agreed upon price. The Portfolio is
subject to interest rate risk, liquidity risk, equity risk, and
currency risk in the normal course of pursuing its investment
objective through its investments in options contracts. The
Portfolio may use options contracts to hedge against changes in
interest rates, the values of equities, or foreign currencies.
The Portfolio may utilize American-style and European-style
options. An American-style option is an option contract that can
be exercised at any time between the time of purchase and the
option’s expiration date. A European-style option is an
option contract that can only be exercised on the option’s
expiration date. The Portfolio may also purchase or write put
and call options on foreign currencies in a manner similar to
that in which futures or forward contracts on foreign currencies
will be utilized. The Portfolio generally invests in options to
hedge against adverse movements in the value of portfolio
holdings.
When an option is written, the Portfolio receives a premium and
becomes obligated to sell or purchase the underlying security at
a fixed price, upon exercise of the option. In writing an
option, the Portfolio bears the risk of an unfavorable change in
the price of the security underlying the written option.
Exercise of an option written by the Portfolio could result in
the Portfolio buying or selling a security at a price different
from the current market value.
When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option, or the
cost of the security for a purchased put or call option are
adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and
OTC put and call options on domestic securities indices, and on
foreign securities indices listed on domestic and foreign
securities exchanges. Options on securities indices are similar
to options on securities except that (1) the expiration
cycles of securities index options are monthly, while those of
securities options are currently quarterly, and (2) the
delivery requirements are different. Instead of giving the right
to take or make delivery of securities at a specified price, an
option on a securities index gives the holder the right to
receive a cash “exercise settlement amount” equal to
(a) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on
the date of exercise, multiplied by (b) a fixed “index
multiplier.” Receipt of this cash amount will depend upon
the closing level of the securities index upon which the option
is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and
the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium
received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the
options are standardized. Options traded OTC expose the
Portfolio to counterparty risk in the event that the
counterparty does not perform. This risk is mitigated by having
a netting arrangement between the Portfolio and the counterparty
and by having the counterparty post collateral to cover the
Portfolio’s exposure to the counterparty.
Holdings of the Portfolio designated to cover outstanding
written options are noted on the Schedule of Investments.
Options written are reported as a liability on the Statement of
Assets and Liabilities as “Options written, at value.”
Realized gains and losses are reported as “Net realized
gain/(loss) from written options contracts” on the
Statement of Operations.
The risk in writing call options is that the Portfolio gives up
the opportunity for profit if the market price of the security
increases and the options are exercised. The risk in writing put
options is that the Portfolio may incur a loss if the market
price of the security decreases and the options are exercised.
The risk in buying options is that the Portfolio pays a premium
whether or not the options are exercised. The use of such
instruments may involve certain additional risks as a result of
unanticipated movements in the market. A lack of correlation
between the value of an instrument underlying an option and the
asset being hedged, or unexpected adverse price movements, could
render the Portfolio’s hedging strategy unsuccessful. In
addition, there can be no assurance that a liquid secondary
market will exist for any option purchased or sold. There is no
limit to the loss the Portfolio may recognize due to written
call options.
During the period, the Portfolio purchased call options on
various equity securities for the purpose of increasing exposure
to individual equity risk.
The following table provides average ending monthly market value
amounts on purchased call options during the period ended
June 30, 2014.
Portfolio
Purchased Call Options
Janus Aspen Global Technology Portfolio
$
16,976
During the period, the Portfolio wrote put options on various
equity securities for the purpose of increasing exposure to
individual equity risk
and/or
generating income.
The following table provides average ending monthly market value
amounts on written put options during the period ended
June 30, 2014.
Portfolio
Written Put Options
Janus Aspen Global Technology Portfolio
$
34,807
Written option activity for the period ended June 30, 2014
is indicated in the table below:
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
Fair Value of Derivative Instruments as of June 30,2014
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
Notes to
Financial Statements (unaudited)
(continued)
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Emerging Market
Investing
The Portfolio may invest in securities of issuers or companies
from or with exposure to one or more “developing
countries” or “emerging markets.” Investing in
emerging markets may involve certain risks and considerations
not typically associated with investing in the United States and
imposes risks greater than, or in addition to, the risks
associated with investing in securities of more developed
foreign countries. Emerging markets securities are exposed to a
number of additional risks, which may result from less
government supervision and regulation of business and industry
practices (including the potential lack of strict finance and
accounting controls and standards), stock exchanges, brokers,
and listed companies, making these investments potentially more
volatile in price and less liquid than investments in developed
securities markets, resulting in greater risk to investors.
There is a risk in developing countries that a future economic
or political crisis could lead to price controls, forced mergers
of companies, expropriation or
confiscatory taxation, imposition or enforcement of foreign
ownership limits, seizure, nationalization, sanctions or
imposition of restrictions by various governmental entities on
investment and trading, or creation of government monopolies,
any of which may have a detrimental effect on the
Portfolio’s investments. In addition, the Portfolio’s
investments may be denominated in foreign currencies and
therefore, changes in the value of a country’s currency
compared to the U.S. dollar may affect the value of the
Portfolio’s investments. To the extent that the Portfolio
invests a significant portion of its assets in the securities of
issuers in or companies of a single country or region, it is
more likely to be impacted by events or conditions affecting
that country or region, which could have a negative impact on
the Portfolio’s performance. Additionally, foreign and
emerging market risks, including but not limited to price
controls, expropriation or confiscatory taxation, imposition or
enforcement of foreign ownership limits, nationalization, and
restrictions on repatriation of assets may be heightened to the
extent the Portfolio invests in Chinese local market securities
(also known as “A Shares”).
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Assets and Derivative Assets
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Assets
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Deutsche Bank AG
$
8,054,998
$
–
$
(8,054,998)
$
–
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Liabilities
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
10,658
$
–
$
–
$
10,658
Goldman Sachs International
769,313
–
(677,648)
91,665
HSBC Securities (USA), Inc.
4,143
–
–
4,143
JPMorgan Chase & Co.
8,830
–
–
8,830
RBC Capital Markets Corp.
4,758
–
–
4,758
Total
$
797,702
$
–
$
(677,648)
$
120,054
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
Deutsche Bank AG acts as securities lending agent and a limited
purpose custodian or subcustodian to receive and disburse cash
balances and cash collateral, hold short-term investments, hold
collateral, and perform other custodian functions. Securities on
loan will be continuously secured by collateral which may
consist of cash, U.S. Government securities, domestic and
foreign short-term debt instruments, letters of credit, time
deposits, repurchase agreements, money market mutual funds or
other money market accounts, or such other collateral as
permitted by the SEC. The value of the collateral must be at
least 102% of the market value of the loaned securities that are
denominated in U.S. dollars and 105% of the market value of
the loaned securities that are not denominated in
U.S. dollars. Upon receipt of cash collateral, Janus
Capital intends to invest the cash
Notes to
Financial Statements (unaudited)
(continued)
collateral in a cash management vehicle for which Janus Capital
serves as investment adviser, Janus Cash Collateral
Fund LLC. Loaned securities and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure requirements
and initial margin requirements. Collateral amounts are
monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater than the risk
of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions
may result in the inability of the Portfolio to sell a security
at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets
exist.
Securities
Lending
Under procedures adopted by the Trustees, the Portfolio may seek
to earn additional income by lending securities to qualified
parties. Deutsche Bank AG acts as securities lending agent and a
limited purpose custodian or subcustodian to receive and
disburse cash balances and cash collateral, hold short-term
investments, hold collateral, and perform other custodian
functions. The Portfolio may lend portfolio securities in an
amount equal to up to 1/3 of its total assets as determined at
the time of the loan origination. There is the risk of delay in
recovering a loaned security or the risk of loss in collateral
rights if the borrower fails financially. In addition, Janus
Capital makes efforts to balance the benefits and risks from
granting such loans. All loans will be continuously secured by
collateral which may consist of cash, U.S. Government
securities, domestic and foreign short-term debt instruments,
letters of credit, time deposits, repurchase agreements, money
market mutual funds or other money market accounts, or such
other collateral as permitted by the SEC. If the Portfolio is
unable to recover a security on loan, the Portfolio may use the
collateral to purchase replacement securities in the market.
There is a risk that the value of the collateral could decrease
below the cost of the replacement security by the time the
replacement investment is made, resulting in a loss to the
Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in
affiliated or non-affiliated cash management vehicles, whether
registered or unregistered entities, as permitted by the 1940
Act and rules promulgated thereunder. Janus Capital currently
intends to invest the cash collateral in a cash management
vehicle for which Janus Capital serves as investment adviser,
Janus Cash Collateral Fund LLC. An investment in Janus Cash
Collateral Fund LLC is generally subject to the same risks
that shareholders experience when investing in similarly
structured vehicles, such as the potential for significant
fluctuations in assets as a result of the purchase and
redemption activity of the securities lending program, a decline
in the value of the collateral, and possible liquidity issues.
Such risks may delay the return of the cash collateral and cause
the Portfolio to violate its agreement to return the cash
collateral to a borrower in a timely manner. As adviser to the
Portfolio and Janus Cash Collateral Fund LLC, Janus Capital
has an inherent conflict of interest as a result of
its fiduciary duties to both the Portfolio and Janus Cash
Collateral Fund LLC. Additionally, Janus Capital receives
an investment advisory fee of 0.05% for managing Janus Cash
Collateral Fund LLC, but it may not receive a fee for
managing certain other affiliated cash management vehicles in
which the Portfolio may invest, and therefore may have an
incentive to allocate preferred investment opportunities to
investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market
value of the loaned securities that are denominated in
U.S. dollars and 105% of the market value of the loaned
securities that are not denominated in U.S. dollars. Loaned
securities and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The cash collateral invested by Janus Capital is disclosed in
the Schedule of Investments. Income earned from the investment
of the cash collateral, net of rebates paid to, or fees paid by,
borrowers and less the fees paid to the lending agent are
included as “Affiliated securities lending income,
net” on the Statement of Operations.
Short
Sales
The Portfolio may engage in “short sales against the
box.” Short sales against the box involve either selling
short a security that the Portfolio owns or selling short a
security that the Portfolio has the right to obtain, for
delivery at a specified date in the future. The Portfolio may
enter into short sales against the box to hedge against
anticipated declines in the market price of portfolio
securities. The Portfolio does not deliver from its portfolio
the securities sold short and does not immediately receive the
proceeds of the short sale. The Portfolio borrows the securities
sold short and receives proceeds from the short sale only when
it delivers the securities to the lender. If the value of the
securities sold short increases prior to the scheduled delivery
date, the Portfolio loses the opportunity to participate in the
gain.
The Portfolio may also engage in other short sales. The
Portfolio may engage in short sales when the portfolio manager
anticipates that a security’s market purchase price will be
less than its borrowing price. To complete the transaction, the
Portfolio must borrow the security to deliver it to the
purchaser and buy that same security in the market to return it
to the lender. No more than 10% of the Portfolio’s net
assets may be invested in short positions (through short sales
of stocks, structured products, futures, swaps, and uncovered
written calls). The Portfolio may engage in short sales
“against the box” and options for hedging purposes
that are not subject to this 10% limit. Although the potential
for gain as a result of a short sale is limited to the price at
which the Portfolio sold the security short less the cost of
borrowing the security, the potential for loss is theoretically
unlimited because there is no limit to the cost of replacing the
borrowed security. There is no assurance the Portfolio will be
able to close out a short position at a particular time or at an
acceptable price. A gain or a loss will be recognized upon
termination of a short sale. Short sales held by the Portfolio
are fully collateralized by restricted cash or other securities,
which are denoted on the accompanying Schedule of Investments.
The Portfolio is also required to pay the lender of the security
any dividends or interest that accrue on a borrowed security
during the period of the loan. Depending on the arrangements
made with the broker or custodian, the Portfolio may or may not
receive any payments (including interest) on collateral it has
deposited with the broker. The Portfolio pays stock loan fees,
disclosed on the Statement of Operations, on assets borrowed
from the security broker.
The Portfolio may also enter into short positions through
derivative instruments, such as options contracts, futures
contracts, and swap agreements, which may expose the Portfolio
to similar risks. To the extent that the Portfolio enters into
short derivative positions, the Portfolio may be exposed to
risks similar to those associated with short sales, including
the risk that the Portfolio’s losses are theoretically
unlimited.
4.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average Daily
Investment
Net Assets
Advisory Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Global Technology Portfolio
All Asset Levels
0.64
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that the Portfolio’s normal
operating expenses in any fiscal year, including the investment
advisory fee, but excluding the distribution and shareholder
servicing fees (applicable to Service Shares), administrative
services fees payable pursuant to the Transfer Agency Agreement,
brokerage commissions, interest, dividends, taxes, acquired fund
fees and expenses, and extraordinary expenses, exceed the
Notes to
Financial Statements (unaudited)
(continued)
annual rate shown below. Janus Capital has agreed to continue
the waiver until at least May 1, 2015. If applicable,
amounts reimbursed to the Portfolio by Janus Capital are
disclosed as “Excess Expense Reimbursement” on the
Statement of Operations.
Portfolio
Expense Limit (%)
Janus Aspen Global Technology Portfolio
1.08(1)
(1)
Effective May 1, 2014, the expense limit increased from 0.97% to
1.08%.
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals and investments in passive foreign investment
companies.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Global Technology Portfolio
$
119,968,089
$
36,977,448
$
(1,280,537)
$
35,696,911
Information on the tax components of securities sold short as of
June 30, 2014 is as follows:
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
(Appreciation)
Depreciation
(Appreciation)
Janus Aspen Global Technology Portfolio
$
(690,976)
$
(138,117)
$
59,780
$
(78,337)
6.
Capital Share
Transactions
Janus Aspen Global Technology Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
146,036
320,790
Reinvested dividends and distributions
64,080
–
Shares repurchased
(65,335)
(250,333)
Net Increase/(Decrease) in Portfolio Shares
144,781
70,457
Shares Outstanding, Beginning of Period
896,190
825,733
Shares Outstanding, End of Period
1,040,971
896,190
Transactions in Portfolio Shares – Service Shares
Shares sold
1,474,546
2,341,161
Reinvested dividends and distributions
1,041,114
–
Shares repurchased
(1,895,992)
(3,456,339)
Net Increase/(Decrease) in Portfolio Shares
619,668
(1,115,178)
Shares Outstanding, Beginning of Period
16,321,950
17,437,128
Shares Outstanding, End of Period
16,941,618
16,321,950
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
Notes to
Financial Statements (unaudited)
(continued)
7.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Global Technology Portfolio
$
55,953,034
$
56,417,661
$
–
$
–
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Janus Aspen
INTECH U.S. Low Volatility Portfolio
(unaudited)
PORTFOLIO SNAPSHOT We seek to add value
using natural stock price volatility through a mathematically
based, risk-managed process. We do not pick individual stocks or
forecast excess returns, but use natural stock price volatility
and correlation characteristics.
Managed by
INTECH Investment Management LLC
PERFORMANCE
OVERVIEW
For the six-month period ended June 30, 2014, Janus Aspen
INTECH U.S. Low Volatility Portfolio’s Service Shares
returned 8.74%. This compares to the 7.14% return posted by the
S&P 500 Index, the Portfolio’s benchmark.
INVESTMENT
STRATEGY
INTECH’s mathematical investment process is designed to
determine potentially more mean-variance efficient (returns that
are maximized for a given level of risk) equity weightings of
the securities in the benchmark index, utilizing a specific
mathematical optimization and disciplined rebalancing routine.
Rather than trying to predict the future direction of stock
prices, the process seeks to use the volatility and correlation
characteristics of stocks to construct portfolios with similar
returns to the S&P 500 Index over time, but with lower
return volatility. In particular, the Portfolio attempts to
achieve market-like returns over the long-term and lower the
volatility of the Portfolio’s absolute returns.
The investment process begins with the stocks in the
Portfolio’s benchmark, the S&P 500 Index. Within
specific risk constraints, INTECH’s mathematical process
attempts to identify stocks that have high volatility relative
to the index, and low correlation to one another. Once the
stocks are identified and the portfolio of stocks is
constructed, it is then rebalanced and re-optimized
periodically. The Portfolio aims to generate market-like returns
over time with significantly lower return fluctuations. Although
the Portfolio may underperform its benchmark in strong up
markets, the strategy seeks to reduce losses in down markets.
Therefore, while some downside protection and a more consistent
experience are expected over the long term, the tracking-error
(a divergence between the price behavior of the Portfolio versus
its benchmark) relative to the S&P 500 Index is
expected to be high.
PERFORMANCE
REVIEW
On average, the Portfolio was overweight lower beta stocks or
stocks with lower sensitivity to market movements which tend to
be less volatile. On average, lower beta stocks outperformed
higher beta stocks and the overall market year to date.
Consequently, the Portfolio’s overweight to lower beta
stocks contributed to the Portfolio’s relative return.
However, the Portfolio’s overweight to lower volatility
stocks as measured by the standard deviation detracted as higher
volatility stocks on average outperformed since the beginning of
the year.
From a sector perspective, the Portfolio’s overweight to
consumer staples and underweight allocation to the information
technology sector detracted. Consistent with its volatility
reduction objective, the Portfolio benefited from an overweight
to the defensive utilities sector, which was the best performing
sector over the period. Over the past six months, the
Portfolio’s overall average active sector positioning
contributed to the strategy’s relative return.
OUTLOOK
Because INTECH does not conduct traditional economic or
fundamental analysis, INTECH has no view on individual stocks,
sectors, economic, or market conditions.
Over time, we believe that the Portfolio will achieve its
investment objective of producing returns that are similar to
the S&P 500 Index, but with lower absolute volatility.
Thank you for your investment in Janus Aspen INTECH
U.S. Low Volatility Portfolio.
Janus Aspen INTECH U.S. Low Volatility Portfolio –
Service Shares
8.74%
17.96%
18.06%
0.94%
0.98%
S&P
500®
Index
7.14%
24.61%
21.47%
Morningstar Quartile – Service Shares
–
4th
4th
Morningstar Ranking – based on total returns for Large
Blend Funds
–
1,536/1,622
1,376/1,538
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus
Capital has contractually agreed to through May 1, 2015.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
The proprietary mathematical process used by INTECH may not
achieve the desired results. Since the portfolio is periodically
re-balanced, this may result in a higher portfolio turnover rate
and higher expenses compared to a “buy and hold” or
index fund strategy. INTECH’s low volatility strategy may
underperform its benchmark during certain periods of up markets
and may not achieve the desired level of protection in down
markets.
Until three years from inception, Janus Capital may recover
expenses previously waived or reimbursed if the expense ratio
falls below certain limits. The expenses shown reflect Janus
Capital’s recoupment of previously waived or reimbursed
expenses of the Portfolio.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees; administrative services fees payable pursuant to the
Transfer Agency Agreement; and other Portfolio expenses. This
example is intended to help you understand your ongoing costs
(in dollars) of investing in the Portfolio and to compare these
costs with the ongoing costs of investing in other mutual funds.
To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. The example is based upon an investment of
$1,000 invested at the beginning of the period and held for the
six-months indicated, unless noted otherwise in the table and
footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in the share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectus. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Service Shares
$
1,000.00
$
1,087.40
$
4.09
$
1,000.00
$
1,020.88
$
3.96
0.79%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectus for more
information regarding waivers and/or reimbursements.
Loaned security; a portion or all of the security is on loan at
June 30, 2014.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen INTECH U.S. Low Volatility Portfolio
Janus Cash Collateral Fund LLC
–
42,082,444
(29,703,776)
12,378,668
$
–
$
2,702(1)
$
12,378,668
Janus Cash Liquidity Fund LLC
4,650,289
91,076,059
(90,005,000)
5,721,348
–
2,203
5,721,348
Total
$
–
$
4,905
$
18,100,016
(1)
Net of Income paid to the
securities lending agent and rebates paid to the borrowing
counterparties.
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen INTECH U.S. Low Volatility Portfolio (the
“Portfolio”) is a series fund. The Portfolio is part
of Janus Aspen Series (the “Trust”), which is
organized as a Delaware statutory trust and is registered under
the Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio invests
primarily in common stocks. The Portfolio is classified as
diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers Service Shares. Service Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans that require a fee from Portfolio assets to
procure distribution and administrative services to contract
owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes.
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the
Notes to
Financial Statements (unaudited)
(continued)
reporting entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep
arrangements whereby the Portfolio’s cash balance is
invested in one or more types of cash management vehicles, as
well as investments in, but not limited to, repurchase
agreements, debt securities, and derivatives, including various
types of swaps, futures and options. The Portfolio intends to
enter into financial transactions with counterparties that Janus
Capital believes to be creditworthy at the time of the
transaction. There is always the risk that Janus Capital’s
analysis of a counterparty’s creditworthiness is incorrect
or may change due to market conditions. To the extent that the
Portfolio focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable).
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Assets
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Deutsche Bank AG
$
12,118,406
$
–
$
(12,118,406)
$
–
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
Deutsche Bank AG acts as securities lending agent and a limited
purpose custodian or subcustodian to receive and disburse cash
balances and cash collateral, hold short-term investments, hold
collateral, and perform other custodian functions. Securities on
loan will be continuously secured by collateral which may
consist of cash, U.S. Government securities, domestic and
foreign short-term debt instruments, letters of credit, time
deposits, repurchase agreements, money market mutual funds or
other money market accounts, or such other collateral as
permitted by the SEC. The value of the collateral must be at
least 102% of the market value of the loaned securities that are
denominated in U.S. dollars and 105% of the market value of
the loaned securities that are not denominated in
U.S. dollars. Upon receipt of cash collateral, Janus
Capital intends to invest the cash collateral in a cash
management vehicle for which Janus Capital serves as investment
adviser, Janus Cash Collateral Fund LLC. Loaned securities
and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure
Notes to
Financial Statements (unaudited)
(continued)
requirements and initial margin requirements. Collateral amounts
are monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Securities
Lending
Under procedures adopted by the Trustees, the Portfolio may seek
to earn additional income by lending securities to qualified
parties. Deutsche Bank AG acts as securities lending agent and a
limited purpose custodian or subcustodian to receive and
disburse cash balances and cash collateral, hold short-term
investments, hold collateral, and perform other custodian
functions. The Portfolio may lend portfolio securities in an
amount equal to up to 1/3 of its total assets as determined at
the time of the loan origination. There is the risk of delay in
recovering a loaned security or the risk of loss in collateral
rights if the borrower fails financially. In addition, Janus
Capital makes efforts to balance the benefits and risks from
granting such loans. All loans will be continuously secured by
collateral which may consist of cash, U.S. Government
securities, domestic and foreign short-term debt instruments,
letters of credit, time deposits, repurchase agreements, money
market mutual funds or other money market accounts, or such
other collateral as permitted by the SEC. If the Portfolio is
unable to recover a security on loan, the Portfolio may use the
collateral to purchase replacement securities in the market.
There is a risk that the value of the collateral could decrease
below the cost of the replacement security by the time the
replacement investment is made, resulting in a loss to the
Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in
affiliated or non-affiliated cash management vehicles, whether
registered or unregistered entities, as permitted by the 1940
Act and rules promulgated thereunder. Janus Capital currently
intends to invest the cash collateral in a cash management
vehicle for which Janus Capital serves as investment adviser,
Janus Cash Collateral Fund LLC. An investment in Janus Cash
Collateral Fund LLC is generally subject to the same risks
that shareholders experience when investing in similarly
structured vehicles, such as the potential for significant
fluctuations in assets as a result of the purchase and
redemption activity of the securities lending program, a decline
in the value of the collateral, and possible liquidity issues.
Such risks may delay the return of the cash collateral and cause
the Portfolio to violate its agreement to return the cash
collateral to a borrower in a timely manner. As adviser to the
Portfolio and Janus Cash Collateral Fund LLC, Janus Capital
has an inherent conflict of interest as a result of its
fiduciary duties to both the Portfolio and Janus Cash Collateral
Fund LLC. Additionally, Janus Capital receives an
investment advisory fee of 0.05% for managing Janus Cash
Collateral Fund LLC, but it may not receive a fee for
managing certain other affiliated cash management vehicles in
which the Portfolio may invest, and therefore may have an
incentive to allocate preferred investment opportunities to
investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market
value of the loaned securities that are denominated in
U.S. dollars and 105% of the market value of the loaned
securities that are not denominated in U.S. dollars. Loaned
securities and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The cash collateral invested by Janus Capital is disclosed in
the Schedule of Investments. Income earned from the investment
of the cash collateral, net of rebates paid to, or fees paid by,
borrowers and less the fees paid to the lending agent are
included as “Affiliated securities lending income,
net” on the Statement of Operations.
3.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that the Portfolio’s normal
operating expenses in any fiscal year, including the investment
advisory fee, but excluding the distribution and shareholder
servicing fees, administrative services fees payable pursuant to
the Transfer Agency Agreement, brokerage commissions, interest,
dividends, taxes, acquired fund fees and expenses, and
extraordinary expenses, exceed the annual rate shown below.
Janus Capital has agreed to continue the waiver until at least
May 1, 2015. If applicable, amounts reimbursed to the
Portfolio by Janus Capital are disclosed as “Excess Expense
Reimbursement” on the Statement of Operations.
Portfolio
Expense Limit (%)
Janus Aspen INTECH U.S. Low Volatility Portfolio
0.74(1)
(1)
Effective May 1, 2014, the expense limit decreased from 0.75% to
0.74%.
For a period of three years subsequent to the Portfolio’s
commencement of operations, Janus Capital may recover from the
Portfolio fees and expenses previously waived or reimbursed,
which could then be considered a deferral, if the
Portfolio’s expense ratio, including recovered expenses,
falls below the expense limit. For the period ended
June 30, 2014, Janus Capital recovered $0 from the
Portfolio. As of June 30, 2014, the aggregate amount of
recoupment that may potentially be made to Janus Capital is $0.
The recoupment of such reimbursements expires September 6,2015.
INTECH Investment Management LLC (“INTECH”) serves as
subadviser to the Portfolio. Janus Capital owns approximately
97% of INTECH. Janus Capital pays INTECH a subadvisory fee rate
equal to 50% of the investment advisory fee paid by the
Portfolio to Janus Capital (calculated after any fee waivers and
expense reimbursements).
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in
Notes to
Financial Statements (unaudited)
(continued)
connection with the investment advisory services Janus Capital
(or the subadviser) provides to the Portfolio. Some expenses
related to compensation payable to the Portfolio’s Chief
Compliance Officer and compliance staff are shared with the
Portfolio. Total compensation of $18,154 was paid to the Chief
Compliance Officer and certain compliance staff by the Trust
during the period ended June 30, 2014. The Portfolio’s
portion is reported as part of “Other expenses” on the
Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
4.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary difference between book and tax
appreciation or depreciation of investments is wash sale loss
deferrals.
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Service Shares
Shares sold
10,515,345
15,440,216
Reinvested dividends and distributions
129,032
145,231
Shares repurchased
(1,379,776)
(1,570,066)
Net Increase/(Decrease) in Portfolio Shares
9,264,601
14,015,381
Shares Outstanding, Beginning of Period
15,736,211
1,720,830
Shares Outstanding, End of Period
25,000,812
15,736,211
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
6.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen INTECH U.S. Low Volatility Portfolio
$
146,215,852
$
33,096,057
$
–
$
–
7.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s investment personnel as well
as statistical information to help you understand how your
Portfolio’s performance and characteristics stack up
against those of comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
investment personnel may allocate a company to a country based
on other factors such as location of the company’s
principal office, the location of the principal trading market
for the company’s securities, or the country where a
majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the investment personnel. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT We believe that buying
high-quality growth franchises with sustainable, projected
above-average earnings growth outlook should allow us to
outperform the benchmark and peers over the long term. We
perform in-depth, fundamental research to build a diversified,
moderately positioned portfolio aiming to deliver peer- and
index-beating returns while managing for risk and volatility.
Barney Wilson
portfolio manager
PERFORMANCE
OVERVIEW
For the six-month period ended June 30, 2014, Janus Aspen
Janus Portfolio’s Institutional Shares and Service Shares
returned 4.86% and 4.73%, respectively. Meanwhile, the
Portfolio’s primary benchmark, the Russell 1000 Growth
Index, returned 6.31% and its secondary benchmark, the
S&P 500 Index, returned 7.14%. Another benchmark we
use to measure performance, the Core Growth Index, returned
6.73% during the last six months. The Core Growth Index is an
internally calculated, hypothetical combination of unmanaged
indices that combines total returns from the Russell 1000
Growth Index and the S&P 500 Index.
INVESTMENT
ENVIRONMENT
U.S. large-cap growth equities continued to climb in the
first half of 2014, lifted in part by confirmation that the
economy was on stable footing and also confirmation that the
Federal Reserve would be cautious in unwinding accommodative
monetary policies supporting a stable, but slow-growing economy.
The European Central Bank’s move to cut interest rates and
take other measures designed to stimulate euro-zone growth was
also a boost to equity markets broadly.
PERFORMANCE
DISCUSSION
The Portfolio had positive returns but underperformed its
primary benchmark during the period. We seek to identify
companies with clearly definable and sustainable long-term
growth drivers. These companies often have a high barrier to
entry, a notable edge in an attractive industry with high growth
potential, or a strong management team that has a clear vision
for the future course of their company. We take a long-term view
with the companies we invest in, and believe a collection of
companies with these competitive advantages should lead to
compounded growth in excess of the market over longer time
horizons. As we look across the portfolio we continue to be
encouraged about the competitive advantages of most companies we
own, and believe the potential for long-term growth for those
companies is still in place. However, we also held several
stocks that fell during the period and negatively impacted our
performance.
Our holdings in the consumer discretionary sector were a large
detractor from relative performance. Two stocks within the
sector, Amazon and L Brands, were among the largest detractors
from the Portfolio’s performance during the period. Amazon
fell in the first quarter after the company reported revenue
growth below consensus expectations. We continue to like the
long-term outlook for the company, however. We believe the
company’s size, scale and efficiency has allowed it to be a
disruptive force. The company has completely rewritten the rules
for retail shopping and we believe it will continue to gain
consumers’ wallet share as more shopping moves from
physical stores to online and mobile purchases. Meanwhile, the
company’s cloud business, Amazon Web Services, has come to
market with scale and a disruptive pricing model for businesses
seeking cloud-based services.
L Brands fell in the first quarter after the company reported a
disappointing holiday sales season. We sold the position during
the period, due to concerns about how the mall-based retailer
will navigate a transition as more shopping moves from physical
stores to mobile and online channels.
Whole Foods Market was the Portfolio’s largest detractor.
The stock fell after the company announced disappointing
earnings results. We are currently reviewing the future growth
potential for the company, which is facing a more competitive
landscape from other natural and organic grocers.
While the aforementioned stocks negatively impacted performance
we were pleased with the results of many of the other companies
we own. Our holdings in the industrial sector were a large
contributor to relative performance. Two stocks within the
sector, Canadian Pacific Railway and Sensata Technologies, were
among the top contributors to the Portfolio’s performance.
In our view, Canadian Pacific Railway has experienced a
significant transformation since a new CEO took over in 2012.
When the new CEO came on board, he focused the efforts of the
company on three key points: better service and reliability to
customers, improved profitability through operating efficiency
and new revenue opportunities. Since then, the CEO has put in a
fully capable team around him to execute on each of the above
points, and success in each category continues to drive the
outperformance we are seeing. Service metrics such as on-time
deliveries and velocity have improved, operating margins have
increased dramatically with more opportunity to expand and the
company has driven new revenues from such markets as domestic
Canada container traffic, grain and crude by rail. Most
recently, a new CFO has joined the company and had a positive
impact on driving better capital allocation decisions, including
commencing a share repurchase program that further benefits
shareholders.
Sensata also put up impressive results during the period. The
company creates sensors and controls that go into a number of
durable goods. We believe Sensata is poised for long-term growth
as sensors continue to be used more heavily in automobiles. We
also think the company will benefit from the greater penetration
of electronic appliances in emerging markets, as many of these
appliances use Sensata technology. The stock was up this period
due to an anticipated
pick-up in
demand for European high-end luxury automobiles, which tend to
have a high level of Sensata content in their vehicles.
Outside of the industrial sector, Apple was a top contributor.
The stock was up in part due to anticipation of a larger
form-factor iPhone. The stock has also been driven up in recent
months as the market has gotten confirmation that Apple does, in
fact, have a place in emerging markets such as China, where
smartphones are experiencing the highest growth. The bear case
against Apple had been that the company would experience little
growth in those markets as it faces stiff competition from
cheaper smartphone options. However, the success of Apple phones
that are being offered by some of China’s largest mobile
carriers has disproved that theory. We maintained our conviction
in Apple during a volatile time period for the stock over the
last 12 months. Our view is that Apple is a strong brand,
and that as consumers get more familiar with Apple products,
they get more deeply entrenched in the Apple ecosystem,
branching out to buy new Apple products and returning to the
brand when it is time to update existing ones. We see evidence
in this trend by the fact that household spending on Apple
products continues to increase. We also think Apple’s
management team has made favorable capital allocation decisions
by reducing its share count recently.
Please see the Derivative Instruments section in the “Notes
to Financial Statements” for derivatives used by the
Portfolio.
OUTLOOK
We expect moderate growth for the U.S. economy in the
coming months and a reasonable backdrop for equity investing.
Among the positives we see are continued, gradual improvement in
the housing market and an improving employment picture. The
U.S. deficit is also much lower, which in our view,
diminishes the risk of policy errors by the government such as
extreme taxation. The reduced threat of policy errors by the
government could in turn encourage more capital spending by
companies.
We continue to find investment opportunities among
U.S. large-cap stocks. On a broad basis, we do not think
the market is overvalued, especially in a low-rate,
low-inflation environment. However, multiples have expanded
considerably since 2013. We have mentioned this in previous
commentaries, but after multiple expansion, we would expect
companies to need to demonstrate earnings growth to experience
further stock price appreciation. We believe this bodes well for
our investment process. If we are correct in identifying
competitively advantaged companies with sustainable, long-term
growth drivers in place, we believe those companies should be
able to put up earnings growth in excess of the market.
Thank you for your investment in Janus Aspen Janus Portfolio.
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard (“GICS”) codes, which are the
exclusive property and a service mark of MSCI Inc. and Standard
& Poor’s.
Morningstar Ranking – based on total returns for Large
Growth Funds
–
1,110/1,762
1,033/1,546
961/1,357
363/574
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
This Portfolio has a performance-based management fee that may
adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Performance for Service Shares prior to December 31, 1999
reflects the performance of Institutional Shares, adjusted to
reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may
have different performance characteristics.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,048.60
$
2.74
$
1,000.00
$
1,022.12
$
2.71
0.54%
Service Shares
$
1,000.00
$
1,047.30
$
4.01
$
1,000.00
$
1,020.88
$
3.96
0.79%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Core Growth Index
An internally-calculated,
hypothetical combination of total returns from the Russell
1000®
Growth Index (50%) and the S&P
500®
Index (50%).
Russell
1000®
Growth Index
Measures the performance of those
Russell
1000®
Index companies with higher
price-to-book
ratios and higher forecasted growth values.
S&P
500®
Index
A commonly recognized,
market-capitalization weighted index of 500 widely held equity
securities, designed to measure broad U.S. equity
performance.
ADR
American Depositary Receipt
LP
Limited Partnership
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Portfolio
Aggregate Value
Janus Aspen Janus Portfolio
$
38,372,200
§
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Janus Portfolio
Colony American Homes Holdings III LP – Private
Placement
1/30/13
$
4,429,260
$
4,866,086
0.8
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Notes to Schedule
of Investments and Other
Information (unaudited)
(continued)
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include futures, forward currency,
written options, and swap contracts. Forward currency contracts
and swap contracts are reported at their unrealized
appreciation/(depreciation) at measurement date, which
represents the change in the contract’s value from trade
date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Janus Portfolio (the “Portfolio”) is a
series fund. The Portfolio is part of Janus Aspen Series (the
“Trust”), which is organized as a Delaware statutory
trust and is registered under the Investment Company Act of
1940, as amended (the “1940 Act”), as an open-end
management investment company, and therefore has applied the
specialized accounting and reporting guidance in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946. The Trust
offers twelve Portfolios which include multiple series of
shares, with differing investment objectives and policies. The
Portfolio invests primarily in common stocks. The Portfolio is
classified as diversified, as defined in the 1940 Act. The
Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Notes to
Financial Statements (unaudited)
(continued)
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
For restricted equity securities and private placements where
observable inputs are limited, assumptions about market activity
and risk are used in employing valuation techniques such as the
market approach, the income approach, or the cost approach, as
defined under the FASB Guidance. These are categorized as
Level 3 in the hierarchy.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3
securities as of June 30, 2014.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a result, the
use of derivatives may expose the Portfolio to additional risks
that it would not be subject to if it invested directly in the
securities underlying those derivatives. The use of derivatives
may result in larger losses or smaller gains than otherwise
would be the case. Derivatives can be volatile and may involve
significant risks, including, but not limited to, counterparty
risk, credit risk, currency risk,
Notes to
Financial Statements (unaudited)
(continued)
equity risk, index risk, interest rate risk, leverage risk, and
liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC, the
Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A forward foreign currency exchange contract (“forward
currency contract”) is an obligation to buy or sell a
specified currency at a future date at a negotiated rate (which
may be U.S. dollars or a foreign currency). The Portfolio
may enter into forward currency contracts for hedging purposes,
including, but not limited to, reducing exposure to changes in
foreign currency exchange rates on foreign portfolio holdings
and locking in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in or exposed to
foreign currencies. The Portfolio may also invest in forward
currency contracts for nonhedging purposes such as seeking to
enhance returns. The Portfolio is subject to currency risk in
the normal course of pursuing its investment objective through
its investments in forward currency contracts.
The gain or loss arising from the difference between the
U.S. dollar cost of the original contract and the value of
the foreign currency in U.S. dollars upon closing a
contract is included in “Net realized gain/(loss) from
investment and foreign currency transactions” on the
Statement of Operations.
During the period, the Portfolio entered into forward contracts
with the obligation to sell foreign currencies in the future at
an agreed upon rate in order to decrease exposure to currency
risk associated with foreign currency denominated securities
held by the Portfolio.
An options contract provides the purchaser with the right, but
not the obligation, to buy (call option) or sell (put option) a
financial instrument at an agreed upon price. The Portfolio is
subject to interest rate risk, liquidity risk, equity risk, and
currency risk in the normal course of pursuing its investment
objective through its investments in options contracts. The
Portfolio may use options contracts to hedge against changes in
interest rates, the values of equities, or foreign currencies.
The Portfolio may utilize American-style and European-style
options. An American-style option is an option contract that can
be exercised at any time between the time of purchase and the
option’s expiration date. A European-style option is an
option contract that can only be exercised on the option’s
expiration date. The Portfolio may also purchase or write put
and call options on foreign currencies in a manner similar to
that in which futures or forward contracts on foreign currencies
will be utilized. The Portfolio generally invests in options to
hedge against adverse movements in the value of portfolio
holdings.
When an option is written, the Portfolio receives a premium and
becomes obligated to sell or purchase the underlying security at
a fixed price, upon exercise of the option. In writing an
option, the Portfolio bears the risk of an unfavorable change in
the price of the security underlying the written option.
Exercise of an option written by the Portfolio could result in
the Portfolio buying or selling a security at a price different
from the current market value.
When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option, or the
cost of the security for a purchased put or call option are
adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and
OTC put and call options on domestic securities indices, and on
foreign securities indices listed on domestic and foreign
securities exchanges. Options on securities indices are similar
to options on securities except that (1) the expiration
cycles of securities index options are monthly, while those of
securities options are currently quarterly, and (2) the
delivery requirements are different. Instead of giving the right
to take or make delivery of securities at a specified price, an
option on a securities index gives the holder the right to
receive a cash “exercise settlement amount” equal to
(a) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on
the date of exercise, multiplied by (b) a fixed “index
multiplier.” Receipt of this cash amount will depend upon
the closing level of the securities index upon which the option
is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and
the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium
received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the
options are standardized. Options traded OTC expose the
Portfolio to counterparty risk in the event that the
counterparty does not perform. This risk is mitigated by having
a netting arrangement between the Portfolio and the counterparty
and by having the counterparty post collateral to cover the
Portfolio’s exposure to the counterparty.
Holdings of the Portfolio designated to cover outstanding
written options are noted on the Schedule of Investments.
Options written are reported as a liability on the Statement of
Assets and Liabilities as “Options written, at value.”
Realized gains and losses are reported as “Net realized
gain/(loss) from written options contracts” on the
Statement of Operations.
The risk in writing call options is that the Portfolio gives up
the opportunity for profit if the market price of the security
increases and the options are exercised. The risk in writing put
options is that the Portfolio may incur a loss if the market
price of the security decreases and the options are exercised.
The risk in buying options is that the Portfolio pays a premium
whether or not the options are exercised. The use of such
instruments may involve certain additional risks as a result of
unanticipated movements in the market. A lack of correlation
between the value of an instrument underlying an option and the
asset being hedged, or unexpected adverse price movements, could
render the Portfolio’s hedging strategy unsuccessful. In
addition, there can be no assurance that a liquid secondary
market will exist for any option purchased or sold. There is no
limit to the loss the Portfolio may recognize due to written
call options.
During the period, the Portfolio purchased call options on
various equity securities for the purpose of increasing exposure
to individual equity risk.
Notes to
Financial Statements (unaudited)
(continued)
The following table provides average ending monthly market value
amounts on purchased call options during the period ended
June 30, 2014.
Portfolio
Purchased Call Options
Janus Aspen Janus Portfolio
$
484,776
During the period, the Portfolio wrote put options on various
equity securities for the purpose of increasing exposure to
individual equity risk
and/or
generating income.
The following table provides average ending monthly market value
amounts on written put options during the period ended
June 30, 2014.
Portfolio
Written Put Options
Janus Aspen Janus Portfolio
$
75,584
Written option activity for the period ended June 30, 2014
is indicated in the table below:
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
Fair Value of Derivative Instruments as of June 30,2014
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks
took steps to support the financial markets. The withdrawal of
this support, a failure of measures put in place to respond to
the crisis, or investor perception that such efforts were not
sufficient each could negatively affect financial markets
generally, and the value and liquidity of specific securities.
In addition, policy and legislative changes in the United States
and in other countries continue to impact many aspects of
financial regulation. The effect of these changes on the
markets, and the practical implications for market participants,
including the Portfolio, may not be fully known for some time.
As a result, it may also be unusually difficult to identify both
investment risks and opportunities, which could limit or
preclude the Portfolio’s ability to achieve its investment
objective. Therefore, it is important to understand that the
value of your investment may fall, sometimes sharply, and you
could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An
Notes to
Financial Statements (unaudited)
(continued)
ISDA Master Agreement is a bilateral agreement between a
Portfolio and a counterparty that governs OTC derivatives and
forward foreign currency exchange contracts and typically
contains, among other things, collateral posting terms and
netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Assets and Derivative Assets
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Assets
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Morgan Stanley & Co. International PLC
$
125,459
$
(50,405)
$
–
$
75,054
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Liabilities
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
141,968
$
–
$
–
$
141,968
HSBC Securities (USA), Inc.
71,910
–
–
71,910
JPMorgan Chase & Co.
131,643
–
–
131,643
Morgan Stanley & Co. International PLC
50,405
(50,405)
–
–
RBC Capital Markets Corp.
31,390
–
–
31,390
Total
$
427,316
$
(50,405)
$
–
$
376,911
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure requirements
and initial margin requirements. Collateral amounts are
monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater than the risk
of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions
may result in the inability of the Portfolio to sell a security
at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets
exist.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s “base” fee rate prior to
any performance adjustment (expressed as an annual rate).
Base Fee
Rate (%)
Portfolio
(annual rate)
Janus Aspen Janus Portfolio
0.64
For the Portfolio, the investment advisory fee rate is
determined by calculating a base fee and applying a performance
adjustment. The base fee rate is the same as the contractual
investment advisory fee rate shown in the table above. The
performance adjustment either increases or decreases the base
fee depending on how well the Portfolio has performed relative
to its benchmark index, as shown below:
Portfolio
Benchmark Index
Janus Aspen Janus Portfolio
Core Growth Index
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance
Adjustment
The investment advisory fee rate paid to Janus Capital by the
Portfolio consists of two components: (1) a base fee
calculated by applying the contractual fixed rate of the
advisory fee to the Portfolio’s average daily net assets
during the previous month (“Base Fee Rate”), plus or
minus (2) a performance-fee adjustment (“Performance
Adjustment”) calculated by applying a variable rate of up
to 0.15% (positive or negative) to the Portfolio’s average
daily net assets during the applicable performance measurement
period. The performance measurement period generally is the
previous 36 months, although no Performance Adjustment is
made until the Portfolio’s performance-based fee structure
has been in effect for at least 12 months. When the
Portfolio’s performance-based fee structure has been in
effect for at least 12 months, but less than
36 months, the performance measurement period will be equal
to the time that has elapsed since the performance-based fee
structure took effect. The Performance Adjustment began July
2011 for the Portfolio.
No Performance Adjustment is applied unless the difference
between the Portfolio’s investment performance and the
cumulative investment record of the Portfolio’s benchmark
index is 0.50% or greater (positive or negative) during the
applicable performance measurement period. The Base Fee Rate is
subject to an upward or downward Performance Adjustment for
every full 0.50% increment by which the Portfolio outperforms or
underperforms its benchmark index. Because the Performance
Adjustment is tied to the Portfolio’s relative performance
compared to its benchmark index (and not its absolute
performance), the Performance Adjustment could increase Janus
Capital’s fee even if the Portfolio’s Shares lose
value during the performance measurement period and could
decrease Janus Capital’s fee even if the Portfolio’s
Shares increase in value during the performance measurement
period. For purposes of computing the Base Fee Rate and the
Performance Adjustment, net assets are averaged over different
periods (average daily net assets during the previous month for
the Base Fee Rate, versus average daily net assets during the
performance measurement period for the Performance Adjustment).
Performance of the Portfolio is calculated net of expenses,
whereas the Portfolio’s benchmark index does not have any
fees or expenses. Reinvestment of dividends and distributions is
included in calculating both the performance of the Portfolio
and the Portfolio’s benchmark index. The Base Fee Rate is
calculated and accrued daily. The Performance Adjustment is
calculated monthly in arrears and is accrued throughout the
month. The investment fee is paid monthly in arrears. Under
extreme circumstances involving underperformance by a rapidly
shrinking Portfolio, the dollar amount of the Performance
Adjustment could be more than the dollar amount of the Base Fee
Rate. In such circumstances, Janus Capital would reimburse the
Portfolio.
The investment performance of the Portfolio’s Service
Shares for the performance measurement period is used to
calculate the Performance Adjustment. After Janus Capital
determines whether the Portfolio’s performance was above or
below its benchmark index by comparing the investment
performance of the Portfolio’s Service Shares against the
cumulative investment record of the Portfolio’s benchmark
index, Janus Capital applies the same Performance Adjustment
(positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance
Adjustment on future overall compensation to Janus Capital since
it depends on the performance of the Portfolio relative to the
record of the Portfolio’s benchmark index and future
changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional
information contain additional information about
performance-based fees. The amount shown as advisory fees on the
Statement of Operations reflects the Base Fee Rate plus/minus
any Performance Adjustment. During the period ended
June 30, 2014, the Portfolio recorded a Performance
Adjustment of $(431,482).
Notes to
Financial Statements (unaudited)
(continued)
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals, investments in partnerships and investments in
passive foreign investment companies.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Janus Portfolio
$
447,403,927
$
149,587,160
$
(3,469,117)
$
146,118,043
Accumulated capital losses noted below represent net capital
loss carryovers, as of December 31, 2013, that may be
available to offset future realized capital gains and thereby
reduce future taxable gains distributions. Under the Regulated
Investment Company Modernization Act of 2010, the Portfolio is
permitted to carry forward capital losses incurred in taxable
years beginning after December 22, 2010 for an unlimited
period. Losses incurred during those future years will be
required to be utilized prior to the losses incurred in
pre-enactment taxable years. As a result of this ordering rule,
pre-enactment capital loss carryforwards may more likely expire
unused. Also, post-enactment capital losses that are carried
forward will retain their character as either short-term or
long-term capital losses rather than being considered all
short-term as under previous law. The following table shows
these capital loss carryovers.
Capital Loss
Carryover Expiration Schedule
For the year ended December 31, 2013
Notes to
Financial Statements (unaudited)
(continued)
Janus Aspen Janus Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Service Shares
Shares sold
159,297
277,787
Reinvested dividends and distributions
373,581
39,977
Shares repurchased
(558,676)
(2,051,746)
Net Increase/(Decrease) in Portfolio Shares
(25,798)
(1,733,982)
Shares Outstanding, Beginning of Period
5,064,257
6,798,239
Shares Outstanding, End of Period
5,038,459
5,064,257
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
7.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Janus Portfolio
$
201,668,689
$
232,769,180
$
–
$
–
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
PORTFOLIO SNAPSHOT The Portfolio invests
opportunistically. We believe our fundamental research uncovers
stocks in which the market price does not reflect a
company’s long-term fundamentals.
Brent Lynn
portfolio manager
PERFORMANCE
OVERVIEW
Janus Aspen Overseas Portfolio’s Institutional Shares and
Service Shares returned 4.80% and 4.67%, respectively, over the
six-month period ended June 30, 2014. The Portfolio’s
primary benchmark, the MSCI All Country World ex-U.S. Index
returned 5.56%, and its secondary benchmark, the MSCI EAFE Index
returned 4.78% during the period.
INVESTMENT
ENVIRONMENT
The landslide election victory of the pro-business Bharatiya
Janata Party (BJP) and new Prime Minister Narendra Modi in
India, and more stability in the global economy contributed to a
rebound in emerging market equities over the second half of the
period and gains for broader global indices. We believe
Modi’s strong mandate could be a seminal event for the
country and ultimately accelerate medium and long-term economic
growth in India.
Elsewhere, China’s economic growth slowed, although in a
measured manner; significantly, new leadership continued
enacting important economic reforms that should have beneficial
effects long-term. Brazil’s market also performed well in
anticipation of the country’s fall election; however,
inflation and economic growth remained problems. Developed
markets lagged emerging markets, with the U.S. and Europe
leading the Pacific region. Japan’s economy was stable in
the period, although lack of progress in Prime Minister Shinzo
Abe’s economic reforms disappointed investors. The
U.S. economy, meanwhile, continued to improve, as did
Europe’s, particularly for the peripheral countries that
were most negatively impacted by the region’s sovereign
debt crisis.
PERFORMANCE
DISCUSSION
The Portfolio’s emerging market exposure helped performance
during the period, led by our holdings and significant
overweight in India, although our holdings and overweight in
another emerging market, Russia, detracted.
I didn’t foresee that protests in Ukraine in March would
lead to perhaps the most dramatic escalation in geopolitical
tension since the Cold War. While I believed cooler heads would
ultimately prevail, geopolitical risk rose significantly. As a
result, I sold our largest Russian position, Sberbank, despite
my view that the Russian bank has an extremely strong franchise
and undervalued stock price. Another Russian holding, TCS Group
Holding, was also among the Portfolio’s top detractors. I
believe the credit card company has a developed cost-effective
business model for identifying creditworthy customers and has
significant growth potential in Russia.
UK-based oil and gas exploration and production firm Ophir
Energy also weighed on performance after the company reported
disappointing drilling results offshore Gabon in Western Africa.
Despite this disappointment, we believe that Ophir has further
potentially exciting exploration prospects in Africa as well as
opportunities to sell down existing discoveries.
Two of the Portfolio’s top contributors were from India and
were beneficiaries of improved market sentiment surrounding the
likelihood of more investment-friendly policies under the BJP
and Modi. Our opportunistic investment approach often leads us
to companies we believe have strong long-term growth prospects
and compelling valuations that have been punished by the market
because of short-term headwinds. These types of stocks often
respond very strongly when investors become less risk averse and
short-term focused and once again are willing to look at
companies’ longer-term potential and valuation.
Two of our largest contributors, Adani Enterprises and Reliance
Industries, had been very negatively impacted by government
policy gridlock in India prior to the political rise of Modi
last fall. The potential for government action and policy reform
helped both stocks during the period. Energy conglomerate
Reliance had suffered from government gridlock on natural gas
pricing and regulation, while integrated power provider Adani
encountered regulatory issues pertaining to coal and electricity
pricing.
Reliance also reported good earnings in its latest quarter; we
think it is poised for a growth cycle in all of its key
businesses – oil refining, petrochemicals, oil and gas
production, retail and telecommunications.
The Portfolio’s largest holding, Li & Fung, also
saw strong gains to contribute to the Portfolio’s
performance. The world leader in outsourcing logistics to
retailers announced a potential spin-off of its portfolio of
owned and licensed brands, which had struggled over the past few
years. I believe a refocusing on organic growth in the
company’s core retail outsourcing business could drive a
higher valuation for the company.
Please see the Derivative Instruments section in the “Notes
to Financial Statements” for derivatives used by the
Portfolio.
OUTLOOK
Although some of our holdings bounced during the latter half of
the period, I continue to believe that many of the
Portfolio’s holdings remain dramatically undervalued. I
believe some improvement in investor risk tolerance will result
in significant revaluation of companies with strong long-term
prospects but somewhat uncertain short-term outlooks.
In terms of positioning, I trimmed some of the stocks that had
performed strongly during the period and added several new
companies, as well as adding to existing positions. I believe
the Portfolio is invested in strong companies with exciting
medium and long-term prospects trading at attractive valuations.
I am very excited about the potential for Janus Overseas
Portfolio.
Thank you for your continued investment in Janus Aspen Overseas
Portfolio.
Morgan Stanley & Co. International PLC
Sberbank of Russia Total Return Swap
–0.81%
Ophir Energy PLC
–0.75%
TCS Group Holding PLC (GDR)
–0.60%
ARM Holdings PLC
–0.60%
Shangri-La Asia, Ltd.
–0.44%
5 Top
Performers – Sectors*
Portfolio Weighting
MSCI All Country World ex-U.S.
Portfolio Contribution
(Average % of Equity)
IndexSM
Weighting
Financials
1.70%
18.10%
26.68%
Industrials
1.31%
14.65%
11.12%
Telecommunication Services
0.26%
0.00%
5.38%
Consumer Staples
0.25%
1.83%
9.90%
Health Care
0.14%
7.28%
8.14%
5 Bottom
Performers – Sectors*
Portfolio Weighting
MSCI All Country World ex-U.S.
Portfolio Contribution
(Average % of Equity)
IndexSM
Weighting
Information Technology
–2.68%
16.16%
6.76%
Energy
–0.64%
18.84%
9.22%
Materials
–0.12%
3.04%
8.61%
Utilities
–0.09%
0.39%
3.47%
Other**
0.05%
1.21%
0.00%
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard (“GICS”) codes, which are the
exclusive property and a service mark of MSCI Inc. and Standard
& Poor’s.
Morningstar Ranking – based on total returns for
Foreign Large Blend Funds
–
100/804
666/698
3/482
4/184
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
This Portfolio has a performance-based management fee that may
adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
Investments in derivatives can be highly volatile and involve
additional risks than if the underlying securities were held
directly. Such risks include gains or losses which, as a result
of leverage, can be substantially greater than the
derivatives’ original cost. There is also a possibility
that derivatives may not perform as intended which can reduce
opportunity for gain or result in losses by offsetting positive
returns in other securities.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
The Portfolio will normally invest at least 80% of its net
assets, measured at the time of purchase, in the type of
securities described by its name.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or redemptions of Fund shares.
The returns do not include adjustments in accordance with
generally accepted accounting principles required at the period
end for financial reporting purposes.
Performance for Service Shares prior to December 31, 1999
reflects the performance of Institutional Shares, adjusted to
reflect the expenses of Service Shares.
Net dividends reinvested are the dividends that remain to be
reinvested after foreign tax obligations have been met. Such
obligations vary from country to country.
Ranking is for the share class shown only; other classes may
have different performance characteristics.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Since inception return is not shown for the index because the
index’s inception date differs significantly from the
Portfolio’s inception date.
Expense
Examples
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,048.00
$
2.64
$
1,000.00
$
1,022.22
$
2.61
0.52%
Service Shares
$
1,000.00
$
1,046.70
$
3.91
$
1,000.00
$
1,020.98
$
3.86
0.77%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
MSCI All Country World
ex-U.S. IndexSM
An unmanaged, free float-adjusted
market capitalization weighted index composed of stocks of
companies located in countries throughout the world, excluding
the United States. It is designed to measure equity market
performance in global developed and emerging markets outside the
United States. The index includes reinvestment of dividends, net
of foreign withholding taxes.
MSCI
EAFE®
Index
A free float-adjusted market
capitalization weighted index designed to measure developed
market equity performance. The MSCI
EAFE®
Index is composed of companies representative of the market
structure of developed market countries. The index includes
reinvestment of dividends, net of foreign withholding taxes.
ADR
American Depositary Receipt
GDR
Global Depositary Receipt
LIBOR
London Interbank Offered Rate
LLC
Limited Liability Company
PLC
Public Limited Company
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Loaned security; a portion or all of the security is on loan at
June 30, 2014.
§
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Overseas Portfolio
Africa Oil Corp. – Private Placement
10/17/13
$
6,845,546
$
5,903,724
0.4
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Share
Share
Balance
Balance
Realized
Dividend
Value
at 12/31/13
Purchases
Sales
at 6/30/14
Gain/(Loss)
Income
at 6/30/14
Janus Aspen Overseas Portfolio
Janus Cash Collateral Fund LLC
–
204,340,895
(132,099,271)
72,241,624
$
–
$
608,800(1)
$
72,241,624
Janus Cash Liquidity Fund LLC
10,292,000
189,165,768
(182,972,768)
16,485,000
–
3,009
16,485,000
Total
$
–
$
611,809
$
88,726,624
(1)
Net of income paid to the
securities lending agent and rebates paid to the borrowing
counterparties.
Notes to Schedule
of Investments and Other
Information (unaudited)
(continued)
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include futures, forward currency,
written options, and swap contracts. Forward currency contracts
and swap contracts are reported at their unrealized
appreciation/(depreciation) at measurement date, which
represents the change in the contract’s value from trade
date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date.
Net gain/(loss) on investments (both realized and unrealized)
1.43
3.96
3.31
(18.25)
11.03
19.86
Total from Investment Operations
1.89
5.08
4.18
(17.98)
11.23
20.20
Less Distributions:
Dividends (from net investment income)*
(1.20)
(1.19)
(0.24)
(0.19)
(0.27)
(0.15)
Distributions (from capital gains)*
(4.05)
–
(4.29)
(0.49)
–
(1.04)
Total Distributions
(5.25)
(1.19)
(4.53)
(0.68)
(0.27)
(1.19)
Net Asset Value, End of Period
$37.56
$40.92
$37.03
$37.38
$56.04
$45.08
Total Return**
4.64%
14.28%
13.30%
(32.41)%
25.02%
78.66%
Net Assets, End of Period (in thousands)
$957,229
$974,424
$1,017,085
$896,544
$1,475,804
$1,254,824
Average Net Assets for the Period (in thousands)
$937,059
$971,802
$998,304
$1,232,913
$1,328,827
$1,001,144
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and
Expense Offsets) to Average Net Assets***
0.77%
0.76%
0.74%
0.90%
0.93%
0.95%
Ratio of Net Expenses (After Waivers and Expense Offsets) to
Average Net Assets***
0.77%
0.76%
0.74%
0.90%
0.93%
0.95%
Ratio of Net Investment Income to Average Net Assets***
2.31%(2)
0.99%
0.89%
0.41%
0.21%
0.39%
Portfolio Turnover Rate
15%
30%
36%
32%
30%
44%
*
See “Federal Income Tax” in Notes to Financial
Statements.
**
Total return not annualized for periods of less than one full
year.
***
Annualized for periods of less than one full year.
(1)
Per share amounts are calculated based on average shares
outstanding during the period.
(2)
Net investment income per share and Ratio of Net Investment
income to Average Net Assets include a special dividend from
Evergrande Real Estate Group, Ltd. in June 2014. The impact of
the special dividend to Net investment income per share and
Ratio of Net Investment Income to Average Net Assets is $0.18
and 0.36%, respectively.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Overseas Portfolio (the “Portfolio”) is a
series fund. The Portfolio is part of Janus Aspen Series (the
“Trust”), which is organized as a Delaware statutory
trust and is registered under the Investment Company Act of
1940, as amended (the “1940 Act”), as an open-end
management investment company, and therefore has applied the
specialized accounting and reporting guidance in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 946. The Trust
offers twelve Portfolios which include multiple series of
shares, with differing investment objectives and policies. The
Portfolio invests primarily in equity securities. The Portfolio
is classified as diversified, as defined in the 1940 Act. The
Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Notes to
Financial Statements (unaudited)
(continued)
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Restricted
Cash
As of June 30, 2014, Janus Aspen Overseas Portfolio had
restricted cash in the amount of $13,655,743. The restricted
cash represents collateral pledged in relation to derivatives
and/or
securities with extended settlement dates, as well as investment
quota for China A Shares. The carrying value of the restricted
cash approximates fair value.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would
use in pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
For restricted equity securities and private placements where
observable inputs are limited, assumptions about market activity
and risk are used in employing valuation techniques such as the
market approach, the income approach, or the cost approach, as
defined under the FASB Guidance. These are categorized as
Level 3 in the hierarchy.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3
securities as of June 30, 2014.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a
Notes to
Financial Statements (unaudited)
(continued)
result, the use of derivatives may expose the Portfolio to
additional risks that it would not be subject to if it invested
directly in the securities underlying those derivatives. The use
of derivatives may result in larger losses or smaller gains than
otherwise would be the case. Derivatives can be volatile and may
involve significant risks, including, but not limited to,
counterparty risk, credit risk, currency risk, equity risk,
index risk, interest rate risk, leverage risk, and liquidity
risk, as described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC, the
Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A forward foreign currency exchange contract (“forward
currency contract”) is an obligation to buy or sell a
specified currency at a future date at a negotiated rate (which
may be U.S. dollars or a foreign currency). The Portfolio
may enter into forward currency contracts for hedging purposes,
including, but not limited to, reducing exposure to changes in
foreign currency exchange rates on foreign portfolio holdings
and locking in the U.S. dollar cost of firm purchase and
sale commitments for securities denominated in or exposed to
foreign currencies. The Portfolio may also invest in forward
currency contracts for nonhedging purposes such as seeking to
enhance returns. The Portfolio is subject to currency risk in
the normal course of pursuing its investment objective through
its investments in forward currency contracts.
The gain or loss arising from the difference between the
U.S. dollar cost of the original contract and the value of
the foreign currency in U.S. dollars upon closing a
contract is included in “Net realized gain/(loss) from
investment
and foreign currency transactions” on the Statement of
Operations.
During the period, the Portfolio entered into forward contracts
with the obligation to sell foreign currencies in the future at
an agreed upon rate in order to decrease exposure to currency
risk associated with foreign currency denominated securities
held by the Portfolio.
The following table provides average ending monthly contract
amounts on sold forward contracts during the period ended
June 30, 2014.
Portfolio
Sold
Janus Aspen Overseas Portfolio
$
11,929,714,286
Swaps
A swap is an agreement that obligates two parties to exchange a
series of cash flows at specified intervals based upon or
calculated by reference to changes in specified prices or rates
for a specified amount of an underlying asset. The Portfolio may
utilize swap agreements as a means to gain exposure to certain
common stocks
and/or to
“hedge” or protect its portfolio from adverse
movements in securities prices or interest rates. The Portfolio
is subject to equity risk and interest rate risk in the normal
course of pursuing its investment objective through investments
in swap contracts. Swap agreements entail the risk that a party
will default on its payment obligation to the Portfolio. If the
other party to a swap defaults, the Portfolio would risk the
loss of the net amount of the payments that it contractually is
entitled to receive. If the Portfolio utilizes a swap at the
wrong time or judges market conditions incorrectly, the swap may
result in a loss to the Portfolio and reduce the
Portfolio’s total return. Swap agreements traditionally
were privately negotiated and entered into in the OTC market.
However, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) of 2010 now
requires certain swap agreements to be cleared through a
clearinghouse and traded on an exchange or swap execution
facility. New regulations under the Dodd-Frank Act could, among
other things, increase the cost of such transactions. Swap
contracts of the Portfolio are reported as an asset or liability
on the Statement of Assets and Liabilities. Realized gains and
losses of the Portfolio are reported in “Net realized
gain/(loss) from swap contracts” on the Statement of
Operations.
Total return swaps involve an exchange by two parties in which
one party makes payments based on a set rate, either fixed or
variable, while the other party makes payments based on the
return of an underlying asset, which includes both the income it
generates and any capital gains over the payment period.
The Portfolio’s maximum risk of loss for total return swaps
from counterparty risk or credit risk is the discounted value of
the payments to be received from/paid to the counterparty over
the contract’s remaining life, to the extent that the
amount is positive. The risk is mitigated by having a netting
arrangement between the Portfolio and the counterparty and by
the posting of collateral to the Portfolio to cover the
Portfolio’s exposure to the counterparty.
During the period, the Portfolio entered into total return swaps
on equity securities or indices to increase exposure to equity
risk. These total return swaps require the Portfolio to pay a
floating reference interest rate, and an amount equal to the
negative price movement of securities or an index multiplied by
the notional amount of the contract. The Portfolio will receive
payments equal to the positive price movement of the same
securities or index multiplied by the notional amount of the
contract and, in some cases, dividends paid on the securities.
The following table provides average ending monthly notional
amounts on total return swaps which are long the reference asset
during the period ended June 30, 2014.
Portfolio
Long
Janus Aspen Overseas Portfolio
$
1,954,342,310
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
Fair Value of Derivative Instruments as of June 30,2014
Notes to
Financial Statements (unaudited)
(continued)
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Act provided for widespread
regulation of financial institutions, consumer financial
products and services, broker-dealers, OTC derivatives,
investment advisers, credit rating agencies, and mortgage
lending, which expands federal oversight in the financial
sector, including the investment management industry. Many
provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly
significant negative effect on issuers in the agricultural
sector and on insurance companies that insure against the impact
of natural disasters.
China A
Shares
The Chinese government may permit a foreign investor to invest
in China A Shares as a licensed Qualified Foreign Institutional
Investor (“QFII”). QFII licenses are granted by the
China Securities Regulatory Commission and investment quota is
granted by the State Administration of Foreign Exchange. Janus
Capital has been granted a QFII license and investment quota.
People’s Republic of China (“PRC”) regulations
require QFIIs to entrust assets held in the PRC and to interact
with government agencies through a China-based qualified
custodian bank. Assets attributable to clients of Janus Capital
will be held by the custodian in foreign exchange accounts and
securities accounts in the joint name of Janus Capital and its
clients, although the terms of the custody agreement make clear
that the contents of the accounts belong to the clients, and not
to Janus Capital.
During the period ended June 30, 2014, Janus Capital, in
its capacity as a QFII, invested in China A Shares on behalf of
the Portfolio. With respect to direct China A Shares
investments, as a general matter, any capital invested and
profits generated cannot be repatriated for a minimum of one
year. Repatriation of any invested capital is subject to
approval by the regulator. Additionally, any repatriation of
profits would be subject to an audit by a registered accountant
in China, and subject to regulatory approval. In light of the
foregoing, the Portfolio’s investment in China A Shares
would be subject to the Portfolio’s limit of investing up
to 15% of its net assets in illiquid investments. Current
Chinese tax law is unclear whether capital gains realized on the
Portfolio’s investments in A shares will be subject to tax.
Because management believes it is more likely than not that
Chinese capital gains tax ultimately will not be imposed, the
Portfolio does not accrue for such taxes.
As of June 30, 2014, the Portfolio has available investment
quota of $290. The Portfolio is subject to certain restrictions
and administrative processes relating to its ability to
repatriate cash balances and may incur substantial delays in
gaining access to its assets.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Emerging Market
Investing
The Portfolio may invest in securities of issuers or companies
from or with exposure to one or more “developing
countries” or “emerging markets.” Investing in
emerging markets may involve certain risks and considerations
not typically associated with investing in the United States and
imposes risks greater than, or in addition to, the risks
associated with investing in securities of more developed
foreign countries. Emerging markets securities are exposed to a
number of additional risks, which may result from less
government supervision and regulation of business and industry
practices (including the potential lack of strict finance and
accounting controls and standards), stock exchanges, brokers,
and listed companies, making these investments potentially more
volatile in price and less liquid than investments in developed
securities markets, resulting in greater risk to investors.
There is a risk in developing countries that a future economic
or political crisis could lead to price controls, forced mergers
of companies, expropriation or confiscatory taxation, imposition
or enforcement of foreign ownership limits, seizure,
nationalization, sanctions or imposition of restrictions by
various governmental entities on investment and trading, or
creation of government monopolies, any of which may have a
detrimental effect on the Portfolio’s investments. In
addition, the Portfolio’s investments may be denominated in
foreign currencies
Notes to
Financial Statements (unaudited)
(continued)
and therefore, changes in the value of a country’s currency
compared to the U.S. dollar may affect the value of the
Portfolio’s investments. To the extent that the Portfolio
invests a significant portion of its assets in the securities of
issuers in or companies of a single country or region, it is
more likely to be impacted by events or conditions affecting
that country or region, which could have a negative impact on
the Portfolio’s performance. Additionally, foreign and
emerging market risks, including but not limited to price
controls, expropriation or confiscatory taxation, imposition or
enforcement of foreign ownership limits, nationalization, and
restrictions on repatriation of assets may be heightened to the
extent the Portfolio invests in Chinese local market securities
(also known as “A Shares”).
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Assets and Derivative Assets
Gross Amounts of
Gross Amounts in the
Counterparty
Recognized Assets
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
620,824
$
(210,011)
$
(410,813)
$
–
Deutsche Bank AG
66,968,294
–
(66,968,294)
–
Total
$
67,589,118
$
(210,011)
$
(67,379,107)
$
–
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts of
Gross Amounts in the
Counterparty
Recognized Liabilities
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
Credit Suisse International
$
210,011
$
(210,011)
$
–
$
–
HSBC Securities (USA), Inc.
183,531
–
–
183,531
JPMorgan Chase & Co.
185,002
–
–
185,002
RBC Capital Markets Corp.
177,196
–
–
177,196
Total
$
755,740
$
(210,011)
$
–
$
545,729
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
Deutsche Bank AG acts as securities lending agent and a limited
purpose custodian or subcustodian to receive and disburse cash
balances and cash collateral, hold short-term investments, hold
collateral, and perform other custodian functions. Securities on
loan will be continuously secured by collateral which may
consist of cash, U.S. Government securities, domestic and
foreign short-term debt instruments, letters of credit, time
deposits, repurchase agreements, money market mutual funds or
other money market accounts, or such other collateral as
permitted by the SEC. The value of the collateral must be at
least 102% of the market value of the loaned securities that are
denominated in U.S. dollars and 105% of the market value of
the loaned securities that are not denominated in
U.S. dollars. Upon receipt of cash collateral, Janus
Capital intends to invest the cash collateral in a cash
management vehicle for which Janus Capital serves as investment
adviser, Janus Cash Collateral Fund LLC. Loaned securities
and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available
pricing information. Collateral levels are then adjusted based
on this
mark-to-market
evaluation.
The Portfolio does not exchange collateral on its forward
currency contracts with its counterparties; however, the
Portfolio will segregate cash or high-grade securities with its
custodian in an amount at all times equal to or greater than the
Portfolio’s commitment with respect to these contracts.
Such segregated assets are denoted on the accompanying Schedule
of Investments and are evaluated daily to ensure their market
value equals or exceeds the current market value of the
Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty
and/or
custodian daily (based on the daily valuation of the financial
asset) if the Portfolio has a net aggregate unrealized loss on
OTC derivative contracts with a particular counterparty. The
collateral amounts are subject to minimum exposure requirements
and initial margin requirements. Collateral amounts are
monitored and subsequently adjusted up or down as valuations
fluctuate by at least the minimum exposure requirement.
Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater than the risk
of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions
may result in the inability of the Portfolio to sell a security
at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets
exist.
Securities
Lending
Under procedures adopted by the Trustees, the Portfolio may seek
to earn additional income by lending securities to qualified
parties. Deutsche Bank AG acts as securities lending agent and a
limited purpose custodian or subcustodian to receive and
disburse cash balances and cash collateral, hold short-term
investments, hold collateral, and perform other custodian
functions. The Portfolio may lend portfolio securities in an
amount equal to up to 1/3 of its total assets as determined at
the time of the loan origination. There is the risk of delay in
recovering a loaned security or the risk of loss in collateral
rights if the borrower fails financially. In addition, Janus
Capital makes efforts to balance the benefits and risks from
granting such loans. All loans will be continuously secured by
collateral which may consist of cash, U.S. Government
securities, domestic and foreign short-term debt instruments,
letters of credit, time deposits, repurchase agreements, money
market mutual funds or other money market accounts, or such
other collateral as permitted by the SEC. If the Portfolio is
unable to recover a security on loan, the Portfolio may use the
collateral to purchase replacement securities in the market.
There is a risk that the value of the collateral could decrease
below the cost of the replacement security by the time the
replacement investment is made, resulting in a loss to the
Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in
affiliated or non-affiliated cash management vehicles, whether
registered or unregistered entities, as permitted by the 1940
Act and rules promulgated thereunder. Janus Capital currently
intends to invest the cash collateral in a cash management
vehicle for which Janus Capital serves as investment adviser,
Janus Cash Collateral Fund LLC. An investment in Janus Cash
Collateral Fund LLC is generally subject to the same risks
that shareholders experience when investing in similarly
structured vehicles, such as the potential for significant
fluctuations in assets as a result of the purchase and
redemption activity of the securities lending program, a decline
in the value of the collateral, and possible liquidity issues.
Such risks may delay the return of the cash collateral and cause
the Portfolio to violate its agreement to return the cash
collateral to a borrower in a timely manner. As adviser to the
Portfolio and Janus Cash Collateral Fund LLC, Janus Capital
has an inherent conflict of interest as a result of its
fiduciary duties to both the Portfolio and Janus Cash Collateral
Fund LLC. Additionally, Janus Capital receives an
investment advisory fee of 0.05% for managing Janus Cash
Collateral Fund LLC, but it may not receive a fee for
managing certain other affiliated cash management
Notes to
Financial Statements (unaudited)
(continued)
vehicles in which the Portfolio may invest, and therefore may
have an incentive to allocate preferred investment opportunities
to investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market
value of the loaned securities that are denominated in
U.S. dollars and 105% of the market value of the loaned
securities that are not denominated in U.S. dollars. Loaned
securities and related collateral are
marked-to-market
each business day based upon the market value of the loaned
securities at the close of business, employing the most recent
available pricing information. Collateral levels are then
adjusted based on this
mark-to-market
evaluation.
The cash collateral invested by Janus Capital is disclosed in
the Schedule of Investments. Income earned from the investment
of the cash collateral, net of rebates paid to, or fees paid by,
borrowers and less the fees paid to the lending agent are
included as “Affiliated securities lending income,
net” on the Statement of Operations.
4.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s “base” fee rate prior to
any performance adjustment (expressed as an annual rate).
Base Fee
Rate (%)
Portfolio
(annual rate)
Janus Aspen Overseas Portfolio
0.64
For the Portfolio, the investment advisory fee rate is
determined by calculating a base fee and applying a performance
adjustment. The base fee rate is the same as the contractual
investment advisory fee rate shown in the table above. The
performance adjustment either increases or decreases the base
fee depending on how well the Portfolio has performed relative
to its benchmark index, as shown below:
Portfolio
Benchmark Index
Janus Aspen Overseas Portfolio
MSCI All Country World ex-U.S.
IndexSM
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance
Adjustment
The investment advisory fee rate paid to Janus Capital by the
Portfolio consists of two components: (1) a base fee
calculated by applying the contractual fixed rate of the
advisory fee to the Portfolio’s average daily net assets
during the previous month (“Base Fee Rate”), plus or
minus (2) a performance-fee adjustment (“Performance
Adjustment”) calculated by applying a variable rate of up
to 0.15% (positive or negative) to the Portfolio’s average
daily net assets during the applicable performance measurement
period. The performance measurement period generally is the
previous 36 months, although no Performance Adjustment is
made until the Portfolio’s performance-based fee structure
has been in effect for at least 15 months. When the
Portfolio’s performance-based fee structure has been in
effect for at least 15 months, but less than
36 months, the performance measurement period will be equal
to the time that has elapsed since the performance-based fee
structure took effect. The Performance Adjustment began October
2011 for the Portfolio.
No Performance Adjustment is applied unless the difference
between the Portfolio’s investment performance and the
cumulative investment record of the Portfolio’s benchmark
index is 0.50% or greater (positive or negative) during the
applicable performance measurement period. The Base Fee Rate is
subject to an upward or downward Performance Adjustment for
every full 0.50% increment by which the Portfolio outperforms or
underperforms its benchmark index. Because the Performance
Adjustment is tied to the Portfolio’s relative performance
compared to its benchmark index (and not its absolute
performance), the Performance Adjustment could increase Janus
Capital’s fee even if the Portfolio’s Shares lose
value during the performance measurement period and could
decrease Janus Capital’s fee even if the Portfolio’s
Shares increase in value during the performance measurement
period. For purposes of computing the Base Fee Rate and the
Performance Adjustment, net assets are averaged over different
periods (average daily net assets during the previous month for
the Base Fee Rate, versus average daily net assets during the
performance measurement period for the Performance Adjustment).
Performance of the Portfolio is calculated net of expenses,
whereas the Portfolio’s benchmark index does not have any
fees or expenses. Reinvestment of dividends and distributions is
included in calculating both the performance of the Portfolio
and the Portfolio’s benchmark index. The Base Fee Rate is
calculated and accrued daily. The Performance Adjustment is
calculated monthly in arrears and is accrued throughout the
month. The investment fee is paid monthly in arrears. Under
extreme circumstances involving underperformance by a rapidly
shrinking Portfolio, the dollar amount of the Performance
Adjustment could be more than the dollar amount of the Base Fee
Rate. In such circumstances, Janus Capital would reimburse the
Portfolio.
The investment performance of the Portfolio’s Service
Shares for the performance measurement period is used to
calculate the Performance Adjustment. After Janus Capital
determines whether the Portfolio’s performance was above or
below its benchmark index by comparing the investment
performance of the Portfolio’s Service Shares against the
cumulative investment record of the Portfolio’s benchmark
index, Janus Capital applies the same Performance Adjustment
(positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance
Adjustment on future overall compensation to Janus Capital since
it depends on the performance of the Portfolio relative to the
record of the Portfolio’s benchmark index and future
changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional
information contain additional information about
performance-based fees. The amount shown as advisory fees on the
Statement of Operations reflects the Base Fee Rate plus/minus
any Performance Adjustment. During the period ended
June 30, 2014, the Portfolio recorded a Performance
Adjustment of $(1,217,295).
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the
Notes to
Financial Statements (unaudited)
(continued)
custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals and investments in passive foreign investment
companies.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Overseas Portfolio
$
1,435,016,833
$
295,012,903
$
(268,272,837)
$
26,740,066
6.
Capital Share
Transactions
Janus Aspen Overseas Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
210,904
534,674
Reinvested dividends and distributions
1,408,595
398,613
Shares repurchased
(789,924)
(3,103,058)
Net Increase/(Decrease) in Portfolio Shares
829,575
(2,169,771)
Shares Outstanding, Beginning of Period
10,799,179
12,968,950
Shares Outstanding, End of Period
11,628,754
10,799,179
Transactions in Portfolio Shares – Service Shares
Shares sold
765,053
1,894,258
Reinvested dividends and distributions
3,139,093
851,348
Shares repurchased
(2,235,987)
(6,395,923)
Net Increase/(Decrease) in Portfolio Shares
1,668,159
(3,650,317)
Shares Outstanding, Beginning of Period
23,814,449
27,464,766
Shares Outstanding, End of Period
25,482,608
23,814,449
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Overseas Portfolio
$
200,524,321
$
292,582,820
$
–
$
–
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Janus
Aspen Perkins Mid Cap Value Portfolio
(unaudited)
PORTFOLIO SNAPSHOT The Portfolio seeks to
invest in what we believe are fundamentally and financially
strong mid-sized companies exhibiting favorable risk-reward
characteristics. We believe in the timeless adage of the power
of compounding and in doing so our focus is on mitigating losses
in difficult markets. We invest in companies we believe have
favorable reward to risk characteristics by conducting rigorous
downside analysis before determining upside potential. We seek
to outperform both our benchmark and peers over a full market
cycle by building a diversified portfolio of high-quality,
undervalued stocks.
Tom Perkins
co-portfolio manager
Jeff Kautz
co-portfolio manager
Kevin Preloger
co-portfolio manager
PERFORMANCE
OVERVIEW
During the six months ended June 30, 2014, Janus Aspen
Perkins Mid Cap Value Portfolio’s Institutional Shares and
Service Shares returned 7.27% and 7.10%, respectively, while its
benchmark, the Russell Midcap Value Index, returned 11.14%. Our
holdings in financials, information technology and industrials
weighed the most on relative performance, while our holdings in
materials and consumer staples contributed.
MARKET
COMMENTARY
After a good finish to an unusually strong 2013, the market was
choppy early in the period. During the understandable pause, the
market dealt with steady but uninspiring earnings, international
and weather-related economic uncertainties, simmering
geopolitical threats and a change in Federal Reserve (Fed)
leadership. Volatility had some brief spikes, providing us with
several opportunities to initiate positions in what we consider
high-quality stocks, but generally remained at low levels. Most
importantly, interest rates as measured by
10-year
Treasurys actually declined, which led to strong returns from
rate-sensitive industries, such as utilities and real estate
investment trusts (REITs).
Gains in equities accelerated during the second quarter. The
unbridled stock
run-up
investors have enjoyed of late has now passed the five-year mark
without a meaningful decline in more than two years. Equities
may continue to rise in the short term, of course, but these
most recent gains have only escalated what we see as embedded
risks in the current loftier valuations. Helping to fuel the
rise in equity prices has been both multiple expansion and share
repurchase programs. In 2013, most of the return of the
S&P 500 was due to
price-to-earnings
expansion. Coupled with this was share repurchase activity that
totaled $598.1 billion last year and $188 billion in
the first quarter of 2014, the highest amount in a quarter since
2007, based on data from Birinyi Associates.
The U.S. economy continued its sluggish recovery for this
point in an economic cycle, and even contracted worse than had
been expected in the first quarter due to weather. At its most
recent meeting, the Fed downgraded its view of gross domestic
product (GDP) growth for the year to 2.1%-2.3%, implying the
second half must improve to offset the decline early in the
year. Merger and Acquisition (M&A) activity picked up
considerably with additional acceleration probable given robust
cash levels on corporate balance sheets, very low debt costs,
attractive offshore tax rates, and limited top line growth.
Activist involvement has also been a catalyst for notable share
price appreciation although much of the activity has been very
short term in nature. The labor market is showing more signs of
surface strength, with recent stronger job growth and small
business confidence approaching pre-crisis levels. However, the
labor participation rate remains stuck at a multidecade low and
pockets of wage growth are being offset by weakness in other
areas. Recent consumer spending weakness and the past
month’s unexpected rise in consumer prices could also prove
troublesome.
The latest geopolitical
flare-up
that market participants seemed to ignore was the outbreak of
sectarian violence in Iraq. Given the repercussions on other
fragile governments in the region, it would seem this violence
would be difficult to contain. Higher oil prices might also
result.
DETRACTORS
KBR, a global engineering and construction company, was our
largest individual detractor. In spite of strong growth in
KBR’s ammonia and oil and gas divisions, the lack of big
project wins in its gas monetization business hurt the
company’s stock, as investors’ concern about its
earnings
Janus
Aspen Perkins Mid Cap Value Portfolio
(unaudited)
outlook increased. While the company is extremely well
positioned internationally in the liquefied natural gas (LNG)
market, its lack of North American wins, where shale gas has
increased LNG’s attractiveness, has been noticeable.
ADT, the largest provider of residential home security, suffered
under threats of increased competition from telecommunication
and cable companies. With over 25% market share, ADT is the most
visible target for increased competition. The company’s
first quarter results, while beating earnings estimates, showed
new deterioration in churn rates and subscriber acquisition
costs, which led to a decline in the period. While we consider
the company to have one of the strongest product offerings and
superior customer service, the continued risk of increased
competition led us to reconsider the downside risk. As a result,
we exited the stock.
Business lender CIT Group also pulled back on disappointing
earnings and a reduced outlook for capital return. With high
tangible common equity to tangible assets and a significant
deferred tax asset valuation allowance, CIT is one of the best
capitalized financial institutions in the world, in our view.
While its stock trades at a reasonable valuation on tangible
book value and below adjusted tangible book value, the upside
realization may be slower than anticipated since regulators
remain very restrictive on the pace of capital return, which
keeps CIT’s return on equity depressed. Based on the
reduced earnings outlook near term, we trimmed CIT, but it
remains a large holding given its strong balance sheet and
long-term earnings potential, in our view.
CONTRIBUTORS
PPL, our largest contributor, was granted regulatory “fast
tracking” for its UK utilities, which should provide better
returns and regulatory visibility for the next eight years.
PPL’s year-end and quarterly earnings results were also
positively impacted by higher rates at its Kentucky utility and
better-than-expected
earnings in its unregulated power supply business. Additionally,
the 10-year
Treasury interest rate decreased during the period, which led to
many yield-focused investors increasing their holdings across
the sector. We think that PPL has a favorable long-term outlook,
given its regulated utility business has been outperforming
management guidance and the company would benefit from potential
improvement in long-term U.S. power prices. PPL was the
Portfolio’s largest holding at period end.
Canadian Pacific Railway, another top contributor, benefited as
the negative impacts of weather earlier in the year were less
than anticipated. Management also announced new initiatives to
focus on growing revenues with a target of 10% annual growth
over the next five years. Lastly, management said it will be
returning more capital to shareholders in the form of dividends
and stock buybacks. Canadian Pacific was our second-largest
holding as of period end. The tailwinds of operating efficiency
improvements and our visibility to its long-term earnings growth
continue.
Plains GP Holdings, the general partner of Plains All American
Pipeline, also aided the Portfolio’s performance. Engaged
in the transportation and storage of energy products, Plains GP
has benefited from increasing crude oil volume growth in the
U.S. The company reported a very solid earnings report and
raised its second quarter earnings before interest, taxes,
depreciation and amortization (EBITDA) guidance and highlighted
its robust $7.5 billion project backlog. The company also
benefited from the announcement that the government would begin
to allow very limited crude condensate exports, since the
company’s crude oil transportation and storage assets are
located in some of the most prolific oil and gas basins across
the country. Additionally, Plains GP gained from investors
looking for high-yield growth stocks in the low interest rate
environment. We continue to believe that the company is well
positioned for the continued energy infrastructure build-out
across North America.
MARKET
OUTLOOK
We believe equities continue to be the most attractive long-term
investment choice compared to other asset classes. However, at
this point most
reward-to-risk
ratios we are finding in the market appear less favorable than
normal, given current valuations although there are some notable
exceptions. General investor complacency also remains high, with
extremely light trading volumes and multiyear lows in the
Chicago Board of Options Exchange Volatility Index (a general
measure of market volatility). It would not take much negative
news for equities to quickly reverse course, exposing investors
to what could be some painful losses if an overdue correction
begins to materialize. As such, we believe a more cautious
portfolio of higher quality stocks which trade at less of a
premium to the market average price earnings ratio is warranted.
Focus on these types of stocks should allow us to outperform
both our benchmark and peers over a full market cycle.
In this type of climate, we believe that our risk-disciplined
investment philosophy makes even more sense than usual. Our
fundamental equity research focuses on evaluating downside
exposure first and foremost, before analyzing
upside potential. We are much more concerned about limiting
downside risk should markets decline rather than maximizing
gains in hopes that everything goes well. By striving to
minimize downside losses while participating in upside market
gains, we seek to compound at a higher rate.
Our research typically leads us to high-quality companies with
healthy balance sheets, earnings stability, solid recurring free
cash flows and attractive competitive moats. Higher-quality
companies may not be cheap on an absolute basis at the moment,
but they continue to offer strong relative value, especially in
terms of their solid defensive characteristics. Add in the
healthy dividend yields being generated by many of these stocks,
and we are confident that our portfolios continue to be well
positioned for the current environment, both in terms of
minimizing loss potential as well as providing competitive
long-term gains.
Within our largest absolute weighting, financial services, we
remain underweight in property REITs, and slightly overweight in
regional banks, insurance and asset managers. The relative
overweight in health care has decreased, as we have trimmed
various holdings as they approached our price targets. We have
an overweight in industrials which comprises businesses that we
believe are less economically cyclical, such as top holdings
waste hauler Republic Services and commercial fire and security
provider Tyco International. This defensiveness is also
highlighted by our relative underweight in materials that tend
to be economically sensitive. Our relative overweight in
consumer staples and underweight in the consumer discretionary
area also exposes the portfolio to less economic cyclicality, in
our view. The Portfolio’s longstanding underweight in
utilities continues, as those stocks are trading at the higher
end of their historical relative valuation range.
Given the above-average risk we are seeing in the market, we
remain confident in our investment methodology and current
portfolio holdings. We believe our strategies are well
positioned to navigate any potential volatility while striving
to deliver consistently attractive risk-adjusted performance
long term. While we are well aware of the
less-than-optimal
relative returns that our strategy has provided in the recent
past, the absolute returns are very competitive in this near
zero interest rate environment. This most recent quarter is much
more in line with what we as a firm generally attempt to achieve
in terms of keeping a close pace with the overall market that
continues to rally while maintaining a high-quality,
risk-sensitive portfolio. We continue to believe volatility and
a market correction could occur at any time and our portfolio of
what we believe are high-quality stocks will provide a solid
defense in that market environment.
Thank you for your investment in Janus Aspen Perkins Mid Cap
Value Portfolio.
Janus
Aspen Perkins Mid Cap Value Portfolio
(unaudited)
Janus Aspen
Perkins Mid Cap Value Portfolio At A Glance
5 Top
Performers – Holdings
Contribution
PPL Corp.
0.49%
Canadian Pacific Railway, Ltd. (U.S. Shares)
0.47%
Plains GP Holdings LP – Class A
0.41%
Molson Coors Brewing Co. – Class B
0.36%
Republic Services, Inc.
0.34%
5 Bottom
Performers – Holdings
Contribution
KBR, Inc.
–0.31%
ADT Corp.
–0.27%
CIT Group, Inc.
–0.20%
Rogers Communications, Inc. – Class B
–0.14%
CA, Inc.
–0.14%
5 Top
Performers – Sectors*
Portfolio Weighting
Russell
Midcap®
Value
Portfolio Contribution
(Average % of Equity)
Index Weighting
Materials
0.37%
1.94%
5.36%
Consumer Staples
0.10%
6.13%
2.74%
Consumer Discretionary
0.07%
6.39%
8.63%
Energy
0.00%
8.96%
7.24%
Health Care
–0.02%
10.37%
8.76%
5 Bottom
Performers – Sectors*
Portfolio Weighting
Russell
Midcap®
Value
Portfolio Contribution
(Average % of Equity)
Index Weighting
Financials
–1.19%
30.80%
32.28%
Information Technology
–1.03%
8.30%
10.79%
Industrials
–0.52%
16.63%
11.65%
Telecommunication Services
–0.48%
2.12%
0.69%
Utilities
–0.44%
5.04%
11.86%
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard codes, which are the exclusive property
and a service mark of MSCI Inc. and Standard & Poor’s.
Janus Aspen Perkins Mid Cap Value Portfolio –
Institutional Shares
7.27%
19.98%
15.75%
9.33%
12.12%#
0.58%
Janus Aspen Perkins Mid Cap Value Portfolio – Service
Shares
7.10%
19.67%
15.38%
8.97%
11.47%*
0.83%
Russell
Midcap®
Value Index
11.14%
27.76%
22.97%
10.66%
12.99%**
Morningstar Quartile – Service Shares
–
4th
4th
3rd
3rd
Morningstar Ranking – based on total returns for
Mid-Cap Value Funds
–
417/438
362/382
208/324
168/292
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
This Portfolio has a performance-based management fee that may
adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that
include those associated with nondiversification, non-investment
grade debt securities, high-yield/high-risk securities,
undervalued or overlooked companies, investments in specific
industries or countries and potential conflicts of interest.
Additional risks to a Portfolio may also include, but are not
limited to, those associated with investing in foreign
securities, emerging markets, initial public offerings, real
estate investment trusts (REITs), derivatives, short sales,
commodity-linked investments and companies with relatively small
market capitalizations. Each Portfolio has different risks.
Please see a Janus prospectus for more information about risks,
Portfolio holdings and other details.
The Portfolio will normally invest at least 80% of its net
assets, measured at the time of purchase, in the type of
securities described by its name.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may
have different performance characteristics. When an expense
waiver is in effect, it may have a material effect on the total
return, and therefore the ranking for the period.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
The Russell
Midcap®
Value Index’s since inception returns are calculated from
December 31, 2002.
Expense
Examples
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,072.70
$
3.13
$
1,000.00
$
1,021.77
$
3.06
0.61%
Service Shares
$
1,000.00
$
1,071.00
$
4.42
$
1,000.00
$
1,020.53
$
4.31
0.86%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
ING Financial Markets LLC, 0.0500%, dated 6/30/14, maturing
7/1/14 to be repurchased at $6,500,009 collateralized by
$6,931,546 in U.S. Treasuries 0% – 3.3750%,
9/4/14 – 5/15/44 with a value of $6,630,015
(cost $6,500,000)
6,500,000
Total Investments (total cost $115,073,868) –
99.5%
146,327,731
Cash, Receivables and Other Assets, net of
Liabilities – 0.5%
734,256
Net Assets – 100%
$
147,061,987
Summary of
Investments by Country – (Long Positions)
(unaudited)
% of Investment
Country
Value
Securities
United
States††
$
136,433,478
93
.2%
Canada
6,996,553
4
.8
Israel
2,897,700
2
.0
Total
$
146,327,731
100
.0%
††
Includes Cash Equivalents of 4.4%.
See Notes to Schedule of Investments and Other Information and
Notes to Financial Statements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
Russell
Midcap®
Value Index
Measures the performance of those
Russell
Midcap®
Index companies with lower
price-to-book
ratios and lower forecasted growth values.
ADR
American Depositary Receipt
LP
Limited Partnership
LLC
Limited Liability Company
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Perkins Mid Cap Value Portfolio (the
“Portfolio”) is a series fund. The Portfolio is part
of Janus Aspen Series (the “Trust”), which is
organized as a Delaware statutory trust and is registered under
the Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio invests
primarily in equity securities. The Portfolio is classified as
diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”). Equity
securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Notes to
Financial Statements (unaudited)
(continued)
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or
depreciation of investments and foreign currency translations
arise from changes in the value of assets and liabilities,
including investments in securities held at the date of the
financial statements, resulting from changes in the exchange
rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy. Other securities that may be
categorized as Level 2 in the hierarchy include, but are
not limited to, preferred stocks, bank loans, swaps, investments
in unregistered investment companies, options, and forward
contracts. The Portfolio uses systematic fair valuation models
provided by independent third parties to value international
equity securities in order to adjust for stale pricing, which
may occur between the close of certain foreign exchanges and the
close of the NYSE. These are generally categorized as
Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Other Investments
and Strategies
Additional
Investment Risk
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. As a result, it may also
be unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July 2010
provided for widespread regulation of financial institutions,
consumer financial products and services, broker-dealers, OTC
derivatives, investment advisers, credit rating agencies, and
mortgage lending, which expands federal oversight in the
financial sector, including the investment management industry.
Many provisions of the Dodd-Frank Act remain pending and will be
implemented through future rulemaking. Therefore, the ultimate
impact of the Dodd-Frank Act and the regulations under the
Dodd-Frank Act on the Portfolio and the investment management
industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
Notes to
Financial Statements (unaudited)
(continued)
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill
its obligation to the Portfolio (“counterparty risk”).
Counterparty risk may arise because of the counterparty’s
financial condition (i.e., financial difficulties, bankruptcy,
or insolvency), market activities and developments, or other
reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant
financial loss to the Portfolio. The Portfolio may be unable to
recover its investment from the counterparty or may obtain a
limited recovery,
and/or
recovery may be delayed. The extent of the Portfolio’s
exposure to counterparty risk in respect to financial assets
approximates its carrying value as recorded on the
Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through
participation in various programs including, but not limited to,
lending its securities to third parties, cash sweep arrangements
whereby the Portfolio’s cash balance is invested in one or
more types of cash management vehicles, as well as investments
in, but not limited to, repurchase agreements, debt securities,
and derivatives, including various types of swaps, futures and
options. The Portfolio intends to enter into financial
transactions with counterparties that Janus Capital believes to
be creditworthy at the time of the transaction. There is always
the risk that Janus Capital’s analysis of a
counterparty’s creditworthiness is incorrect or may change
due to market conditions. To the extent that the Portfolio
focuses its transactions with a limited number of
counterparties, it will have greater exposure to the risks
associated with one or more counterparties.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following tables present gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable).
Offsetting of
Financial Assets and Derivative Assets
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Assets
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
ING Financial Markets LLC
$
6,500,000
$
–
$
(6,500,000)
$
–
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
All repurchase agreements are transacted under legally
enforceable master repurchase agreements that give the
Portfolio, in the event of default by the counterparty, the
right to liquidate securities held and to offset receivables and
payables with the counterparty. Repurchase agreements held by
the Portfolio are fully collateralized,
and such collateral is in the possession of the Portfolio’s
custodian or, for tri-party agreements, the custodian designated
by the agreement. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the
repurchase agreements, including accrued interest.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Repurchase
Agreements
Repurchase agreements held by a Portfolio are fully
collateralized, and such collateral is in the possession of the
Portfolio’s custodian or, for tri-party agreements, the
custodian designated by the agreement. The collateral is
evaluated daily to ensure its market value exceeds the current
market value of the repurchase agreements, including accrued
interest. In the event of default on the obligation to
repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the other
party to the agreement, realization
and/or
retention of the collateral or proceeds may be subject to legal
proceedings.
3.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s “base” fee rate prior to
any performance adjustment (expressed as an annual rate).
Base Fee
Rate (%)
Portfolio
(annual rate)
Janus Aspen Perkins Mid Cap Value Portfolio
0.64
For the Portfolio, the investment advisory fee rate is
determined by calculating a base fee and applying a performance
adjustment. The base fee rate is the same as the contractual
investment advisory fee rate shown in the table above. The
performance adjustment either increases or decreases the base
fee depending on how well the Portfolio has performed relative
to its benchmark index, as shown below:
Portfolio
Benchmark Index
Janus Aspen Perkins Mid Cap Value Portfolio
Russell
Midcap®
Value Index
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance
Adjustment
The investment advisory fee rate paid to Janus Capital by the
Portfolio consists of two components: (1) a base fee
calculated by applying the contractual fixed rate of the
advisory fee to the Portfolio’s average daily net assets
during the previous month (“Base Fee Rate”), plus or
minus (2) a performance-fee adjustment (“Performance
Adjustment”) calculated by applying a variable rate of up
to 0.15% (positive or negative) to the Portfolio’s average
daily net assets during the applicable performance measurement
period. The Performance Adjustment is based on a rolling
36-month
performance measurement period. The Performance Adjustment began
February 2007 for the Portfolio.
No Performance Adjustment is applied unless the difference
between the Portfolio’s investment performance and the
cumulative investment record of the Portfolio’s benchmark
index is 0.50% or greater (positive or negative) during the
applicable performance measurement period. The Base Fee Rate is
subject to an upward or downward Performance Adjustment for
every full 0.50% increment by which the Portfolio outperforms or
underperforms its benchmark index. Because the Performance
Adjustment is tied to the Portfolio’s relative performance
compared to its benchmark index (and not its absolute
performance), the Performance Adjustment could increase Janus
Capital’s fee even if the Portfolio’s Shares lose
value during the performance measurement period and could
decrease Janus Capital’s fee even if the Portfolio’s
Shares increase in value during the performance measurement
period. For purposes of computing the Base Fee Rate and the
Performance Adjustment, net assets are averaged over different
periods (average daily net assets during the previous month for
the Base Fee Rate, versus average daily net assets during the
performance measurement period for the Performance Adjustment).
Performance of the Portfolio is calculated net of expenses,
whereas the Portfolio’s benchmark index does not have any
fees or expenses. Reinvestment of dividends and distributions is
included in calculating both the performance of the Portfolio
and the Portfolio’s benchmark index. The Base Fee Rate is
calculated and accrued daily. The Performance Adjustment is
calculated monthly in arrears and is accrued throughout the
month.
Notes to
Financial Statements (unaudited)
(continued)
The investment fee is paid monthly in arrears. Under extreme
circumstances involving underperformance by a rapidly shrinking
Portfolio, the dollar amount of the Performance Adjustment could
be more than the dollar amount of the Base Fee Rate. In such
circumstances, Janus Capital would reimburse the Portfolio.
The application of an expense limit, if any, will have a
positive effect upon the Portfolio’s performance and may
result in an increase in the Performance Adjustment. It is
possible that the cumulative dollar amount of additional
compensation ultimately payable to Janus Capital may, under some
circumstances, exceed the cumulative dollar amount of management
fees waived by Janus Capital.
The investment performance of the Portfolio’s Service
Shares for the performance measurement period is used to
calculate the Performance Adjustment. After Janus Capital
determines whether the Portfolio’s performance was above or
below its benchmark index by comparing the investment
performance of the Portfolio’s Service Shares against the
cumulative investment record of the Portfolio’s benchmark
index, Janus Capital applies the same Performance Adjustment
(positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance
Adjustment on future overall compensation to Janus Capital since
it depends on the performance of the Portfolio relative to the
record of the Portfolio’s benchmark index and future
changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional
information contain additional information about
performance-based fees. The amount shown as advisory fees on the
Statement of Operations reflects the Base Fee Rate plus/minus
any Performance Adjustment. During the period ended
June 30, 2014, the Portfolio recorded a Performance
Adjustment of $(99,161).
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that the Portfolio’s normal
operating expenses in any fiscal year, including the investment
advisory fee, but excluding any performance adjustments to
management fees, the distribution and shareholder servicing fees
(applicable to Service Shares), administrative services fees
payable pursuant to the Transfer Agency Agreement, brokerage
commissions, interest, dividends, taxes, acquired fund fees and
expenses, and extraordinary expenses, exceed the annual rate
shown below. Janus Capital has agreed to continue the waiver
until at least May 1, 2015. If applicable, amounts
reimbursed to the Portfolio by Janus Capital are disclosed as
“Excess Expense Reimbursement” on the Statement of
Operations.
Expense
Portfolio
Limit (%)
Janus Aspen Perkins Mid Cap Value Portfolio
0.77(1)
(1)
Effective May 1, 2014, the expense limit decreased from 0.86% to
0.77%.
Perkins Investment Management LLC (“Perkins”) serves
as subadviser to the Portfolio. Janus Capital pays Perkins a fee
equal to 50% of the advisory fee paid by the Portfolio to Janus
Capital (plus or minus half of any performance fee adjustment,
and net of any reimbursement of expenses incurred or fees waived
by Janus Capital).
Perkins or its predecessors have been in the investment
management business since 1984 and serves as investment adviser
or subadviser to other Janus registered investment companies and
other accounts. Janus Capital owns 100% of Perkins.
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s actual
distribution and shareholder service expenses incurred during a
calendar year are less than the payments made during a calendar
year, the Portfolio will be refunded the difference. Refunds, if
any, are included in “Distribution fees and shareholder
servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts
credited to the account then increase or decrease, as the case
may be, in accordance with the performance of one or more of the
Janus funds that are selected by the Trustees. The account
balance continues to fluctuate in accordance with the
performance of the selected fund or funds until final payment of
all amounts are credited to the account. The fluctuation of the
account balance is recorded by the Portfolio as unrealized
appreciation/(depreciation) and is shown as of June 30,2014 on the Statement of Assets and Liabilities as an asset,
“Non-interested Trustees’ deferred compensation,”
and a liability, “Non-interested Trustees’ deferred
compensation fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital (or the subadviser)
provides to the Portfolio. Some expenses related to compensation
payable to the Portfolio’s Chief Compliance Officer and
compliance staff are shared with the Portfolio. Total
compensation of $18,154 was paid to the Chief Compliance Officer
and certain compliance staff by the Trust during the period
ended June 30, 2014. The Portfolio’s portion is
reported as part of “Other expenses” on the Statement
of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
4.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency transactions, net investment losses and
capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary differences between book and tax
appreciation or depreciation of investments are wash sale loss
deferrals and investments in partnerships.
Notes to
Financial Statements (unaudited)
(continued)
5.
Capital Share
Transactions
Janus Aspen Perkins Mid Cap Value Portfolio
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional Shares
Shares sold
243,401
753,806
Reinvested dividends and distributions
238,373
81,630
Shares repurchased
(480,007)
(1,150,084)
Net Increase/(Decrease) in Portfolio Shares
1,767
(314,648)
Shares Outstanding, Beginning of Period
2,331,522
2,646,170
Shares Outstanding, End of Period
2,333,289
2,331,522
Transactions in Portfolio Shares – Service Shares
Shares sold
262,601
1,238,440
Reinvested dividends and distributions
581,469
175,645
Shares repurchased
(697,266)
(1,459,295)
Net Increase/(Decrease) in Portfolio Shares
146,804
(45,210)
Shares Outstanding, Beginning of Period
5,532,330
5,577,540
Shares Outstanding, End of Period
5,679,134
5,532,330
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands.
6.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Perkins Mid Cap Value Portfolio
$
42,782,237
$
52,935,930
$
–
$
–
7.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s managers as well as
statistical information to help you understand how your
Portfolio’s performance and characteristics stack up
against those of comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
managers may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio managers. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Janus Aspen
Preservation Series - Growth
(unaudited)
PORTFOLIO SNAPSHOT Janus Aspen Preservation
Series – Growth is a growth fund with a protection
feature that seeks to minimize and cap losses. This is the only
U.S. fund series that offers potential upside based on
stock market participation and a level of certainty in falling
markets.
Jonathan Coleman
portfolio manager
PERFORMANCE
REVIEW
Janus Aspen Preservation Series – Growth Institutional
Shares and Service Shares returned 2.47% and 2.33%,
respectively, for the six-month period ended June 30, 2014.
The Portfolio’s primary benchmark, the Russell 1000
Growth Index, returned 6.31% during the period. Its secondary
benchmark, the Preservation Series – Growth Blended
Index, returned 3.81% during the period.
INVESTMENT
ENVIRONMENT
U.S. large-cap growth equities continued to climb in the
first half of 2014, lifted in part by confirmation that the
economy was on stable footing and also confirmation that the
Federal Reserve would be cautious in unwinding accommodative
monetary policies supporting a stable but slow-growing economy.
The European Central Bank’s move to cut interest rates and
take other measures designed to stimulate euro-zone growth was
also a boost to equity markets broadly.
PERFORMANCE
DISCUSSION
We slightly decreased our exposure to equities during the
period. We entered the year at 99.00% exposure to equities and
ended at 98.24% exposure, with the protection component
comprising the rest of the portfolio.
The protection component can be comprised of cash and cash
equivalents, U.S. Treasurys, short index futures and other
instruments designed to reduce equity market exposure. Depending
on the market environment, the Portfolio can be invested in any
variation in either component. In rising markets, we expect
there to be more assets in the equity component as compared with
falling markets during which we expect to have more allocated to
the protection component. The protection feature, however,
affects the Portfolio’s ability to respond to changing
equity market conditions and the Portfolio’s ability to
capture certain market gains.
During the course of the period, the average allocation to the
protection component was approximately 5.43%. The average
allocation was higher than the beginning or ending period as we
increased the allocation in reaction to market volatility in
April. In declining markets, we expect the protection component
to contribute to performance. In rising markets, we expect the
protection component to detract from relative performance. As
markets rose during the six-month period, our allocation to the
protection component played a role in our underperformance.
In addition to the protection component allocation, the
Portfolio has a protection feature that is designed to minimize
and ultimately cap any losses at a maximum of 20%. As the Net
Asset Value (NAV) of the Portfolio rises to new levels, the
Protected NAV (PNAV) also rises. Over time, this could lead to a
situation where an investor could potentially limit losses. We
feel this is an attractive feature, providing investors with a
level of downside protection, given the significant uncertainty
evident in the global economy and markets.
In the equity component of our Portfolio, we emphasize companies
with sustainable, long-term growth drivers. We focus on
companies with clear, definable growth stories such as a high
barrier to entry, a winning management team with a clear vision
for the future, stable and recurring revenue streams, or a
definable edge in an attractive industry with high growth
potential. These competitive advantages should allow the
companies to grow regardless of the economy. As we look across
the portfolio we continue to be encouraged about the competitive
advantages of most companies we own, and believe the potential
for long-term growth for those companies is still in place.
However, we also held several stocks that fell during the period
and caused the equity component of our Portfolio to lag the
benchmark.
Whole Foods Market was the Portfolio’s largest detractor.
The stock fell after the company announced disappointing
earnings results. We are currently reviewing the future growth
potential for the company, which is facing a more
Janus Aspen
Preservation Series - Growth
(unaudited)
competitive landscape from other natural and organic grocers.
L Brands was another detractor. The stock fell in the first
quarter after the company reported a disappointing holiday sales
season. We sold the position during the period, due to concerns
about how the mall-based retailer will navigate a transition as
more shopping moves from physical stores to mobile and online
channels.
TJX Companies, the parent company of T.J. Maxx and Marshalls,
was another large detractor from performance. The stock fell due
to earnings results that were below market expectations. In our
view, the disappointing results were due largely to weaker
in-store traffic caused by bad weather during the first quarter.
We believe the retailer has become a core destination for
consumers seeking off-price retail, and has also become an
important distribution channel for name brands by serving as a
clearing mechanism for products. However, we trimmed the
position during the period due to questions about changing
consumer behavior as more shopping takes place online and
outside of physical stores.
While the aforementioned stocks negatively impacted performance
we were pleased with the results of many of the other companies
we own. Apple was the top contributor to the Portfolio’s
performance. The stock was up in part due to anticipation of a
larger form-factor iPhone. The stock has also been driven up in
recent months as the market has gotten confirmation that Apple
does, in fact, have a place in emerging markets such as China,
where smartphones are experiencing the highest growth. The bear
case against Apple had been that the company would experience
little growth in those markets as it faces stiff competition
from cheaper smartphone options. However, the success of Apple
phones that are being offered by some of China’s largest
mobile carriers has disproved that theory. We maintained our
conviction in Apple during a volatile time period for the stock
over the last 12 months. Our view is that Apple is a strong
brand, and that as consumers get more familiar with Apple
products, they get more deeply entrenched in the Apple
ecosystem, branching out to buy new Apple products and returning
to the brand when it is time to update existing ones. We see
evidence in this trend by the fact that household spending on
Apple products continues to increase. We also think Apple’s
management team has made favorable capital allocation decisions
by reducing its share count recently.
Canadian Pacific was another top contributor. In our view,
Canadian Pacific Railway has experienced a significant
transformation since a new CEO took over in 2012. When the new
CEO came on board, he focused the efforts of the company on
three key points: better service and reliability to customers,
improved profitability through operating efficiency and new
revenue opportunities. Since then, the CEO has put a fully
capable team around him to execute on each of the above points,
and success in each category continues to drive the
outperformance we are seeing. Service metrics such as on-time
deliveries and velocity have improved, operating margins have
increased dramatically with more opportunity to expand and the
company has driven new revenues from such markets as domestic
Canada container traffic, grain and crude by rail. Most
recently, a new CFO has joined the company and had a positive
impact on driving better capital allocation decisions, including
commencing a share repurchase program that further benefits
shareholders.
Cadence Design Systems was also a top contributor to the
Portfolio’s performance. The company provides software to
the semiconductor industry to help them design microchips. We
continue to have strong conviction in the long-term growth of
the company, however. We believe Cadence is one of the few
companies tied to the semiconductor industry with considerable
pricing power. In our view, Cadence is one of only two companies
that semiconductor manufacturers can use to design chips. Going
forward, we think both competitors will benefit from growth in
the number of semiconductor engineers, who depend on design
software to function. The stock was up during the period as the
company started returning more cash to shareholders. An
improving environment for semiconductor manufacturers also
helped lift the stock.
DERIVATIVES
This Portfolio invests in derivatives, primarily options to
periodically hedge market risk. The purpose of the option
strategy is an attempt to reduce the risk in the portfolio. The
Portfolio may also utilize options or other instruments for
exposure to the Chicago Board Options Exchange Market Volatility
Index (CBOE VIX) or another volatility index. Such
investments would be used in accordance with the risk
methodology under the Capital Protection Agreement and would be
designed in an effort to limit losses in a sharp market decline.
There is no guarantee that using such instruments would be
effective in limiting losses, and the use of such instruments
could impact the ability to increase returns. During the period,
this strategy detracted from relative results. Please see the
Derivative Instruments section in the “Notes to Financial
Statements” for derivatives used by the Portfolio.
We expect moderate growth for the U.S. economy in the
coming months and a reasonable backdrop for equity investing.
Among the positives we see are continued, gradual improvement in
the housing market and an improving employment picture. The
U.S. deficit is also much lower, which in our view,
diminishes the risk of policy errors by the government such as
extreme taxation. The reduced threat of policy errors by the
government could in turn encourage more capital spending by
companies.
We continue to find investment opportunities among
U.S. large-cap stocks. On a broad basis, we do not think
the market is overvalued, especially in a low-rate,
low-inflation environment. However, multiples have expanded
considerably since 2013. We have mentioned this in previous
commentaries, but after multiple expansion, we would expect
companies to need to demonstrate earnings growth to experience
further stock price appreciation. We believe this bodes well for
our investment process. If we are correct in identifying
competitively advantaged companies with sustainable, long-term
growth drivers in place, we believe those companies should be
able to put up earnings growth in excess of the market.
Thank you for your investment in Janus Aspen Preservation
Series – Growth.
Janus Aspen
Preservation Series - Growth
(unaudited)
Janus Aspen
Preservation Series - Growth At A Glance
5 Top
Performers – Holdings
Contribution
Apple, Inc.
0.68%
Canadian Pacific Railway, Ltd.
0.48%
Cadence Design Systems, Inc.
0.43%
Sensata Technologies Holding NV
0.42%
Union Pacific Corp.
0.35%
5 Bottom
Performers – Holdings
Contribution
Whole Foods Market, Inc.
–0.55%
S&P
500®
E-mini Future – expired June 2014
–0.38%
L Brands, Inc.
–0.26%
TJX Cos., Inc.
–0.22%
Sally Beauty Holdings, Inc.
–0.20%
5 Top
Performers – Sectors*
Portfolio Weighting
Russell
1000®
Growth
Portfolio Contribution
(Average % of Equity)
Index Weighting
Industrials
0.65%
14.97%
12.37%
Financials
0.38%
3.06%
5.47%
Materials
0.02%
2.62%
4.55%
Utilities
–0.02%
–0.05%
0.15%
Telecommunication Services
–0.04%
0.61%
2.17%
5 Bottom
Performers – Sectors*
Portfolio Weighting
Russell
1000®
Growth
Portfolio Contribution
(Average % of Equity)
Index Weighting
Protection Component**
–0.98%
6.15%
0.00%
Energy
–0.66%
3.74%
4.80%
Consumer Staples
–0.62%
6.62%
11.78%
Consumer Discretionary
–0.56%
17.35%
19.19%
Information Technology
–0.49%
30.20%
26.94%
Security contribution to performance is measured by using an
algorithm that multiplies the daily performance of each security
with the previous day’s ending weight in the portfolio and
is gross of advisory fees. Fixed income securities and certain
equity securities, such as private placements and some share
classes of equity securities, are excluded.
*
Based on sector classification according to the Global Industry
Classification Standard (“GICS”) codes, which are the
exclusive property and a service mark of MSCI Inc. and Standard
& Poor’s.
Janus Aspen Preservation Series – Growth –
Institutional Shares
2.47%
21.70%
14.69%
3.95%
1.37%
Janus Aspen Preservation Series – Growth –
Service Shares
2.33%
21.43%
14.43%
4.20%
1.62%
Russell
1000®
Growth Index
6.31%
26.92%
21.17%
Preservation Series – Growth Blended Index
3.81%
15.58%
12.40%
Morningstar Quartile – Institutional Shares
–
4th
4th
Morningstar Ranking – based on total returns for Large
Growth Funds
–
1,580/1,762
1,689/1,714
Returns quoted are past performance and do not guarantee
future results; current performance may be lower or higher.
Investment returns and principal value will vary; there may be a
gain or loss when shares are sold. For the most recent month-end
performance call 877.33JANUS(52687) or visit
janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus
Capital has contractually agreed to through May 1, 2015,
and include a Capital Protection Fee that can fluctuate between
0.60% and 0.75%.
The Portfolio is not a capital guaranteed or insured
portfolio. As with all investments, there are inherent risks
when investing in the Portfolio including, but not limited to,
allocation risk, maximum settlement amount risk, turnover risk,
liquidation risk, opportunity cost risk, capital protection
termination risk, underperformance risk and counterparty risk,
each as disclosed in the Portfolio’s Prospectuses. The
protection feature only covers shareholders who hold their
shares on the termination date, and is subject to various
conditions and the financial payment capabilities of BNP
Paribas, the Capital Protection Provider, as described in the
Notes to Financial Statements.
The Capital Protection Agreement is a financial product that
is intended to protect the Portfolio against significant market
declines and does not in any way constitute any form of
insurance. The Capital Protection Provider is not an insurance
company or an insurance provider, nor is it acting as an adviser
or subadviser for the Portfolio.
The Portfolio’s asset allocation will vary over time
depending on market conditions and therefore the
Portfolio’s allocation to each investment component could
change as frequently as daily resulting in a higher portfolio
turnover rate than other mutual funds. Increased portfolio
turnover may result in higher costs, which may have a negative
effect on the Portfolio’s performance.
Amounts owed by the Capital Protection Provider under the
Capital Protection Agreement are owed directly to the Portfolio
and not to the Portfolio’s shareholders. As a result, a
shareholder’s ability to receive the Protected NAV from the
Portfolio is dependent on the Portfolio’s ability to
collect any settlement amount due from the Capital Protection
Provider,
and/or its
parent guarantor pursuant to the terms of the Capital Protection
Agreement. Portfolio transactions involving a counterparty, such
as the Capital Protection Provider
and/or its
parent guarantor, are subject to the risk that the counterparty
will not fulfill its obligation to the Portfolio. Counterparty
risk may arise because of the counterparty’s financial
condition (i.e. financial difficulties, bankruptcy or
insolvency), market activities or developments, or other
reasons, whether foreseen or not. As such the Portfolio’s
ability to benefit from the Protection may depend on the Capital
Protection Provider’s, as well as its parent
guarantor’s, financial condition.
Although the risk allocation methodology is designed so that
the NAV of any share class does not fall below its Protected
NAV, there is the possibility that the risk allocation
methodology may not work as designed and the NAV of any share
class may fall below its Protected NAV. If this happens, it is
expected that the Portfolio will receive payment of the
Settlement Amount from the Capital Protection Provider, if due,
and commence the liquidation process as soon as possible
following the event.
It is possible that under the terms of the Capital Protection
Agreement, the Portfolio’s allocation to the Equity
Component could drop to a low level or be eliminated altogether,
especially during periods of heightened volatility in the equity
markets. This would reduce the Portfolio’s ability to
participate in upward equity market movements and therefore,
represents loss of opportunity compared to a portfolio that is
fully invested in equities and may cause the Portfolio to
underperform its primary benchmark
and/or other
similarly situated growth funds. As a result, the Portfolio may
not achieve its investment objective.
The Portfolio uses short index futures and other types of
derivatives in attempt to hedge risk. Derivatives can be highly
volatile and involve risks in addition to the risks of the
underlying referenced securities. Gains or losses from a
derivative can be substantially greater than the
derivative’s original cost, and can therefore involve
leverage.
Foreign securities are subject to additional risks including
currency fluctuations, political and economic uncertainty,
increased volatility and differing financial and information
reporting standards, all of which are magnified in emerging
markets.
These returns do not reflect the charges and expenses of any
particular insurance product or qualified plan. Returns shown
would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions
and do not reflect the deduction of taxes that a shareholder
would pay on Portfolio distributions or redemptions of Portfolio
shares. The returns do not include adjustments in accordance
with generally accepted accounting principles required at the
period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may
have different performance characteristics. When an expense
waiver is in effect, it may have a material effect on the total
return, and therefore the ranking for the period.
There is no assurance that the investment process will
consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for
index definitions.
A Portfolio’s holdings may differ significantly from the
securities held in an index. An index is unmanaged and not
available for direct investment; therefore, its performance does
not reflect the expenses associated with the active management
of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective January 28, 2014, Janus Aspen Protected
Series – Growth changed its name to Janus Aspen
Preservation Series – Growth. Additionally the
Portfolio changed the name of its secondary benchmark index from
Protected Series – Growth Blended Index to
Preservation Series – Growth Blended Index.
Janus Aspen
Preservation Series - Growth
(unaudited)
Expense
Examples
As a shareholder of the Portfolio, you incur two types of costs:
(1) transaction costs and (2) ongoing costs, including
management fees; distribution and shareholder servicing (12b-1)
fees (applicable to Service Shares only); administrative
services fees payable pursuant to the Transfer Agency Agreement;
and other Portfolio expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in
the Portfolio and to compare these costs with the ongoing costs
of investing in other mutual funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds. The
example is based upon an investment of $1,000 invested at the
beginning of the period and held for the six-months indicated,
unless noted otherwise in the table and footnotes below.
Actual
Expenses
The information in the table under the heading
“Actual” provides information about actual account
values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number
in the appropriate column for your share class under the heading
entitled “Expenses Paid During Period” to estimate the
expenses you paid on your account during the period.
Hypothetical
Example for Comparison Purposes
The information in the table under the heading
“Hypothetical (5% return before expenses)” provides
information about hypothetical account values and hypothetical
expenses based upon the Portfolio’s actual expense ratio
and an assumed rate of return of 5% per year before expenses,
which is not the Portfolio’s actual return. The
hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the
ongoing costs of investing in the Portfolio and other funds. To
do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of
the other funds. Additionally, for an analysis of the fees
associated with an investment in either share class or other
similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and do not reflect any
transaction costs. These fees are fully described in the
Portfolio’s prospectuses. Therefore, the hypothetical
examples are useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs were
included, your costs would have been higher.
Hypothetical
Actual
(5% return before expenses)
Beginning
Ending
Expenses
Beginning
Ending
Expenses
Account
Account
Paid During
Account
Account
Paid During
Net Annualized
Value
Value
Period
Value
Value
Period
Expense Ratio
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14)
(6/30/14)
(1/1/14 - 6/30/14)†
(1/1/14 - 6/30/14)
Institutional Shares
$
1,000.00
$
1,024.70
$
6.98
$
1,000.00
$
1,017.90
$
6.95
1.39%
Service Shares
$
1,000.00
$
1,023.30
$
8.23
$
1,000.00
$
1,016.66
$
8.20
1.64%
†
Expenses Paid During Period are equal to the Net Annualized
Expense Ratio multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year
period). Expenses in the examples include the effect of
applicable fee waivers and/or expense reimbursements, if any.
Had such waivers and/or reimbursements not been in effect, your
expenses would have been higher. Please refer to the Notes to
Financial Statements or the Portfolio’s prospectuses for
more information regarding waivers and/or reimbursements.
Notes to Schedule
of Investments and Other
Information
(unaudited)
BNP IVIX Index
A volatility strategy index
sponsored by BNP Paribas.
Citigroup
3-Month
U.S. Treasury Bill Index
An unmanaged index that represents
the performance of three-month Treasury bills. The index
reflects reinvestment of all distributions and changes in market
prices.
Preservation Series – Growth
Blended Index
An internally-calculated,
hypothetical combination of unmanaged indices that combines
total returns from the Russell
1000®
Growth Index (60%) and the Citigroup
3-Month
U.S. Treasury Bill Index (40%).
Russell
1000®
Growth Index
Measures the performance of those
Russell
1000®
Index companies with higher
price-to-book
ratios and higher forecasted growth values.
ADR
American Depositary Receipt
LLC
Limited Liability Company
PLC
Public Limited Company
U.S. Shares
Securities of foreign companies
trading on an American stock exchange.
*
Non-income producing security.
†
A portion of this security has been segregated to cover margin
or segregation requirements on open futures contracts, forward
currency contracts, options contracts, short sales, swap
agreements,
and/or
securities with extended settlement dates, the value of which,
as of June 30, 2014, is noted below.
Schedule of
Restricted and Illiquid Securities (as of June 30, 2014)
Acquisition
Acquisition
Value as a
Date
Cost
Value
% of Net Assets
Janus Aspen Preservation Series – Growth
Capital Protection Agreement
1/3/12
$
0
$
0
0.0
%
The Portfolio has registration rights for certain restricted
securities held as of June 30, 2014. The issuer incurs all
registration costs.
£
The Portfolio may
invest in certain securities that are considered affiliated
companies. As defined by the Investment Company Act of 1940, as
amended, an affiliated company is one in which the Portfolio
owns 5% or more of the outstanding voting securities, or a
company which is under common ownership or control. Based on the
Portfolio’s relative ownership, the following securities
were considered affiliated companies for all or some portion of
the period ended June 30, 2014. Unless otherwise indicated, all
information in the table is for the period ended June 30, 2014.
Notes to Schedule
of Investments and Other
Information (unaudited)
(continued)
The following is a summary of the inputs that were used to value
the Portfolio’s investments in securities and other
financial instruments as of June 30, 2014. See Notes to
Financial Statements for more information.
Other financial instruments include the capital protection
agreement, futures, forward currency, written options, zero
strike options, and swap contracts. Forward currency contracts,
zero strike options, and swap contracts are reported at their
unrealized appreciation/(depreciation) at measurement date,
which represents the change in the contract’s value from
trade date. Futures are reported at their variation margin at
measurement date, which represents the amount due to/from the
Portfolio at that date. Options are reported at their market
value at measurement date. The capital protection agreement is
reported at its market value at measurement date.
Undistributed net realized gain from investment and foreign
currency transactions*
506,599
Unrealized net appreciation of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation
1,151,556
Total Net Assets
$
7,014,258
Net Assets - Institutional Shares
$
3,518,073
Shares Outstanding, $0.001 Par Value (unlimited shares
authorized)
266,055
Net Asset Value Per Share
$
13.22
Protected Net Asset Value Per
Share(3)
$
10.58
Net Assets - Service Shares
$
3,496,185
Shares Outstanding, $0.001 Par Value (unlimited shares
authorized)
266,143
Net Asset Value Per Share
$
13.14
Protected Net Asset Value Per
Share(3)
$
10.51
*
See “Federal Income Tax” in Notes to Financial
Statements.
(1)
Formerly named Janus Aspen Protected Series - Growth.
(2)
Premium to be paid of $102,694.
(3)
The Protected NAV is the protection feature of the Portfolio and
is calculated at 80% of the highest previously achieved NAV,
reduced for dividends, distributions, any extraordinary
expenses, and certain extraordinary items. Shareholders cannot
transact purchases or redemptions at the Protected NAV.
The following section describes the organization and significant
accounting policies and provides more detailed information about
the schedules and tables that appear throughout this report. In
addition, the Notes to Financial Statements explain the methods
used in preparing and presenting this report.
1.
Organization and
Significant Accounting Policies
Janus Aspen Preservation Series – Growth (formerly
named Janus Aspen Protected Series – Growth) (the
“Portfolio”) is a series fund. The Portfolio is part
of Janus Aspen Series (the “Trust”), which is
organized as a Delaware statutory trust and is registered under
the Investment Company Act of 1940, as amended (the “1940
Act”), as an open-end management investment company, and
therefore has applied the specialized accounting and reporting
guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 946. The Trust offers twelve Portfolios
which include multiple series of shares, with differing
investment objectives and policies. The Portfolio invests
primarily in equity securities. The Portfolio is classified as
diversified, as defined in the 1940 Act. The Portfolio is a
no-load investment.
The Portfolio currently offers two classes of shares:
Institutional Shares and Service Shares. Institutional Shares
are offered only in connection with investment in and payments
under variable insurance contracts as well as certain qualified
retirement plans. Service Shares are offered only in connection
with investment in and payments under variable insurance
contracts as well as certain qualified retirement plans that
require a fee from Portfolio assets to procure distribution and
administrative services to contract owners and plan participants.
Capital
Protection Agreement
BNP Paribas Prime Brokerage, Inc., a U.S. registered
broker-dealer, is the Portfolio’s Capital Protection
Provider. Pursuant to the Capital Protection Agreement entered
into by the Capital Protection Provider and the Portfolio, the
Capital Protection Provider has agreed to provide capital
protection to protect against a decrease in the NAV per share
for each share class of the Portfolio below 80% of the highest
NAV per share for the share class attained since the inception
of the share class, reduced for dividends, distributions, any
extraordinary expenses, and certain extraordinary items,
provided the terms and conditions of the Capital Protection
Agreement are satisfied and the agreement is not otherwise void.
For this capital protection, the Portfolio pays the Capital
Protection Provider, under the Capital Protection Agreement, a
fee equal to 0.75% of the aggregate protected amount, which is
calculated daily and paid monthly. Because the capital
protection fee is based on the aggregate protected assets of the
Portfolio rather than on the Portfolio’s total net assets,
it can fluctuate between 0.60% and 0.75% of the Portfolio’s
total net assets.
BNP Paribas, the Parent Guarantor and the Capital Protection
Provider’s ultimate parent company, has provided an
irrevocable guaranty pursuant to which it guarantees any and all
financial obligations of the Capital Protection Provider to pay
or deliver payment on its obligations under the Capital
Protection Agreement to the extent that the Capital Protection
Provider is obligated to pay. The Capital Protection Provider is
a subsidiary of the Parent Guarantor and is a
U.S. registered broker-dealer. Under the Parent Guaranty,
the Parent Guarantor can assert the same defenses, rights, set
offs, or counterclaims as the Capital Protection Provider would
have under the Capital Protection Agreement.
Neither the Capital Protection Provider nor the Parent Guarantor
is an insurance company or an insurance provider. Nor is the
Capital Protection Provider, the Parent Guarantor, or any of
their affiliates acting as an investment adviser or subadviser
to the Portfolio. The Settlement Amount under the Capital
Protection Agreement is owed directly to the Portfolio and not
the Portfolio’s investors. Therefore, as a shareholder you
will not have any action against or recourse to the Capital
Protection Provider or the Parent Guarantor. Further, no
shareholder will have any right to receive payment, or any other
rights whatsoever, under the Capital Protection Agreement or the
Parent Guaranty.
The Capital Protection Agreement is valued at the greater of
$0.00 or the Protected NAV less the NAV per share, which
approximates fair value.
The Protected NAV for each share class as well as the
percentages of the Portfolio’s assets that are allocated
between the Equity Component and the Protection Component will
be posted on the Janus website at janus.com/variable-insurance.
Please refer to the Portfolio’s Prospectuses for
information regarding how the Protection works in the event it
is triggered and the Portfolio proceeds to liquidation, as well
as how the Protection is calculated to help you understand the
80% protection of the NAV per share.
The following accounting policies have been followed by the
Portfolio and are in conformity with accounting principles
generally accepted in the United States of America.
Investment
Valuation
Securities held by the Portfolio are valued in accordance with
policies and procedures established by and under the supervision
of the Trustees (the “Valuation Procedures”).
Notes to
Financial Statements (unaudited)
(continued)
Equity securities traded on a domestic securities exchange are
generally valued at the closing prices on the primary market or
exchange on which they trade. If such price is lacking for the
trading period immediately preceding the time of determination,
such securities are valued at their current bid price. Equity
securities that are traded on a foreign exchange are generally
valued at the closing prices on such markets. In the event that
there is no current trading volume on a particular security in
such foreign exchange, the bid price from the primary exchange
is generally used to value the security. Securities that are
traded on the over-the-counter (“OTC”) markets are
generally valued at their closing or latest bid prices as
available. Foreign securities and currencies are converted to
U.S. dollars using the applicable exchange rate in effect
at the close of the New York Stock Exchange (“NYSE”).
The Portfolio will determine the market value of individual
securities held by it by using prices provided by one or more
professional pricing services which may provide market prices to
other funds or, as needed, by obtaining market quotations from
independent broker-dealers. Short-term securities maturing
within 60 days or less are valued on an amortized cost
basis. Debt securities with a remaining maturity of greater than
60 days are valued in accordance with the evaluated bid
price supplied by the pricing service that is intended to
reflect market value. The evaluated bid price supplied by the
pricing service is an evaluation that may consider factors such
as security prices, yields, maturities and ratings. Securities
for which market quotations or evaluated prices are not readily
available or deemed unreliable are valued at fair value
determined in good faith under the Valuation Procedures.
Circumstances in which fair value pricing may be utilized
include, but are not limited to: (i) a significant event
that may affect the securities of a single issuer, such as a
merger, bankruptcy, or significant issuer-specific development;
(ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action;
(iii) a nonsignificant event such as a market closing early
or not opening, or a security trading halt; and
(iv) pricing of a nonvalued security and a restricted or
nonpublic security. The Portfolio uses systematic fair valuation
models provided by independent third parties to value
international equity securities in order to adjust for stale
pricing, which may occur between the close of certain foreign
exchanges and the close of the NYSE.
Investment
Transactions and Investment Income
Investment transactions are accounted for as of the date
purchased or sold (trade date). Dividend income is recorded on
the ex-dividend date. Certain dividends from foreign securities
will be recorded as soon as the Trust is informed of the
dividend, if such information is obtained subsequent to the
ex-dividend date. Dividends from foreign securities may be
subject to withholding taxes in foreign jurisdictions. Interest
income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts. Gains and
losses are determined on the identified cost basis, which is the
same basis used for federal income tax purposes. Income,
as well as gains and losses, both realized and unrealized, are
allocated daily to each class of shares based upon the ratio of
net assets represented by each class as a percentage of total
net assets.
Expenses
The Portfolio bears expenses incurred specifically on its
behalf, as well as a portion of general expenses, which may be
allocated pro rata to the Portfolio. Each class of shares bears
a portion of general expenses, which are allocated daily to each
class of shares based upon the ratio of net assets represented
by each class as a percentage of total net assets. Expenses
directly attributable to a specific class of shares are charged
against the operations of such class. Expenses include the fee
paid to the Capital Protection Provider. Because the fee is
based on the aggregate protected assets of the Portfolio, it can
fluctuate between 0.60% and 0.75% of the Portfolio’s net
assets.
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of income and
expenses during the reporting period. Actual results could
differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into
contracts that contain provisions for indemnification of other
parties against certain potential liabilities. The
Portfolio’s maximum exposure under these arrangements is
unknown, and would involve future claims that may be made
against the Portfolio that have not yet occurred. Currently, the
risk of material loss from such claims is considered remote.
Foreign Currency
Translations
The Portfolio does not isolate that portion of the results of
operations resulting from the effect of changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held at the date of the
financial statements. Net unrealized
appreciation or depreciation of investments and foreign currency
translations arise from changes in the value of assets and
liabilities, including investments in securities held at the
date of the financial statements, resulting from changes in the
exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and
receivables that are denominated in foreign currencies. The
payables and receivables are generally related to foreign
security transactions and income translations.
Foreign currency-denominated assets and forward currency
contracts may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory
risk and equity risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Dividend
Distributions
The Portfolio may make semiannual distributions of substantially
all of its investment income and an annual distribution of its
net realized capital gains (if any).
Because the payment of dividends and distributions could have
the effect of reducing the Portfolio’s NAV as a result of
the reduction in the aggregate value of the Portfolio’s
assets, any such distribution made during the term of the
Capital Protection Agreement, including distributions made
before the investment by the shareholder, will reduce the
Protected NAV of each share class and therefore the amount of
protection afforded to the Portfolio by the Capital Protection
Provider. This means that the Protected NAV could be less than
80% of the highest previously attained NAV. Janus Capital
intends to estimate dividends payable prior to any distribution
date in an effort to minimize the impact of such distributions
to the Protected NAV. There is no guarantee that Janus Capital
will be successful in doing so. Incorrect estimates could impact
the dividend calculation methodology and affect the Protected
NAV per share. Please refer to the Portfolio’s Prospectuses
for additional examples of how distributions will affect the
Protected NAV.
The Portfolio may make certain investments in real estate
investment trusts (“REITs”) which pay dividends to
their shareholders based upon funds available from operations.
It is quite common for these dividends to exceed the REITs’
taxable earnings and profits, resulting in the excess portion of
such dividends being designated as a return of capital. If the
Portfolio distributes such amounts, such distributions could
constitute a return of capital to shareholders for federal
income tax purposes.
Federal Income
Taxes
The Portfolio intends to continue to qualify as a regulated
investment company and distribute all of its taxable income in
accordance with the requirements of Subchapter M of the Internal
Revenue Code. Management has analyzed the Portfolio’s tax
positions taken for all open federal income tax years, generally
a three-year period, and has concluded that no provision for
federal income tax is required in the Portfolio’s financial
statements. The Portfolio is not aware of any tax positions for
which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next
twelve months.
Valuation Inputs
Summary
In accordance with FASB standard guidance, the Portfolio
utilizes the “Fair Value Measurements” to define fair
value, establish a framework for measuring fair value, and
expand disclosure requirements regarding fair value
measurements. The Fair Value Measurement Standard does not
require new fair value measurements, but is applied to the
extent that other accounting pronouncements require or permit
fair value measurements. This standard emphasizes that fair
value is a market-based measurement that should be determined
based on the assumptions that market participants would use in
pricing an asset or liability. Various inputs are used in
determining the value of the Portfolio’s investments
defined pursuant to this standard. These inputs are summarized
into three broad levels:
Level 1 – Quoted prices in active markets for
identical securities.
Level 2 – Prices determined using other
significant observable inputs. Observable inputs are inputs that
reflect the assumptions market participants would use in pricing
a security and are developed based on market data obtained from
sources independent of the reporting entity. These may include
quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, and others.
Debt securities may be valued in accordance with the evaluated
bid price supplied by the pricing service and generally
categorized as Level 2 in the hierarchy. Securities traded
on OTC markets and listed securities for which no sales are
reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers transacting in a
market for such securities or by a pricing service approved by
the Portfolio’s Trustees and are categorized as
Level 2 in the hierarchy. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value and are categorized as
Level 2 in the hierarchy.
Notes to
Financial Statements (unaudited)
(continued)
Other securities that may be categorized as Level 2 in the
hierarchy include, but are not limited to, preferred stocks,
bank loans, swaps, investments in unregistered investment
companies, options, and forward contracts. The Portfolio uses
systematic fair valuation models provided by independent third
parties to value international equity securities in order to
adjust for stale pricing, which may occur between the close of
certain foreign exchanges and the close of the NYSE. These are
generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant
unobservable inputs. In situations where quoted prices or
observable inputs are unavailable or deemed less relevant (for
example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs are inputs that reflect the reporting
entity’s own assumptions about the factors market
participants would use in pricing the security and would be
based on the best information available under the circumstances.
For restricted equity securities and private placements where
observable inputs are limited, assumptions about market activity
and risk are used in employing valuation techniques such as the
market approach, the income approach, or the cost approach, as
defined under the FASB Guidance. These are categorized as
Level 3 in the hierarchy.
There have been no significant changes in valuation techniques
used in valuing any such positions held by the Portfolio since
the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities. The summary of inputs used as of
June 30, 2014 to value the Portfolio’s investments in
securities and other financial instruments is included in the
“Valuation Inputs Summary” in the Notes to Schedule of
Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3
securities as of June 30, 2014.
There were no transfers between Level 1, Level 2 and
Level 3 during the period. The Portfolio recognizes
transfers between the levels as of the beginning of the fiscal
year.
2.
Derivative
Instruments
The Portfolio may invest in various types of derivatives, which
may at times result in significant derivative exposure. A
derivative is a financial instrument whose performance is
derived from the performance of another asset. The Portfolio may
invest in derivative instruments including, but not limited to:
futures contracts, put options, call options, options on future
contracts, options on foreign currencies, swaps, forward
contracts, structured investments, and other equity-linked
derivatives. Each derivative instrument that was held by the
Portfolio during the period ended June 30, 2014 is
discussed in further detail below. A summary of derivative
activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to
offset risks associated with an investment, currency exposure,
or market conditions) or for speculative (to seek to enhance
returns) purposes. When the Portfolio invests in a derivative
for speculative purposes, the Portfolio will be fully exposed to
the risks of loss of that derivative, which may sometimes be
greater than the derivative’s cost. The Portfolio may not
use any derivative to gain exposure to an asset or class of
assets in which it would be prohibited by its investment
restrictions from purchasing directly. The Portfolio’s
ability to use derivative instruments may also be limited by tax
considerations.
Investments in derivatives in general are subject to market
risks that may cause their prices to fluctuate over time.
Investments in derivatives may not directly correlate with the
price movements of the underlying instrument. As a result, the
use of derivatives may expose the Portfolio to additional risks
that it would not be subject to if it invested directly in the
securities underlying those derivatives. The use of derivatives
may result in larger losses or smaller gains than otherwise
would be the case. Derivatives can be volatile and may involve
significant risks, including, but not limited to, counterparty
risk, credit risk, currency risk, equity risk, index risk,
interest rate risk, leverage risk, and liquidity risk, as
described below.
Derivatives may generally be traded OTC or on an exchange.
Derivatives traded OTC, such as options and structured notes,
are agreements that are individually negotiated between parties
and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may
be subject to increased credit risk. In an effort to mitigate
credit risk associated with derivatives traded OTC, the
Portfolio may enter into collateral agreements with certain
counterparties whereby, subject to certain minimum exposure
requirements, the Portfolio may require the counterparty to post
collateral if the Portfolio has a net aggregate unrealized gain
on all OTC derivative contracts with a particular counterparty.
There is no guarantee that counterparty exposure is reduced and
these arrangements are dependent on Janus Capital Management
LLC’s (“Janus Capital”) ability to establish and
maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek
to use derivatives to increase or decrease exposure to the
following market risk factors:
•
Counterparty Risk – Counterparty risk is the
risk that the counterparty (the party on the other side of the
transaction) on a derivative transaction will be unable to honor
its financial obligation to the Portfolio.
•
Credit Risk – Credit risk is the risk an issuer
will be unable to make principal and interest payments when due,
or will default on its obligations.
•
Currency Risk – Currency risk is the risk that
changes in the exchange rate between currencies will adversely
affect the value (in U.S. dollar terms) of an investment.
•
Equity Risk – Equity risk relates to the change in
value of equity securities as they relate to increases or
decreases in the general market.
•
Index Risk – If the derivative is linked to the
performance of an index, it will be subject to the risks
associated with changes in that index. If the index changes, the
Portfolio could receive lower interest payments or experience a
reduction in the value of the derivative to below what the
Portfolio paid. Certain indexed securities, including inverse
securities (which move in an opposite direction to the index),
may create leverage, to the extent that they increase or
decrease in value at a rate that is a multiple of the changes in
the applicable index.
•
Interest Rate Risk – Interest rate risk is the
risk that the value of fixed-income securities will generally
decline as prevailing interest rates rise, which may cause the
Portfolio’s NAV to likewise decrease, and vice versa.
•
Leverage Risk – Leverage risk is the risk
associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market
movements may result in large changes in the value of an
investment. The Portfolio creates leverage by investing in
instruments, including derivatives, where the investment loss
can exceed the original amount invested. Certain investments or
trading strategies, such as short sales, that involve leverage
can result in losses that greatly exceed the amount originally
invested.
•
Liquidity Risk – Liquidity risk is the risk
that certain securities may be difficult or impossible to sell
at the time that the seller would like or at the price that the
seller believes the security is currently worth.
A futures contract is an exchange-traded agreement to take or
make delivery of an underlying asset at a specific time in the
future for a specific predetermined negotiated price. The
Portfolio may enter into futures contracts to gain exposure to
the stock market pending investment of cash balances or to meet
liquidity needs. The Portfolio is subject to interest rate risk,
equity risk, and currency risk in the normal course of pursuing
its investment objective through its investments in futures
contracts. The Portfolio may also use such derivative
instruments to hedge or protect from adverse movements in
securities prices, currency rates or interest rates. The use of
futures contracts may involve risks such as the possibility of
illiquid markets or imperfect correlation between the values of
the contracts and the underlying securities, or that the
counterparty will fail to perform its obligations.
Futures contracts are
marked-to-market
daily, and the daily variation margin is recorded as a
receivable or payable on the Statement of Assets and
Liabilities. When a contract is closed, a realized gain or loss
is recorded as “Net realized gain/(loss) from futures
contracts” on the Statement of Operations, equal to the
difference between the opening and closing value of the
contract. Generally, futures contracts are
marked-to-market
(i.e., treated as realized and subject to distribution) for
federal income tax purposes at fiscal year-end. Securities held
by the Portfolio that are designated as collateral for market
value on futures contracts are noted on the Schedule of
Investments. Such collateral is in the possession of the
Portfolio’s futures commission merchant.
With futures, there is minimal counterparty credit risk to the
Portfolio since futures are exchange-traded and the
exchange’s clearinghouse, as counterparty to all
exchange-traded futures, guarantees the futures against default.
During the period, the Portfolio sold futures on equity indices
to decrease exposure to equity risk.
The following table provides average ending monthly market value
amounts on sold futures contracts during the period ended
June 30, 2014.
Notes to
Financial Statements (unaudited)
(continued)
option) a financial instrument at an agreed upon price. The
Portfolio is subject to interest rate risk, liquidity risk,
equity risk, and currency risk in the normal course of pursuing
its investment objective through its investments in options
contracts. The Portfolio may use options contracts to hedge
against changes in interest rates, the values of equities, or
foreign currencies. The Portfolio may utilize American-style and
European-style options. An American-style option is an option
contract that can be exercised at any time between the time of
purchase and the option’s expiration date. A European-style
option is an option contract that can only be exercised on the
option’s expiration date. The Portfolio may also purchase
or write put and call options on foreign currencies in a manner
similar to that in which futures or forward contracts on foreign
currencies will be utilized. The Portfolio generally invests in
options to hedge against adverse movements in the value of
portfolio holdings.
The Portfolio may also utilize swaps, options, exchange-traded
funds, exchange-traded notes, or other instruments for exposure
to the Chicago Board Options Exchange Market Volatility Index
(“VIX”) or another volatility index. Such investments
would be used in accordance with the risk methodology under the
Capital Protection Agreement and would be designed in an effort
to limit losses in a sharp market decline. There is no guarantee
that using such instruments would be effective in limiting
losses, and the use of such instruments could impact the ability
to increase returns. There are costs associated with entering
into such investments, which can impact returns. The Capital
Protection Provider may be the entity used to enter into a
transaction related to the VIX and, if so, would receive
compensation.
When an option is written, the Portfolio receives a premium and
becomes obligated to sell or purchase the underlying security at
a fixed price, upon exercise of the option. In writing an
option, the Portfolio bears the risk of an unfavorable change in
the price of the security underlying the written option.
Exercise of an option written by the Portfolio could result in
the Portfolio buying or selling a security at a price different
from the current market value.
When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option, or the
cost of the security for a purchased put or call option are
adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and
OTC put and call options on domestic securities indices, and on
foreign securities indices listed on domestic and foreign
securities exchanges. Options on securities indices are similar
to options on securities except that (1) the expiration
cycles of securities index options are monthly, while those of
securities options are currently quarterly, and (2) the
delivery requirements are different. Instead of giving the right
to take or make delivery of securities at a specified price, an
option on a securities index gives the holder the right to
receive a cash “exercise settlement amount” equal to
(a) the amount, if any, by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on
the date of exercise, multiplied by (b) a fixed “index
multiplier.” Receipt of this cash amount will depend upon
the closing level of the securities index upon which the option
is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and
the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium
received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the
options are standardized. Options traded OTC expose the
Portfolio to counterparty risk in the event that the
counterparty does not perform. This risk is mitigated by having
a netting arrangement between the Portfolio and the counterparty
and by having the counterparty post collateral to cover the
Portfolio’s exposure to the counterparty.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded. The difference
between the premium received or paid, and market value of the
option, is recorded as unrealized appreciation or depreciation.
The net change in unrealized appreciation or depreciation is
reported in the Statement of Operations. When an option is
exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost of the
security for a purchased put or call option are adjusted by the
amount of premium received or paid. Upon the expiration or
closing of the option transaction, a gain or loss is reported in
the Statement of Operations.
During the period, the Portfolio purchased call options on
various equity indices for the purpose of increasing exposure to
broad equity risk.
The following table provides average ending monthly market value
amounts on purchased call options during the period ended
June 30, 2014.
The following table, grouped by derivative type, provides
information about the fair value and location of derivatives
within the Statement of Assets and Liabilities as of
June 30, 2014.
Fair Value of Derivative Instruments as of June 30,2014
The following tables provide information about the effect of
derivatives and hedging activities on the Portfolio’s
Statement of Operations for the period ended June 30, 2014.
The effect of Derivative Instruments on the Statement of
Operations for the period ended June 30, 2014
Amount of Net Realized Gain/(Loss) on Derivatives Recognized
in Income
Please see the Portfolio’s Statement of Operations for the
Portfolio’s “Net Realized and Unrealized Gain/(Loss)
on Investments.”
3.
Other Investments
and Strategies
Additional
Investment Risk
As with all investments, there are inherent risks when investing
in the Portfolio. The Portfolio’s participation in the
Capital Protection Agreement also subjects the Portfolio to
certain risks not generally associated with equity funds,
including but not limited to, allocation risk, maximum
settlement amount risk, turnover risk, liquidation risk,
opportunity cost risk, capital protection termination risk,
underperformance risk, and counterparty risk. For information
relating to these and other risks of investing in the Portfolio
as well as other general information about the Portfolio, please
refer to the Portfolio’s Prospectuses and statements of
additional information.
The financial crisis that began in 2008 caused a significant
decline in the value and liquidity of many securities of issuers
worldwide in the equity and fixed-income/credit markets. In
response to the crisis, the United States and certain foreign
governments, along with the U.S. Federal Reserve and
certain foreign central banks took steps to support the
financial markets. The withdrawal of this support, a failure of
measures put in place to respond to the crisis, or investor
perception that such efforts were not sufficient each could
negatively affect financial markets generally, and the value and
liquidity of specific securities. In addition, policy and
legislative changes in the United States and in other countries
continue to impact many aspects of financial regulation. The
effect of these changes on the markets, and the practical
implications for market participants, including the Portfolio,
may not be fully known for some time. Redemptions, particularly
a large redemption, may impact the allocation process, and the
NAV of any share class may fall below its Protected NAV. If this
happens, it is expected that the Portfolio will receive payment
of the Settlement Amount from the Capital Protection Provider,
if due, and will proceed with the liquidation process as soon as
possible following the event. As a result, it may also be
unusually difficult to identify both investment risks and
opportunities, which could limit or preclude the
Portfolio’s ability to achieve its investment objective.
Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in July
Notes to
Financial Statements (unaudited)
(continued)
2010 provided for widespread regulation of financial
institutions, consumer financial products and services,
broker-dealers, OTC derivatives, investment advisers, credit
rating agencies, and mortgage lending, which expands federal
oversight in the financial sector, including the investment
management industry. Many provisions of the Dodd-Frank Act
remain pending and will be implemented through future
rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act
and the regulations under the Dodd-Frank Act on the Portfolio
and the investment management industry as a whole, is not yet
certain.
A number of countries in the European Union (“EU”)
have experienced severe economic and financial difficulties. As
a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity.
Responses to these financial problems by European governments,
central banks, and others, including austerity measures and
reforms, may not work, may result in social unrest, and may
limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructuring by
governments and others of their debt could have additional
adverse effects on economies, financial markets, and asset
valuations around the world.
Certain areas of the world have historically been prone to and
economically sensitive to environmental events such as, but not
limited to, hurricanes, earthquakes, typhoons, flooding, tidal
waves, tsunamis, erupting volcanoes, wildfires or droughts,
tornadoes, mudslides, or other weather-related phenomena. Such
disasters, and the resulting physical or economic damage, could
have a severe and negative impact on the Portfolio’s
investment portfolio and, in the longer term, could impair the
ability of issuers in which the Portfolio invests to conduct
their businesses as they would under normal conditions. Adverse
weather conditions may also have a particularly significant
negative effect on issuers in the agricultural sector and on
insurance companies that insure against the impact of natural
disasters.
Counterparties
Portfolio transactions involving a counterparty, such as the
Capital Protection Provider, are subject to the risk that the
counterparty or a third party will not fulfill its obligation to
the Portfolio (“counterparty risk”). Counterparty risk
may arise because of the counterparty’s financial condition
(i.e., financial difficulties, bankruptcy, or insolvency),
market activities and developments, or other reasons, whether
foreseen or not. A shareholder’s ability to receive the
Protected NAV from the Portfolio is dependent on the
Portfolio’s ability to collect any settlement from the
Capital Protection Provider pursuant to the terms of the Capital
Protection Agreement or from BNP Paribas, the parent company of
the Capital Protection Provider (the “Parent
Guarantor”), under a separate parent guaranty. As such, the
Portfolio’s ability to benefit from the Protection may
depend on the Capital Protection Provider’s, as well as its
parent company’s, financial condition. As an added measure
of protection, the Parent Guarantor has issued an absolute,
irrevocable and continuing guaranty pursuant to which it
guarantees any and all financial obligations of the Capital
Protection Provider under the Capital Protection Agreement.
There is, however, a risk that the Capital Protection
Provider’s parent company may not fulfill its obligations
under the guaranty it has issued. The extent of the
Portfolio’s exposure to counterparty risk in respect to
financial assets approximates its carrying value as recorded on
the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may also be exposed to counterparty risk through
participation in various programs including, but not limited to,
cash sweep arrangements whereby the Portfolio’s cash
balance is invested in one or more types of cash management
vehicles, as well as investments in, but not limited to,
repurchase agreements, debt securities, and derivatives,
including various types of swaps, futures and options. The
Portfolio intends to enter into financial transactions with
counterparties that Janus Capital believes to be creditworthy at
the time of the transaction. There is always the risk that Janus
Capital’s analysis of a counterparty’s
creditworthiness is incorrect or may change due to market
conditions. To the extent that the Portfolio focuses its
transactions with a limited number of counterparties, it will
have greater exposure to the risks associated with one or more
counterparties. Under the terms of the Capital Protection
Agreement, the Protected NAV of each share class will be reduced
by any reductions in the NAV per share resulting from such
events as, but not limited to, (i) the bankruptcy,
insolvency, reorganization or default of a contractual
counterparty of the Portfolio, including counterparties to
derivatives transactions, and entities that hold cash or other
assets of the Portfolio; (ii) any trade or pricing error of
the Portfolio; and (iii) any realized or unrealized losses
on any investment of the Portfolio in money market funds.
Emerging Market
Investing
Within the parameters of its investment policies, the Portfolio
may invest in securities of issuers or companies from or with
exposure to one or more “developing countries” or
“emerging markets.” Investing in emerging markets may
involve certain risks and considerations not typically
associated with investing in the United States and imposes risks
greater than, or in addition to, the risks associated with
investing in securities of more developed foreign countries.
Emerging markets securities are exposed to a number of
additional risks, which may result
from less government supervision and regulation of business and
industry practices (including the potential lack of strict
finance and accounting controls and standards), stock exchanges,
brokers, and listed companies, making these investments
potentially more volatile in price and less liquid than
investments in developed securities markets, resulting in
greater risk to investors. There is a risk in developing
countries that a future economic or political crisis could lead
to price controls, forced mergers of companies, expropriation or
confiscatory taxation, imposition or enforcement of foreign
ownership limits, seizure, nationalization, sanctions or
imposition of restrictions by various governmental entities on
investment and trading, or creation of government monopolies,
any of which may have a detrimental effect on the
Portfolio’s investments. In addition, the Portfolio’s
investments may be denominated in foreign currencies and
therefore, changes in the value of a country’s currency
compared to the U.S. dollar may affect the value of the
Portfolio’s investments. To the extent that the Portfolio
invests a significant portion of its assets in the securities of
issuers in or companies of a single country or region, it is
more likely to be impacted by events or conditions affecting
that country or region, which could have a negative impact on
the Portfolio’s performance.
Offsetting Assets
and Liabilities
The Portfolio presents gross and net information about
transactions that are either offset in the financial statements
or subject to an enforceable master netting arrangement or
similar agreement with a designated counterparty, regardless of
whether the transactions are actually offset in the Statement of
Assets and Liabilities.
In order to better define its contractual rights and to secure
rights that will help the Portfolio mitigate its counterparty
risk, the Portfolio may enter into an International Swaps and
Derivatives Association, Inc. Master Agreement (“ISDA
Master Agreement”) or similar agreement with its derivative
contract counterparties. An ISDA Master Agreement is a bilateral
agreement between a Portfolio and a counterparty that governs
OTC derivatives and forward foreign currency exchange contracts
and typically contains, among other things, collateral posting
terms and netting provisions in the event of a default
and/or
termination event. Under an ISDA Master Agreement, in the event
of a default
and/or
termination event, the Portfolio may offset with each
counterparty certain derivative financial instrument’s
payables
and/or
receivables with collateral held
and/or
posted and create one single net payment. Note that for
financial reporting purposes, the Portfolio does not offset
certain derivative financial instrument’s payables and
receivables and related collateral on the Statement of Assets
and Liabilities.
The following table presents gross amounts of recognized assets
and liabilities and the net amounts after deducting collateral
that has been pledged by counterparties or has been pledged to
counterparties (if applicable). For corresponding information
grouped by type of instrument, see the “Fair Value of
Derivative Instruments as of June 30, 2014” table
located in Note 2 of these Notes to Financial Statements.
Offsetting of
Financial Liabilities and Derivative Liabilities
Gross Amounts
Gross Amounts in the
Counterparty
of Recognized Liabilities
Statement of Assets and Liabilities
Collateral Pledged*
Net Amount
BNP Paribas
$
1,513
$
–
$
–
$
1,513
*
Collateral pledged is limited to the net outstanding amount due
to/from an individual counterparty. The actual collateral
amounts pledged may exceed these amounts and may fluctuate in
value.
The Portfolio may require the counterparty to pledge securities
as collateral daily (based on the daily valuation of the
financial asset) if the Portfolio has a net aggregate unrealized
gain on OTC derivative contracts with a particular counterparty.
The Portfolio may deposit cash as collateral with the
counterparty and/or custodian daily (based on the daily
valuation of the financial asset) if the Portfolio has a net
aggregate unrealized loss on OTC derivative contracts with a
particular counterparty. The collateral amounts are subject to
minimum exposure requirements and initial margin requirements.
Collateral amounts are monitored and subsequently adjusted up or
down as valuations fluctuate by at least the minimum exposure
requirement. Collateral may reduce the risk of loss.
Real Estate
Investing
The Portfolio may invest in equity and debt securities of real
estate-related companies. Such companies may include those in
the real estate industry or real estate-related industries.
These securities may include common stocks, preferred stocks,
and other equity securities, including, but not limited to,
mortgage-backed securities, real estate-backed securities,
securities of REITs and similar REIT-like entities. A REIT is a
trust that invests in real estate-related projects, such as
properties, mortgage loans, and construction loans. REITs are
generally categorized as equity, mortgage, or hybrid REITs. A
REIT may be listed on an exchange or traded OTC.
Notes to
Financial Statements (unaudited)
(continued)
Restricted
Security Transactions
Restricted securities held by the Portfolio may not be sold
except in exempt transactions or in a public offering registered
under the Securities Act of 1933, as amended. The risk of
investing in such securities is generally greater than the risk
of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions
may result in the inability of the Portfolio to sell a security
at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets
exist.
Sovereign
Debt
The Portfolio may invest in U.S. and foreign government
debt securities (“sovereign debt”). Investments in
U.S. sovereign debt are considered low risk. However,
investments in
non-U.S. sovereign
debt can involve a high degree of risk, including the risk that
the governmental entity that controls the repayment of sovereign
debt may not be willing or able to repay the principal
and/or to
pay the interest on its sovereign debt in a timely manner. A
sovereign debtor’s willingness or ability to satisfy its
debt obligation may be affected by various factors, including
its cash flow situation, the extent of its foreign currency
reserves, the availability of foreign exchange when a payment is
due, the relative size of its debt position in relation to its
economy as a whole, the sovereign debtor’s policy toward
international lenders, and local political constraints to which
the governmental entity may be subject. Sovereign debtors may
also be dependent on expected disbursements from foreign
governments, multilateral agencies, and other entities. The
failure of a sovereign debtor to implement economic reforms,
achieve specified levels of economic performance, or repay
principal or interest when due may result in the cancellation of
third party commitments to lend funds to the sovereign debtor,
which may further impair such debtor’s ability or
willingness to timely service its debts. The Portfolio may be
requested to participate in the rescheduling of such sovereign
debt and to extend further loans to governmental entities, which
may adversely affect the Portfolio’s holdings. In the event
of default, there may be limited or no legal remedies for
collecting sovereign debt and there may be no bankruptcy
proceedings through which the Portfolio may collect all or part
of the sovereign debt that a governmental entity has not repaid.
4.
Investment
Advisory Agreements and Other Transactions with
Affiliates
The Portfolio pays Janus Capital an investment advisory fee
which is calculated daily and paid monthly. The following table
reflects the Portfolio’s contractual investment advisory
fee rate (expressed as an annual rate).
Contractual
Average
Investment
Daily
Advisory
Net Assets
Fee (%)
Portfolio
of the Portfolio
(annual rate)
Janus Aspen Preservation Series - Growth
All Asset Levels
0.64
Janus Capital has contractually agreed to waive the advisory fee
payable by the Portfolio or reimburse expenses in an amount
equal to the amount, if any, that the Portfolio’s normal
operating expenses in any fiscal year, including the investment
advisory fee and the capital protection fee, but excluding the
distribution and shareholder servicing fees (applicable to
Service Shares), administrative services fees payable pursuant
to the Transfer Agency Agreement, brokerage commissions,
interest, dividends, taxes, acquired fund fees and expenses, and
extraordinary expenses, exceed the annual rate shown below.
Janus Capital has agreed to continue the waiver until at least
May 1, 2015. If applicable, amounts reimbursed to the
Portfolio by Janus Capital are disclosed as “Excess Expense
Reimbursement” on the Statement of Operations.
Expense
Portfolio
Limit (%)
Janus Aspen Preservation Series - Growth
1.35 -
1.50(1),*
(1)
Effective May 1, 2014, the expense limit decreased from 1.38% -
1.53% to 1.35% - 1.50%.
*
Varies based on the amount of the Capital Protection Fee.
Janus Services LLC (“Janus Services”), a wholly-owned
subsidiary of Janus Capital, is the Portfolio’s transfer
agent. In addition, Janus Services provides or arranges for the
provision of certain other administrative, recordkeeping, and
shareholder relations services for the Portfolio. Janus Services
is not compensated for its services related to the shares,
except for
out-of-pocket
costs.
Under a distribution and shareholder servicing plan (the
“Plan”) adopted in accordance with
Rule 12b-1
under the 1940 Act, the Service Shares may pay the Trust’s
distributor, Janus Distributors LLC, a wholly-owned subsidiary
of Janus Capital, a fee at an annual rate of up to 0.25% of the
average daily net assets of the Shares. Under the terms of the
Plan, the Trust is authorized to make payments to Janus
Distributors for remittance to insurance companies and qualified
plan service providers as compensation for distribution
and/or
administrative services performed by such entities. Payments
under the Plan are not tied exclusively to actual distribution
and shareholder service expenses, and the payments may exceed
distribution and shareholder service expenses actually incurred
by the Portfolio. If any of the Portfolio’s
actual distribution and shareholder service expenses incurred
during a calendar year are less than the payments made during a
calendar year, the Portfolio will be refunded the difference.
Refunds, if any, are included in “Distribution fees and
shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan
(the “Deferred Plan”) for independent Trustees to
elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from the Portfolio.
All deferred fees are credited to an account established in the
name of the Trustees. The amounts credited to the account then
increase or decrease, as the case may be, in accordance with the
performance of one or more of the Janus funds that are selected
by the Trustees. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds
until final payment of all amounts are credited to the account.
The fluctuation of the account balance is recorded by the
Portfolio as unrealized appreciation/(depreciation) and is shown
as of June 30, 2014 on the Statement of Assets and
Liabilities as an asset, “Non-interested Trustees’
deferred compensation,” and a liability,
“Non-interested Trustees’ deferred compensation
fees.” Additionally, the recorded unrealized
appreciation/(depreciation) is included in “Unrealized net
appreciation/(depreciation) of investments, foreign currency
translations and non-interested Trustees’ deferred
compensation” on the Statement of Assets and Liabilities.
Deferred compensation expenses for the period ended
June 30, 2014 are included in “Non-interested
Trustees’ fees and expenses” on the Statement of
Operations. Trustees are allowed to change their designation of
mutual funds from time to time. Amounts will be deferred until
distributed in accordance with the Deferred Plan. Deferred fees
of $144,500 were paid by the Trust to a Trustee under the
Deferred Plan during the period ended June 30, 2014.
Certain officers of the Portfolio may also be officers
and/or
directors of Janus Capital. The Portfolio pays for the salaries,
fees, and expenses of certain Janus Capital employees and
Portfolio officers, with respect to certain specified
administration functions they perform on behalf of the
Portfolio. Administration costs are separate and apart from
advisory fees and other expenses paid in connection with the
investment advisory services Janus Capital provides to the
Portfolio. Some expenses related to compensation payable to the
Portfolio’s Chief Compliance Officer and compliance staff
are shared with the Portfolio. Total compensation of $18,154 was
paid to the Chief Compliance Officer and certain compliance
staff by the Trust during the period ended June 30, 2014.
The Portfolio’s portion is reported as part of “Other
expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets
from an unaffiliated custodian
and/or
transfer agent. Such credits or offsets are included in
“Expense and Fee Offset” on the Statement of
Operations. The Portfolio could have employed the assets used by
the custodian
and/or
transfer agent to produce income if it had not entered into an
expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated
thereunder, the Portfolio may participate in an affiliated or
nonaffiliated cash sweep program. In the cash sweep program,
uninvested cash balances of the Portfolio may be used to
purchase shares of affiliated or nonaffiliated money market
funds or cash management pooled investment vehicles. The
Portfolio is eligible to participate in the cash sweep program
(the “Investing Fund”). Janus Cash Liquidity
Fund LLC is an affiliated unregistered cash management
pooled investment vehicle that invests primarily in highly-rated
short-term fixed-income securities. Janus Cash Liquidity
Fund LLC currently maintains a NAV of $1.00 per share and
distributes income daily in a manner consistent with a
registered 2a-7 product. There are no restrictions on the
Portfolio’s ability to withdraw investments from Janus Cash
Liquidity Fund LLC at will, and there are no unfunded
capital commitments due from the Portfolio to Janus Cash
Liquidity Fund LLC. As adviser, Janus Capital has an
inherent conflict of interest because of its fiduciary duties to
the affiliated cash management pooled investment vehicles and
the Investing Fund.
During the period ended June 30, 2014, any recorded
distributions from affiliated investments as affiliated dividend
income, and affiliated purchases and sales can be found in the
Notes to Schedule of Investments and Other Information.
As of June 30, 2014, shares of the Portfolio were owned by
Janus Capital
and/or other
funds advised by Janus Capital, as indicated in the table below:
% of
% of
Class
Portfolio
Portfolio
Owned
Owned
Janus Preservation Series - Growth - Institutional Shares
100
%
50
%
Janus Preservation Series - Growth - Service Shares
100
50
5.
Federal Income
Tax
Income and capital gains distributions are determined in
accordance with income tax regulations that may differ from
accounting principles generally accepted in the United States of
America. These differences are due to differing treatments for
items such as net short-term gains, deferral of wash sale
losses, foreign currency
Notes to
Financial Statements (unaudited)
(continued)
transactions, net investment losses and capital loss carryovers.
The Portfolio has elected to treat gains and losses on forward
foreign currency contracts as capital gains and losses, if
applicable. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income
tax purposes pursuant to Section 988 of the Internal
Revenue Code.
The aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investment
securities for federal income tax purposes as of June 30,2014 are noted below.
Unrealized appreciation and unrealized depreciation in the table
below exclude appreciation/depreciation on foreign currency
translations. The primary difference between book and tax
appreciation or depreciation of investments is wash sale loss
deferrals.
Federal Tax
Unrealized
Unrealized
Net Tax
Portfolio
Cost
Appreciation
(Depreciation)
Appreciation
Janus Aspen Preservation Series - Growth
$
5,957,494
$
1,163,639
$
(48,705)
$
1,114,934
6.
Capital Share
Transactions
Janus Aspen Preservation Series - Growth
For the period ended June 30 (unaudited) and the year
ended December 31
2014
2013(1)
Transactions in Portfolio Shares – Institutional
Shares:
Shares sold
–
–
Reinvested dividends and distributions
4,841
11,214
Shares repurchased
–
–
Net Increase/(Decrease) in Portfolio Shares
4,841
11,214
Shares Outstanding, Beginning of Period
261,214
250,000
Shares Outstanding, End of Period
266,055
261,214
Transactions in Portfolio Shares – Service Shares:
Shares sold
–
–
Reinvested dividends and distributions
4,875
11,268
Shares repurchased
–
–
Net Increase/(Decrease) in Portfolio Shares
4,875
11,268
Shares Outstanding, Beginning of Period
261,268
250,000
Shares Outstanding, End of Period
266,143
261,268
(1)
Amounts reflect current year presentation. Prior year amounts
were disclosed in thousands
7.
Purchases and
Sales of Investment Securities
For the period ended June 30, 2014, the aggregate cost of
purchases and proceeds from sales of investment securities
(excluding any short-term securities, short-term options
contracts, and in-kind transactions) was as follows:
Purchases of Long-
Proceeds from Sales
Purchases of
Proceeds from Sales
Term U.S. Government
of Long-Term U.S.
Portfolio
Securities
of Securities
Obligations
Government Obligations
Janus Aspen Preservation Series - Growth
$
3,471,456
$
3,594,045
$
–
$
–
8.
Subsequent
Event
Management has evaluated whether any other events or
transactions occurred subsequent to June 30, 2014 and
through the date of issuance of the Portfolio’s financial
statements and determined that there were no material events or
transactions that would require recognition or disclosure in the
Portfolio’s financial statements.
A description of the policies and procedures that the Portfolio
uses to determine how to vote proxies relating to its portfolio
securities is available without charge: (i) upon request,
by calling
1-800-525-0020
(toll free); (ii) on the Portfolio’s website at
janus.com/proxyvoting; and (iii) on the SEC’s website
at
http://www.sec.gov.
Additionally, information regarding the Portfolio’s proxy
voting record for the most recent twelve-month period ended June
30 is also available, free of charge, through
janus.com/proxyvoting and from the SEC’s website at
http://www.sec.gov.
Quarterly
Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of
investments) with the SEC for the first and third quarters of
each fiscal year on
Form N-Q
within 60 days of the end of such fiscal quarter. The
Portfolio’s
Form N-Q:
(i) is available on the SEC’s website at
http://www.sec.gov;
(ii) may be reviewed and copied at the SEC’s Public
Reference Room in Washington, D.C. (information on the Public
Reference Room may be obtained by calling
1-800-SEC-0330);
and (iii) is available without charge, upon request, by
calling Janus at
1-800-525-0020
(toll free).
APPROVAL OF
ADVISORY AGREEMENTS DURING THE PERIOD
The Trustees of Janus Investment Fund and Janus Aspen Series,
each of whom serves as an “independent” Trustee (the
“Trustees”), oversee the management of each Fund of
Janus Investment Fund and each Portfolio of Janus Aspen Series
(each, a “Fund” and collectively, the
“Funds”), and as required by law, determine annually
whether to continue the investment advisory agreement for each
Fund and the subadvisory agreements for the 16 Funds that
utilize subadvisers.
In connection with their most recent consideration of those
agreements for each Fund, the Trustees received and reviewed
information provided by Janus Capital and the respective
subadvisers in response to requests of the Trustees and their
independent legal counsel. They also received and reviewed
information and analysis provided by, and in response to
requests of, their independent fee consultant. Throughout their
consideration of the agreements, the Trustees were advised by
their independent legal counsel. The Trustees met with
management to consider the agreements, and also met separately
in executive session with their independent legal counsel and
their independent fee consultant.
At a meeting held on December 17, 2013, based on the
Trustees’ evaluation of the information provided by Janus
Capital, the subadvisers, and the independent fee consultant, as
well as other information, the Trustees determined that the
overall arrangements between each Fund and Janus Capital and
each subadviser, as applicable, were fair and reasonable in
light of the nature, extent and quality of the services provided
by Janus Capital, its affiliates and the subadvisers, the fees
charged for those services, and other matters that the Trustees
considered relevant in the exercise of their business judgment.
At that meeting, the Trustees unanimously approved the
continuation of the investment advisory agreement for each Fund,
and the subadvisory agreement for each subadvised Fund, for the
period from either January 1 or February 1, 2014 through
January 1 or February 1, 2015, respectively, subject to
earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the
Trustees reviewed and analyzed various factors that they
determined were relevant, including the factors described below,
none of which by itself was considered dispositive. However, the
material factors and conclusions that formed the basis for the
Trustees’ determination to approve the continuation of the
agreements are discussed separately below. Also included is a
summary of the independent fee consultant’s conclusions and
opinions that arose during, and were included as part of, the
Trustees’ consideration of the agreements. “Management
fees,” as used herein, reflect actual annual advisory fees
and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the
services provided by Janus Capital and the subadvisers to the
Funds, taking into account the investment objective, strategies
and policies of each Fund, and the knowledge the Trustees gained
from their regular meetings with management on at least a
quarterly basis and their ongoing review of information related
to the Funds. In addition, the Trustees reviewed the resources
and key personnel of Janus Capital and each subadviser,
particularly noting those employees who provide investment and
risk management services to the Funds. The Trustees also
considered other services provided to the Funds by Janus Capital
or the subadvisers, such as managing the execution of portfolio
transactions and the selection of broker-dealers for those
transactions. The Trustees considered Janus Capital’s role
as administrator to the Funds, noting that Janus Capital does
not receive a fee for its services but is reimbursed for its
out-of-pocket
costs. The Trustees considered the role of Janus Capital in
monitoring adherence to the Funds’ investment restrictions,
providing support services for the Trustees and Trustee
committees, communicating with shareholders and overseeing the
activities of other service providers,
including monitoring compliance with various policies and
procedures of the Funds and with applicable securities laws and
regulations.
In this regard, the independent fee consultant noted that Janus
Capital provides a number of different services for the Funds
and Fund shareholders, ranging from investment management
services to various other servicing functions, and that, in its
opinion, Janus Capital is a capable provider of those services.
The independent fee consultant also provided its belief that
Janus Capital has developed institutional competitive advantages
that should be able to provide superior investment management
returns over the long term.
The Trustees concluded that the nature, extent and quality of
the services provided by Janus Capital or the subadviser to each
Fund were appropriate and consistent with the terms of the
respective advisory and subadvisory agreements, and that, taking
into account steps taken to address those Funds whose
performance lagged that of their peers for certain periods, the
Funds were likely to benefit from the continued provision of
those services. They also concluded that Janus Capital and each
subadviser had sufficient personnel, with the appropriate
education and experience, to serve the Funds effectively and had
demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund
over various time periods. They noted that they considered Fund
performance data throughout the year, including periodic
meetings with each Fund’s portfolio manager(s), and also
reviewed information comparing each Fund’s performance with
the performance of comparable funds and peer groups identified
by independent data providers, and with the Fund’s
benchmark index. In this regard, the independent fee consultant
found that the overall Funds’ performance has improved
modestly: for the 36 months ended September 30, 2013,
approximately 51% of the Funds were in the top two Lipper
quartiles of performance, and for the 12 months ended
September 30, 2013, approximately 52% of the Funds were in
the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting
that performance may vary by share class, and noted the
following:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus High-Yield Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Real Return Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
12 months ended May 31, 2013.
•
For Janus Short-Term Bond Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and the steps Janus Capital had taken or was taking to improve
performance.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s performance was in the third Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance
and that the performance trend was improving.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 36 months ended May 31,2013 and the 12 months ended May 31, 2013.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
second Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted that
the Fund’s performance was in the bottom Lipper quartile
for the 12 months ended May 31, 2013. The Trustees
noted the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Janus Global Real Estate Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Perkins Large Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Mid Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Select Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 12 months ended May 31, 2013. The Trustees noted
the reasons for the Fund’s underperformance, and its
limited performance history.
•
For Perkins Small Cap Value Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital and Perkins had taken or was taking to
improve performance.
•
For Perkins Value Plus Income Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 12 months ended May 31, 2013.
•
For INTECH International Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Growth Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
For Janus Contrarian Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Enterprise Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Forty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Growth and Income Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
36 months ended May 31, 2013 and in the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
•
For Janus Research Fund, the Trustees noted that the Fund’s
performance was in the second Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Triton Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s performance was in the third Lipper quartile for the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, and its limited
performance history.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Global Research Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Global Select Fund, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the third Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
the steps Janus Capital had taken or was taking to improve
performance, and that the performance trend was improving.
For Janus Global Technology Fund, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus International Equity Fund, the Trustees noted that the
Fund’s performance was in the second Lipper quartile for
the 36 months ended May 31, 2013 and the first Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
performance was in the bottom Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013. The Trustees noted the reasons for the
Fund’s underperformance, noting that the Fund has a
performance fee structure that results in lower management fees
during periods of underperformance, and the steps Janus Capital
had taken or was taking to improve performance.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
•
For Janus Preservation Series – Growth, the Trustees noted
that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s performance was in the first Lipper quartile for the
36 months ended May 31, 2013 and the 12 months
ended May 31, 2013.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s performance was in the first Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Global Allocation Portfolio – Moderate, the
Trustees noted that the Fund’s performance was in the
second Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s performance was in the third Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, and that the performance trend was
improving.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s performance was in the second Lipper
quartile for the 36 months ended May 31, 2013 and the
first Lipper quartile for the 12 months ended May 31,2013.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that this was a new Fund and did not yet have
extensive performance to evaluate.
•
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the second Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
noting that the Fund has a performance fee structure that
results in lower management fees during periods of
underperformance, the steps Janus Capital had taken or was
taking to improve performance, and that the performance trend
was improving.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s performance was in the bottom Lipper quartile for
the 36 months ended May 31, 2013 and the
12 months ended May 31, 2013. The Trustees noted the
reasons for the Fund’s underperformance, noting that the
Fund has a performance fee structure that results in lower
management fees during periods of underperformance, and the
steps Janus Capital had taken or was taking to improve
performance.
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 36 months ended May 31, 2013 and the
third Lipper quartile for the 12 months ended May 31,2013. The Trustees noted the reasons for the Fund’s
underperformance, noting that the Fund has a performance fee
structure that results in lower management fees during periods
of underperformance, the steps Janus Capital and Perkins had
taken or was taking to improve performance, and that the
performance trend was improving.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that the Fund’s performance was in the bottom Lipper
quartile for the 12 months ended May 31, 2013. The
Trustees noted the reasons for the Fund’s underperformance,
and its limited performance history.
In consideration of each Fund’s performance, the Trustees
concluded that, taking into account the factors relevant to
performance, as well as other considerations, the Fund’s
performance warranted continuation of the Fund’s investment
advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and
expenses of each Fund in comparison to similar information for
other comparable funds as provided by independent data
providers. They also reviewed an analysis of that information
provided by their independent fee consultant and noted that the
rate of management (investment advisory and any administration)
fees for many of the Funds, after applicable contractual expense
limitations, was below the mean management fee rate of the
respective peer group of funds selected by independent data
providers. The Trustees also examined information regarding the
subadvisory fees charged for subadvisory services, as
applicable, noting that all such fees were paid by Janus Capital
out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its
belief that the management fees charged by Janus Capital to each
of the Funds under the current investment advisory and
administration agreements are reasonable in relation to the
services provided by Janus Capital. The independent fee
consultant found: (1) the total expenses and management
fees of the Funds to be reasonable relative to other mutual
funds; (2) total expenses, on average, were 17% below the
mean total expenses of their respective Lipper Expense Group
peers and 29% below the mean total expenses for their Lipper
Expense Universes; (3) management fees for the Funds, on
average, were 14% below the mean management fees for their
Expense Groups and 16% below the mean for their Expense
Universes; and (4) Janus fund expenses at the functional
level for each asset and share class category were reasonable.
The Trustees also considered how the total expenses for each
share class of each Fund compared to the mean total expenses for
its Lipper Expense Group peers and to mean total expenses for
its Lipper Expense Universe.
The independent fee consultant concluded that, based on its
strategic review of expenses at the complex, category and
individual fund level, Fund expenses were found to be reasonable
relative to both Expense Group and Expense Universe benchmarks.
Further, for certain Funds, the independent fee consultant also
performed a systematic “focus list” analysis of
expenses in the context of the performance or service delivered
to each set of investors in each share class in each selected
Fund. Based on this analysis, the independent fee consultant
found that the combination of service quality/performance and
expenses on these individual Funds and share classes were
reasonable in light of performance trends, performance
histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital
and each subadviser in determining compensation payable to
portfolio managers, the competitive environment for investment
management talent, and the competitive market for mutual funds
in different distribution channels.
The Trustees also reviewed management fees charged by Janus
Capital and each subadviser to comparable separate account
clients and to comparable non-affiliated funds subadvised by
Janus Capital or by a subadviser (for which Janus Capital or the
subadviser provides only portfolio management services).
Although in most instances subadvisory and separate account fee
rates for various investment strategies were lower than
management fee rates for Funds having a similar strategy, the
Trustees noted that, under the terms of the management
agreements with the Funds, Janus Capital performs significant
additional services for the Funds that it does not provide to
those other clients, including administration services,
oversight of the Funds’ other service providers, trustee
support, regulatory compliance and numerous other services, and
that, in serving the Funds, Janus Capital assumes many legal
risks that it does not assume in servicing its other clients.
Moreover, they noted that the independent fee consultant found
that: (1) the management fees Janus Capital charges to the
Funds are reasonable in relation to the management fees Janus
Capital charges to its institutional and subadvised accounts;
(2) these institutional and subadvised accounts have
different service and infrastructure needs; and (3) the
average spread between management fees
charged to the Funds and those charged to Janus Capital’s
institutional and subadvised accounts is reasonable relative to
the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal
year ended in 2012, and noted the following with regard to each
Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
•
For Janus Flexible Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Bond Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus High-Yield Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Real Return Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Janus Short-Term Bond Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Government Money Market Fund, the Trustees noted that
the Fund’s total expenses exceeded the peer group mean for
both share classes. The Trustees considered that management fees
for this Fund are higher than the peer group mean due to the
Fund’s management fee including other costs, such as
custody and transfer agent services, while many funds in the
peer group pay these expenses separately from their management
fee. In addition, the Trustees considered that Janus Capital
voluntarily waives one-half of its advisory fee.
•
For Janus Money Market Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes. In addition, the Trustees considered that
Janus Capital voluntarily waives one-half of its advisory fee.
Asset Allocation Funds
•
For Janus Global Allocation Fund – Conservative, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for all share classes.
•
For Janus Global Allocation Fund – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for certain share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses, although this limit did not apply because
the Fund’s total expenses were already below the applicable
fee limit.
•
For Janus Global Allocation Fund – Moderate, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for all share classes.
Alternative Funds
•
For Janus Diversified Alternatives Fund, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for certain share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
•
For Janus Global Real Estate Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Value Funds
•
For Perkins Global Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Perkins Large Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed
to limit the Fund’s expenses, although this limit did not
apply because the Fund’s total expenses were already below
the applicable fee limit.
•
For Perkins Mid Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Select Value Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For Perkins Small Cap Value Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
•
For Perkins Value Plus Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
Mathematical Funds
•
For INTECH Global Dividend Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses.
•
For INTECH International Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Core Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For INTECH U.S. Growth Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For INTECH U.S. Value Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
Growth and Core Funds
•
For Janus Balanced Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Contrarian Fund, the Trustees noted that the
Fund’s total expenses were below or the same as the peer
group mean for all share classes.
•
For Janus Enterprise Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Forty Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Growth and Income Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for certain share classes, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses, although this limit did not apply because the
Fund’s total expenses were already below the applicable fee
limit.
For Janus Research Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for one
share class, overall the Fund’s total expenses were
reasonable.
•
For Janus Triton Fund, the Trustees noted that, although the
Fund’s total expenses exceeded the peer group mean for
certain share classes, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Twenty Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
•
For Janus Venture Fund, the Trustees noted that the Fund’s
total expenses were below or the same as the peer group mean for
all share classes.
Global and International Funds
•
For Janus Asia Equity Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Emerging Markets Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Life Sciences Fund, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
all share classes.
•
For Janus Global Research Fund (formerly named Janus Worldwide
Fund), the Trustees noted that the Fund’s total expenses
were below the peer group mean for all share classes.
•
For Janus Global Select Fund, the Trustees noted that, although
the Fund’s total expenses exceeded the peer group mean for
one share class, overall the Fund’s total expenses were
reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Global Technology Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable.
•
For Janus International Equity Fund, the Trustees noted that,
although the Fund’s total expenses exceeded the peer group
mean for one share class, overall the Fund’s total expenses
were reasonable. The Trustees also noted that Janus Capital has
contractually agreed to limit the Fund’s expenses, although
this limit did not apply because the Fund’s total expenses
were already below the applicable fee limit.
•
For Janus Overseas Fund, the Trustees noted that the Fund’s
total expenses were below the peer group mean for all share
classes.
Preservation Series
•
For Janus Preservation Series – Global, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for all share classes.
•
For Janus Preservation Series – Growth, the Trustees noted
that, although the Fund’s total expenses exceeded the peer
group mean for one share class, overall the Fund’s total
expenses were reasonable. The Trustees also noted that Janus
Capital has contractually agreed to limit the Fund’s
expenses.
Janus Aspen Series
•
For Janus Aspen Balanced Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Enterprise Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Flexible Bond Portfolio, the Trustees noted that
the Fund’s total expenses were below the peer group mean
for both share classes.
•
For Janus Aspen Forty Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Global Allocation Portfolio-Moderate, the
Trustees noted that, although the Fund’s total expenses
exceeded the peer group mean for both share classes, overall the
Fund’s total expenses were reasonable. The Trustees also
noted that Janus Capital has contractually agreed to limit the
Fund’s expenses.
•
For Janus Aspen Global Research Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen Global Technology Portfolio, the Trustees noted
that the Fund’s total expenses were below the peer group
mean for both share classes.
•
For Janus Aspen INTECH U.S. Low Volatility Portfolio, the
Trustees noted that the Fund’s total expenses were below
the peer group mean for its sole share class.
For Janus Aspen Janus Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Overseas Portfolio, the Trustees noted that the
Fund’s total expenses were below the peer group mean for
both share classes.
•
For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees
noted that the Fund’s total expenses were below the peer
group mean for both share classes.
•
For Janus Aspen Preservation Series – Growth, the Trustees
noted that, although the Fund’s total expenses exceeded the
peer group mean for both share classes, overall the Fund’s
total expenses were reasonable. The Trustees also noted that
Janus Capital has contractually agreed to limit the Fund’s
expenses.
The Trustees reviewed information on the profitability to Janus
Capital and its affiliates of their relationships with each
Fund, as well as an explanation of the methodology utilized in
allocating various expenses of Janus Capital and its affiliates
among the Funds and other clients. The Trustees also reviewed
the financial statements and corporate structure of Janus
Capital’s parent company. In their review, the Trustees
considered whether Janus Capital and each subadviser receive
adequate incentives to manage the Funds effectively. The
Trustees recognized that profitability comparisons among fund
managers are difficult because very little comparative
information is publicly available, and the profitability of any
fund manager is affected by numerous factors, including the
organizational structure of the particular fund manager, the
types of funds and other accounts it manages, possible other
lines of business, the methodology for allocating expenses, and
the fund manager’s capital structure and cost of capital.
However, taking into account those factors and the analysis
provided by the Trustees’ independent fee consultant, and
based on the information available, the Trustees concluded that
Janus Capital’s profitability with respect to each Fund in
relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while
assessing the reasonableness of expenses in light of Janus
Capital’s profits is dependent on comparisons with other
publicly-traded mutual fund advisers, and that these comparisons
are limited in accuracy by differences in complex size, business
mix, institutional account orientation, and other factors, after
accepting these limitations, the level of profit earned by Janus
Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other
compensation payable by each Fund to Janus Capital and its
affiliates, as well as the fees paid by Janus Capital to the
subadvisers of subadvised Funds, were reasonable in relation to
the nature, extent, and quality of the services provided, taking
into account the fees charged by other advisers for managing
comparable mutual funds with similar strategies, the fees Janus
Capital and the subadvisers charge to other clients, and, as
applicable, the impact of fund performance on management fees
payable by the Funds. The Trustees also concluded that the
overall expense ratio of each Fund was reasonable, taking into
account the size of the Fund, the quality of services provided
by Janus Capital and any subadviser, the investment performance
of the Fund, and any expense limitations agreed to or provided
by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for
Janus Capital to realize economies of scale as the assets of the
Funds increase. They noted that, although many Funds pay
advisory fees at a base fixed rate as a percentage of net
assets, without any breakpoints, the base management fee rate
paid by most of the Funds, before any adjustment for performance
and after any contractual expense limitations, was below the
mean management fee rate of the Fund’s peer group
identified by independent data providers; and, for those Funds
whose expenses are being reduced by the contractual expense
limitations of Janus Capital, Janus Capital is subsidizing the
Funds because they have not reached adequate scale. Moreover, as
the assets of many of the Funds have declined in the past few
years, certain Funds have benefited from having advisory fee
rates that have remained constant rather than increasing as
assets declined. In addition, performance fee structures have
been implemented for various Funds that have caused the
effective rate of advisory fees payable by such a Fund to vary
depending on the investment performance of the Fund relative to
its benchmark index over the measurement period; and a few Funds
have fee schedules with breakpoints and reduced fee rates above
certain asset levels. The Trustees also noted that the Funds
share directly in economies of scale through the lower charges
of third-party service providers that are based in part on the
combined scale of all of the Funds. Based on all of the
information they reviewed, including research and analysis
conducted by the Trustees’ independent fee consultant, the
Trustees concluded that the current fee structure of each Fund
was reasonable and that the current rates of fees do reflect a
sharing between Janus Capital and the Fund of any economies of
scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that,
based on analysis it completed, and given the limitations in
these analytical approaches and their
conflicting results, it could not confirm or deny the existence
of economies of scale in the Janus complex. Further, the
independent fee consultant provided its belief that Fund
investors are well-served by the fee levels and performance fee
structures in place on the Funds in light of any economies of
scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus
Capital and its affiliates from their relationships with the
Funds. They recognized that two affiliates of Janus Capital
separately serve the Funds as transfer agent and distributor,
respectively, and the transfer agent receives compensation
directly from the non-money market funds for services provided.
The Trustees also considered Janus Capital’s past and
proposed use of commissions paid by the Funds on their portfolio
brokerage transactions to obtain proprietary and third-party
research products and services benefiting the Fund
and/or other
clients of Janus Capital. The Trustees concluded that Janus
Capital’s use of these types of client commission
arrangements to obtain proprietary and third-party research
products and services was consistent with regulatory
requirements and guidelines and was likely to benefit each Fund.
The Trustees also concluded that, other than the services
provided by Janus Capital and its affiliates pursuant to the
agreements and the fees to be paid by each Fund therefor, the
Funds and Janus Capital may potentially benefit from their
relationship with each other in other ways. They concluded that
Janus Capital benefits from the receipt of research products and
services acquired through commissions paid on portfolio
transactions of the Funds and that the Funds benefit from Janus
Capital’s receipt of those products and services as well as
research products and services acquired through commissions paid
by other clients of Janus Capital. They further concluded that
the success of any Fund could attract other business to Janus
Capital or other Janus funds, and that the success of Janus
Capital could enhance Janus Capital’s ability to serve the
Funds.
Useful
Information About Your Portfolio Report
(unaudited)
1.
Management
Commentary
The Management Commentary in this report includes valuable
insight from the Portfolio’s manager as well as statistical
information to help you understand how your Portfolio’s
performance and characteristics stack up against those of
comparable indices.
If the Portfolio invests in foreign securities, this report may
include information about country exposure. Country exposure is
based primarily on the country of risk. The Portfolio’s
manager may allocate a company to a country based on other
factors such as location of the company’s principal office,
the location of the principal trading market for the
company’s securities, or the country where a majority of
the company’s revenues are derived.
Please keep in mind that the opinions expressed in the
Management Commentary are just that: opinions. They are a
reflection based on best judgment at the time this report was
compiled, which was June 30, 2014. As the investing
environment changes, so could opinions. These views are unique
and aren’t necessarily shared by fellow employees or by
Janus in general.
2.
Performance
Overviews
Performance overview graphs compare the performance of a
hypothetical $10,000 investment in the Portfolio with one or
more widely used market indices.
When comparing the performance of the Portfolio with an index,
keep in mind that market indices do not include brokerage
commissions that would be incurred if you purchased the
individual securities in the index. They also do not include
taxes payable on dividends and interest or operating expenses
incurred if you maintained the Portfolio invested in the index.
Average annual total returns are quoted for a Portfolio with
more than one year of performance history. Average annual total
return is calculated by taking the growth or decline in value of
an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual
compounded percentage rate that would have produced the same
result had the rate of growth been constant throughout the
period. Average annual total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio
distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less
than one year of performance history. Cumulative total return is
the growth or decline in value of an investment over time,
independent of the period of time involved. Cumulative total
return does not reflect the deduction of taxes that a
shareholder would pay on Portfolio distributions or redemptions
of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in
the performance chart reflect subsidized (if applicable) and
unsubsidized ratios. The total annual fund operating expenses
ratio is gross of any fee waivers, reflecting the
Portfolio’s unsubsidized expense ratio. The net annual fund
operating expenses ratio (if applicable) includes contractual
waivers of Janus Capital and reflects the Portfolio’s
subsidized expense ratio. Ratios may be higher or lower than
those shown in the “Financial Highlights” in this
report.
3.
Schedule of
Investments
Following the performance overview section is the
Portfolio’s Schedule of Investments. This schedule reports
the types of securities held in the Portfolio on the last day of
the reporting period. Securities are usually listed by type
(common stock, corporate bonds, U.S. Government obligations,
etc.) and by industry classification (banking, communications,
insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign
currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also
provide a summary of investments by country. This summary
reports the Portfolio’s exposure to different countries by
providing the percentage of securities invested in each country.
The country of each security represents the country of risk. The
Portfolio’s Schedule of Investments relies upon the
industry group and country classifications published by Barclays
and/or MSCI
Inc.
Tables listing details of individual forward currency contracts,
futures, written options and swaps follow the Portfolio’s
Schedule of Investments (if applicable).
4.
Statement of
Assets and Liabilities
This statement is often referred to as the “balance
sheet.” It lists the assets and liabilities of the
Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value
of the securities owned, the receivable for securities sold but
not yet settled, the receivable for dividends declared but not
yet received on securities owned and the receivable for
Portfolio shares sold to investors but not yet settled. The
Portfolio’s liabilities include payables for securities
purchased but not yet settled, Portfolio shares redeemed but not
yet paid and expenses owed but not yet paid. Additionally, there
may be other assets and liabilities such as unrealized gain or
loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks
down the components of the Portfolio’s net assets. Because
the Portfolio must distribute substantially all earnings, you
will notice that a significant portion of net assets is
shareholder capital.
The last section of this statement reports the net asset value
(“NAV”) per share on the last day of the reporting
period. The NAV is calculated by dividing the Portfolio’s
net assets for each share class (assets minus liabilities) by
the number of shares outstanding.
5.
Statement of
Operations
This statement details the Portfolio’s income, expenses,
realized gains and losses on securities and currency
transactions, and changes in unrealized appreciation or
depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment
Income,” reports the dividends earned from securities and
interest earned from interest-bearing securities in the
Portfolio.
The next section reports the expenses incurred by the Portfolio,
including the advisory fee paid to the investment adviser,
transfer agent fees and expenses, and printing and postage for
mailing statements, financial reports and prospectuses. Expense
offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses
from investment and foreign currency transactions, and changes
in unrealized appreciation or depreciation of investments and
foreign currency-denominated assets and liabilities. The
Portfolio will realize a gain (or loss) when it sells its
position in a particular security. A change in unrealized gain
(or loss) refers to the change in net appreciation or
depreciation of the Portfolio during the reporting period.
“Net Realized and Unrealized Gain/(Loss) on
Investments” is affected both by changes in the market
value of Portfolio holdings and by gains (or losses) realized
during the reporting period.
6.
Statements of
Changes in Net Assets
These statements report the increase or decrease in the
Portfolio’s net assets during the reporting period. Changes
in the Portfolio’s net assets are attributable to
investment operations, dividends and distributions to investors
and capital share transactions. This is important to investors
because it shows exactly what caused the Portfolio’s net
asset size to change during the period.
The first section summarizes the information from the Statement
of Operations regarding changes in net assets due to the
Portfolio’s investment operations. The Portfolio’s net
assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends
and/or
distributions in cash, money is taken out of the Portfolio to
pay the dividend
and/or
distribution. If investors reinvest their dividends
and/or
distributions, the Portfolio’s net assets will not be
affected. If you compare the Portfolio’s “Net Decrease
from Dividends and Distributions” to “Reinvested
Dividends and Distributions,” you will notice that
dividends and distributions have little effect on the
Portfolio’s net assets. This is because the majority of the
Portfolio’s investors reinvest their dividends
and/or
distributions.
The reinvestment of dividends and distributions is included
under “Capital Share Transactions.”“Capital
Shares” refers to the money investors contribute to the
Portfolio through purchases or withdrawals via redemptions. The
Portfolio’s net assets will increase and decrease in value
as investors purchase and redeem shares from the Portfolio.
7.
Financial
Highlights
This schedule provides a per-share breakdown of the components
that affect the Portfolio’s NAV for current and past
reporting periods as well as total return, asset size, ratios
and portfolio turnover rate.
The first line in the table reflects the NAV per share at the
beginning of the reporting period. The next line reports the net
investment income/(loss) per share. Following is the per share
total of net gains/(losses), realized and unrealized. Per share
dividends and distributions to investors are then subtracted to
arrive at the NAV per share at the end of the period. The next
line reflects the total return for the period. The total return
may include adjustments in accordance with generally accepted
accounting principles required at the period end for financial
reporting purposes. As a result, the total return may differ
from the total return reflected for individual shareholder
transactions. Also included are ratios of expenses and net
investment income to average net assets.
The Portfolio’s expenses may be reduced through expense
offsets and expense reimbursements. The ratios shown reflect
expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income
earned less expenses, divided by the average net assets of the
Portfolio during the reporting period. Don’t confuse this
ratio with the Portfolio’s yield. The net investment income
ratio is not a true measure of the Portfolio’s yield
because it doesn’t take into account the dividends
distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures
the buying and selling activity in the Portfolio.
Useful
Information About Your Portfolio Report
(unaudited)
(continued)
Portfolio turnover is affected by market conditions, changes in
the asset size of the Portfolio, fluctuating volume of
shareholder purchase and redemption orders, the nature of the
Portfolio’s investments, and the investment style
and/or
outlook of the portfolio manager. A 100% rate implies that an
amount equal to the value of the entire portfolio was replaced
once during the fiscal year; a 50% rate means that an amount
equal to the value of half the portfolio is traded in a year;
and a 200% rate means that an amount equal to the value of the
entire portfolio is traded every six months.
Janus provides
access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to
deliver strong risk-adjusted returns over a full market cycle
with lower correlation to equity markets than traditional
investments.
Asset
Allocation
Janus’ asset allocation funds
utilize our fundamental,
bottom-up
research to balance risk over the long term. From fund options
that meet investors’ risk tolerance and objectives to a
method that incorporates non-traditional investment choices to
seek non-correlated sources of risk and return, Janus’
asset allocation funds aim to allocate risk more effectively.
Fixed
Income
Janus fixed income funds attempt to
provide less risk relative to equities while seeking to deliver
a competitive total return through high current income and
appreciation. Janus money market funds seek capital preservation
and liquidity with current income as a secondary objective.
Global &
International
Janus global and international
funds seek to leverage Janus’ research capabilities by
taking advantage of inefficiencies in foreign markets, where
accurate information and analytical insight are often at a
premium.
Growth &
Core
Janus growth funds focus on
companies believed to be the leaders in their respective
industries, with solid management teams, expanding market share,
margins and efficiencies. Janus core funds seek investments in
more stable and predictable companies. Our core funds look for a
strategic combination of steady growth and, for certain funds,
some degree of income.
Mathematical
Our mathematical funds seek to
outperform their respective indices while maintaining a risk
profile equal to or lower than the index itself. Managed by
INTECH (a Janus subsidiary), these funds use a mathematical
process in an attempt to build a more “efficient”
portfolio than the index.
Value
Our value funds, managed by Perkins
(a Janus subsidiary), seek to identify companies with favorable
reward to risk characteristics by conducting rigorous downside
analysis before determining upside potential.
For more
information about our funds, contact your investment
professional or go to janus.com/variable-insurance.
Please consider the charges,
risks, expenses and investment objectives carefully before
investing. For a prospectus or, if available, a summary
prospectus containing this and other information, please call
Janus at 877.33JANUS (52687) or download the file from
janus.com/variable-insurance. Read it carefully before you
invest or send money.
Schedule of Investments is contained in the Reports to Shareholders included under Item 1 of this Form N-CSR.
(b)
Not applicable.
Item 7
— Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment
Companies
Not
applicable to this Registrant.
Item 8 — Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant.
Item 9 — Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant.
Item 10 — Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of
Trustees.
Item 11 — Controls and Procedures
(a)
The Registrant’s Principal Executive Officer and Principal
Financial Officer have evaluated the Registrant’s disclosure
controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended) within 90 days of
this filing and have concluded that the Registrant’s disclosure
controls and procedures were effective, as of that date.
(b)
There have been no changes in the Registrant’s internal
control over financial reporting (as defined in Rule 30a-3(d)
under the Investment Company Act of 1940, as amended) that
occurred during the Registrant’s second fiscal quarter of
the period covered by this report that have materially
affected, or are reasonably likely to materially affect,
the Registrant’s internal control over financial reporting.
Item 12 — Exhibits
(a)(1)
Not applicable because the Registrant has posted its Code of
Ethics (as defined in Item 2(b) of Form N-CSR) on its website
pursuant to paragraph (f)(2) of Item 2 of Form N-CSR.
(a)(2)
Separate certifications for the Registrant’s Principal
Executive Officer and Principal Financial Officer, as required
under Rule 30a-2(a)under the Investment Company Act of 1940,
as amended, are attached as Ex99.CERT.
(a)(3)
Not applicable to this Registrant.
(b)
A certification for the Registrant’s Principal Executive Officer
and Principal Financial Officer, as required by Rule 30a-2(b)
under the Investment Company Act of 1940, as amended, is attached
as Ex99.906CERT.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
and the Investment Company Act of 1940, as amended, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Vice President, Chief Financial Officer, Treasurer and Principal
Accounting Officer of Janus Aspen Series (Principal Accounting
Officer and Principal Financial Officer)
