Table of Contents
OMB APPROVAL OMB Number: 3235-0570 Expires: August 31, 2011 Estimated average burden hours per response: 18.9 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7736
Janus Aspen Series
(Exact name of registrant as specified in charter)
151 Detroit Street, Denver, Colorado (Address of principal executive offices) | 80206 (Zip code) |
Stephanie Grauerholz-Lofton, 151 Detroit Street, Denver, Colorado 80206
(Name and address of agent for service)
(Name and address of agent for service)
Registrant’s telephone number, including area code: 303-333-3863
Date of fiscal year end: 12/31
Date of reporting period: 12/31/09
TABLE OF CONTENTS
Table of Contents
Item 1 | - | Reports to Shareholders |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics
and holdings
and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 17 | |
Statement of Operations | 18 | |
Statements of Changes in Net Assets | 19 | |
Financial Highlights | 20 | |
Notes to Schedule of Investments | 21 | |
Notes to Financial Statements | 23 | |
Report of Independent Registered Public Accounting Firm | 38 | |
Additional Information | 39 | |
Explanations of Charts, Tables and Financial Statements | 42 | |
Designation Requirements | 45 | |
Trustees and Officers | 46 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of the managers’ best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Balanced Portfolio (unaudited)
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 Overview
Janus Aspen Balanced Portfolio’s Institutional Shares and Service Shares returned 25.89% and 25.58%, respectively, for the 12-month period ended December 31, 2009, compared with a 16.65% return by the Balanced Index, an internally-calculated secondary benchmark. The Balanced Index is composed of a 55% weighting in the S&P 500® Index, the Portfolio’s primary benchmark, and a 45% weighting in the Barclays Capital U.S. Aggregate Bond Index, the Portfolio’s other secondary benchmark, which returned 26.46% and 5.93%, respectively. The Barclays Capital U.S. Aggregate Government/Credit Index returned 4.52% over the same period.
Economic Overview
Equity markets began the year in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher. For the year, mid cap stocks easily outpaced small and large cap stocks, which performed similarly. Growth-style indices also outperformed value indices, as information technology was easily the best performing sector followed distantly by materials. Telecommunications and utilities were relative laggards. Commodities generally were higher during the year led by industrials metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Coming off the financial crisis of 2008, we have worked through numerous phases culminating in where we are today. Early in the crisis, concern over companies going bankrupt led to incredible volatility and a reduction in risk-taking across all markets. Equities and corporate bonds declined in price to valuations not seen in decades. The flight-to-quality trade that helped to push U.S. Treasuries to record low yields began to abate in January as corporate spreads dropped and Treasury yields rose.
The U.S. Federal Reserve’s (Fed) zero interest rate policy has helped to anchor the short-end of the yield curve. With the massive amount of liquidity in the system, concerns around future inflation have escalated leading to long-term rates moving higher and a steepening of the yield curve during the period. This helped the yield curve close the period near its steepest point on record as the yield difference between the 10-year and 2-year Treasury notes stood at 270 basis points (bps) at the end of December (down from the period and record high of 285 bps on December 22, 2009).
The steepening of the yield curve provided a negative backdrop for most U.S. government-related securities. U.S. Long Treasuries posted a double-digit decline and were among the worst performers, while short-term Treasuries ended the period flat. The U.S. Government’s and Fed’s ongoing support for agencies (Fannie and Freddie) and the mortgage-backed securities (MBS) market (through various purchase programs) helped each group outperform the Barclays Capital U.S. Aggregate Bond Index, which finished the period with a small gain. Spreads of agencies and MBS relative to U.S. Treasuries were near historically tight levels at year end. Spread tightening within corporate credit and commercial mortgage-backed securities (CMBS) continued to be a key driver of outperformance for these segments. The top two performing segments within fixed income markets, high yield and CMBS, saw spreads decline over 1000 bps and 537 bps, respectively. Investment grade credit spreads narrowed 362 bps in the period. Overall spreads within corporate credit remained well above long-term averages at the end of December.
Risk assets started to rebound due to actions by global governments and central banks, which resulted in flooding the financial system with liquidity and in creating a myriad of programs to help with the recovery process. Signs of
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
stability in the financial system helped facilitate the increased risk appetite in financial markets. At the same time corporations were very aggressive in tackling their organizational structures with layoffs and significant cost cutting that resulted in wage reductions and lower discretionary spending. As the economy stabilized, these aggressive cuts and disciplined cost management flowed directly into positive earnings, providing additional support to the market.
Equity Contributors
Global brewer Anheuser-Busch InBev N.V. (ABI) performed well for much of 2009. It has benefited from asset sales, cost cutting measures and strong earnings. We think the company will continue to make operating improvements. We like its dominant global presence in a market that has favorable pricing trends in our view. We believe there is a multiyear opportunity for the beer industry to see more rational pricing, making it an attractive industry to us. ABI is well positioned in our opinion given its dominant market share in the U.S. and Brazil, two of the largest beer markets in the world.
Apple, Inc. has been a winning position for the Portfolio for much of the year. It has been gaining market share in the PC market during a period of soft economic growth. Its iPhone and other portable devices have been market leaders as well. We believe Apple is still early in its market share gains, particularly in the high-end PC market. We also think its iPhone will remain a dominant device in the smart phone wireless market, an area we think will continue to expand. Apple’s success has been tied to its ability to offer the consumer a better value proposition than its competitors given its smooth integration of hardware and software products. We believe this will continue to drive long-term growth for the company.
Equity Detractors
The Portfolio’s top individual detractor was casino owner MGM Mirage. Investors worried about the company’s ability to address financing issues regarding its City Center project in Las Vegas. The uncertainty caused us to exit the position at a loss, but after the company secured financing and issued new equity to remove the risk of bankruptcy, we re-established a position. The stock later rebounded and we decided to sell the name and capture gains. However, for the period the holding was a net detractor.
Another detractor during the year was Gilead Sciences, Inc., which suffered amid the uncertainty surrounding health care reform in the U.S. Despite this uncertainty, we believe Gilead has a strong differentiated drug franchise with its HIV-fighting drug Truvada.
Fixed Income Contributors
Our significant overweight and security selection within corporate credit were the primary contributors to relative performance. Our underweights in Treasuries and U.S. agency debt were modest contributors as well. Within corporate sectors, our overweight and security selection in industrial metals were the top contributors followed by our overweight in technology.
Our credit holdings in Anheuser-Busch InBev were also among the top contributors. Management has continued to deliver on its pledge to make asset sales and pay down debt it incurred with InBev’s acquisition of Anheuser-Busch in 2008. Consistent with our philosophy, we favor the company’s bonds due to its free cash flow generation potential, cost reduction efforts and management’s commitment to paying down debt.
Tyco Electronics Group S.A., a technology holding, was the second largest individual contributor. The global provider of electronic components saw its bonds post strong gains during the second half of the period. We feel management is focused on maintaining its BBB credit rating; we also believe its semiconductor business will continue to improve.
Fixed Income Detractors
Our average underweight in CMBS was the largest detractor. While many are driven to the CMBS sector due to the higher ratings relative to high-yield corporates, we feel that better total return profiles exist with companies going through positive fundamental transformation of their capital structures with potential ratings upside offer better opportunities. On a corporate sector basis, our holdings within wirelines and property and casual insurers were the largest detractors. Our underweighting Wells Fargo & Co. was the largest individual detractor. We have maintained an underweight in the name relative to the index as we are concerned about the bank’s West Coast real estate exposure and a lack of transparency in addressing some of Wells’ problem loans.
Outlook
While the U.S. economy is recovering, we believe growth will remain somewhat muted due to high unemployment and relatively tight credit markets. We think these issues will continue to weigh on consumer spending and the housing market. We do not view inflation as a big threat in
Janus Aspen Series | 3
Table of Contents
Janus Aspen Balanced Portfolio (unaudited)
2010, which should allow the Fed to maintain its accommodative monetary policy. Given that we see uncertainty surrounding the sustainability of the current economic recovery, we are positioning the Portfolio’s equity holdings more conservatively with an emphasis on companies that have sustainable cash flows, good dividend yields and strong earnings visibility, as opposed to names that are more dependent on a strong economy.
Despite the significant spread tightening we’ve seen in corporate credit relative to Treasuries, we believe there is the potential for further tightening. There are a number of fundamental and structural issues within fixed income that we see as being key drivers of returns over the near term. Government intervention and rising budget deficits have led to a large and unprecedented level of financing needs for the federal government, which has resulted in an increased issuance of Treasury bonds. Meanwhile, corporate America is in the early innings of a deleveraging cycle that we believe will lead to management teams opting for capital structures with less leverage and greater liquidity profiles. We have seen management teams focus more on paying down debt and building liquidity since emerging from one of the most significant financial crises in history. We think this could continue and that a shrinking supply of corporate bonds coupled with investors demand for higher yields provides a positive backdrop for further spread narrowing within corporate credit.
In addition, as we have highlighted previously, we believe that the evolution of the fixed income markets, moving from four primary sectors (credit, Treasuries, government agencies and agency MBS) to two (credit and government) result in agencies and MBS being more sensitive to interest rate movements. Given agency and MBS securities are at historically tight spreads relative to Treasuries, we prefer to express our view on interest rates using Treasuries versus taking the basis risk. The U.S. government’s support of Fannie and Freddie is likely to continue and remain a key determinant of agencies spreads. Even with the Fed’s MBS purchase program scheduled to end in March, we believe the mortgage market is likely to remain under pressure due to the fragile nature of the housing market. Because of these structural issues, we think both segments will display similar return characteristics to Treasuries and that there are very few spread alternatives to pursue outside of corporate credit.
We have often emphasized the importance of credit analysis in fixed income investing. Furthermore, we believe the corporate credit sector remains an area where fundamental bottom-up analysis combined with robust risk management can improve a manager’s potential to provide risk-adjusted outperformance within fixed income.
Thank you for investing in Janus Aspen Balanced Portfolio.
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Janus Aspen Balanced Portfolio At A Glance
5 Top Performers – Equity Holdings
Contribution | ||||
Anheuser-Busch InBev N.V. | 3.82% | |||
Apple, Inc. | 2.91% | |||
Reckitt Benckiser Group PLC | 1.78% | |||
Goldman Sachs Group, Inc. | 1.66% | |||
Starwood Hotels & Resorts Worldwide, Inc. | 1.56% |
5 Bottom Performers – Equity Holdings
Contribution | ||||
MGM Mirage | –0.55% | |||
ConocoPhillips | –0.51% | |||
Gilead Sciences, Inc. | –0.49% | |||
Nintendo Co., Ltd. | –0.29% | |||
Bank of America Corp. | –0.17% |
5 Top Performers – Sectors*
Portfolio | Portfolio Weighting | S&P 500® | ||||||||||
Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Information Technology | 10.07% | 18.12% | 18.13% | |||||||||
Consumer Staples | 7.90% | 19.78% | 12.11% | |||||||||
Consumer Discretionary | 5.09% | 8.81% | 8.98% | |||||||||
Financials | 5.01% | 10.13% | 13.16% | |||||||||
Industrials | 3.59% | 9.85% | 10.22% |
5 Bottom Performers – Sectors*
Portfolio | Portfolio Weighting | S&P 500® | ||||||||||
Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Utilities | 0.00% | 0.00% | 3.99% | |||||||||
Telecommunication Services | 0.17% | 0.30% | 3.46% | |||||||||
Materials | 1.36% | 3.81% | 3.34% | |||||||||
Energy | 2.18% | 9.99% | 12.64% | |||||||||
Health Care | 3.42% | 19.21% | 13.97% |
* | 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 Series | 5
Table of Contents
Janus Aspen Balanced Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Philip Morris International, Inc. Tobacco | 1.9% | |||
Reckitt Benckiser Group PLC Soap and Cleaning Preparations | 1.8% | |||
Bristol-Myers Squibb Co. Medical – Drugs | 1.8% | |||
Morgan Stanley Diversified Banking Institutions | 1.8% | |||
Roche Holding A.G. Medical – Drugs | 1.8% | |||
9.1% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 3.0% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Balanced Portfolio – Institutional Shares | 25.89% | 6.96% | 4.21% | 10.27% | 0.57% | ||||||
Janus Aspen Balanced Portfolio – Service Shares | 25.58% | 6.68% | 4.07% | 10.14% | 0.82% | ||||||
S&P 500® Index | 26.46% | 0.42% | –0.95% | 7.58% | |||||||
Barclays Capital U.S. Aggregate Bond Index (#) | 5.93% | 4.97% | 6.33% | 6.02% | |||||||
Barclays Capital U.S. Government/Credit Bond Index | 4.52% | 4.71% | 6.34% | 5.91% | |||||||
Balanced Index | 16.65% | 2.65% | 2.64% | 7.16% | |||||||
Lipper Quartile – Institutional Shares | 2nd | 1st | 1st | 1st | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Mixed-Asset Target Allocation Moderate Funds | 49/179 | 1/81 | 12/48 | 1/18 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Balanced Portfolio (unaudited)
The Portfolio’s performance may be affected by risks that include those associated with non-investment grade debt securities and investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio invests in Real Estate Investment Trusts (REITs), which may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic region. REITs may be subject to risks including, but not limited to: legal, political, liquidity, and interest rate risks, a decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrowers. To the extent the Portfolio invests in foreign REITs, the Portfolio may be subject to fluctuations in currency rates or political or economic conditions in a particular country.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
Portfolios that invest in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Unlike owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond portfolios. The return of principal is not guaranteed due to net asset value fluctuation that is caused by changes in the price of specific bonds held in the Portfolio and selling of bonds within the Portfolio by the portfolio managers.
The Portfolio invests in mortgage-backed securities. Mortgage-backed securities are subject to prepayment risk (early payoff of mortgages during periods of declining interest rates) and extension risk (extending the duration of mortgage-backed securities during periods of rising interest rates). These risks may increase the volatility of these securities and affect total returns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
September 30, 1993 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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 “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – September 13, 1993 | |
# | The Portfolio changed its secondary benchmark index from the Barclays Capital U.S. Government/Credit Bond Index to the Barclays Capital U.S. Aggregate Bond Index. Janus Capital believes that the new secondary benchmark index provides a more appropriate representation of the Portfolio’s investments. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged market value weighted index for U.S. dollar-denominated investment-grade debt issues, including government, corporate, mortgage-backed, and asset-backed securities with maturities of at least one year. |
8 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,157.60 | $ | 3.15 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.22 | $ | 2.95 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,156.40 | $ | 4.50 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.96 | $ | 4.22 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.58% for Institutional Shares and 0.83% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Janus Aspen Series | 9
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Common Stock – 58.2% | ||||||||||||
Aerospace and Defense – 1.2% | ||||||||||||
197,410 | Boeing Co. | $ | 10,685,804 | |||||||||
468,249 | Empresa Brasileira de Aeronautica S.A. (ADR) | 10,352,985 | ||||||||||
21,038,789 | ||||||||||||
Agricultural Chemicals – 1.7% | ||||||||||||
107,931 | Monsanto Co. | 8,823,359 | ||||||||||
365,749 | Syngenta A.G. (ADR)** | 20,580,696 | ||||||||||
29,404,055 | ||||||||||||
Applications Software – 0.5% | ||||||||||||
265,787 | Microsoft Corp. | 8,103,846 | ||||||||||
Athletic Footwear – 1.2% | ||||||||||||
296,724 | NIKE, Inc. – Class B | 19,604,555 | ||||||||||
Automotive – Cars and Light Trucks – 0.2% | ||||||||||||
58,848 | Daimler A.G.** | 3,136,598 | ||||||||||
Brewery – 1.7% | ||||||||||||
558,617 | Anheuser-Busch InBev N.V.** | 28,881,519 | ||||||||||
784,368 | Anheuser-Busch InBev N.V. – VVPR Strip*,** | 5,620 | ||||||||||
28,887,139 | ||||||||||||
Cable Television – 0.6% | ||||||||||||
319,441 | DIRECTV Group, Inc.* | 10,653,357 | ||||||||||
Casino Hotels – 0.6% | ||||||||||||
1,021,616 | Crown, Ltd. | 7,321,236 | ||||||||||
36,675 | Wynn Resorts, Ltd. | 2,135,585 | ||||||||||
9,456,821 | ||||||||||||
Cellular Telecommunications – 0.4% | ||||||||||||
268,655 | Vodafone Group PLC** | 6,203,244 | ||||||||||
Commercial Banks – 1.6% | ||||||||||||
226,800 | ICICI Bank, Ltd. (ADR) | 8,552,628 | ||||||||||
320,590 | Itau Unibanco Holding S.A. (ADR) | 7,322,276 | ||||||||||
453,417 | Standard Chartered PLC** | 11,350,481 | ||||||||||
27,225,385 | ||||||||||||
Commercial Services – Finance – 0.3% | ||||||||||||
242,611 | Western Union Co. | 4,573,217 | ||||||||||
Computers – 3.3% | ||||||||||||
99,184 | Apple, Inc.* | 20,913,938 | ||||||||||
134,072 | International Business Machines Corp. | 17,550,025 | ||||||||||
249,230 | Research In Motion, Ltd. (U.S. Shares)* | 16,832,994 | ||||||||||
55,296,957 | ||||||||||||
Cosmetics and Toiletries – 1.0% | ||||||||||||
201,234 | Colgate-Palmolive Co. | 16,531,373 | ||||||||||
Diversified Banking Institutions – 5.3% | ||||||||||||
800,873 | Bank of America Corp. | 12,061,147 | ||||||||||
463,125 | Credit Suisse Group A.G. (ADR)** | 22,767,225 | ||||||||||
145,256 | Goldman Sachs Group, Inc. | 24,525,023 | ||||||||||
1,012,576 | Morgan Stanley | 29,972,251 | ||||||||||
89,325,646 | ||||||||||||
Diversified Operations – 1.6% | ||||||||||||
1,392,670 | China Merchants Holdings International Co., Ltd. | 4,486,228 | ||||||||||
284,107 | Danaher Corp. | 21,364,846 | ||||||||||
2,899,640 | Melco International Development, Ltd.* | 1,326,284 | ||||||||||
27,177,358 | ||||||||||||
E-Commerce/Services – 0.6% | ||||||||||||
372,794 | eBay, Inc.* | 8,775,571 | ||||||||||
168,360 | Liberty Media Corp. – Interactive – Class A* | 1,825,022 | ||||||||||
10,600,593 | ||||||||||||
Electric Products – Miscellaneous – 0.4% | ||||||||||||
170,842 | Emerson Electric Co. | 7,277,869 | ||||||||||
Electronic Components – Semiconductors – 0.4% | ||||||||||||
85,903 | Broadcom Corp. – Class A* | 2,701,649 | ||||||||||
171,430 | Microchip Technology, Inc. | 4,981,756 | ||||||||||
7,683,405 | ||||||||||||
Electronic Connectors – 0.8% | ||||||||||||
288,758 | Amphenol Corp. – Class A | 13,334,844 | ||||||||||
Enterprise Software/Services – 1.7% | ||||||||||||
218,099 | CA, Inc. | �� | 4,898,504 | |||||||||
969,395 | Oracle Corp. | 23,788,953 | ||||||||||
28,687,457 | ||||||||||||
Fiduciary Banks – 0.1% | ||||||||||||
44,853 | Northern Trust Corp. | 2,350,297 | ||||||||||
Finance – Investment Bankers/Brokers – 0.3% | ||||||||||||
306,391 | Charles Schwab Corp. | 5,766,279 | ||||||||||
Finance – Other Services – 0.4% | ||||||||||||
257,356 | NYSE Euronext | 6,511,107 | ||||||||||
Food – Miscellaneous/Diversified – 1.6% | ||||||||||||
548,309 | Nestle S.A.** | 26,662,871 | ||||||||||
Food – Retail – 0.3% | ||||||||||||
720,814 | Tesco PLC** | 4,950,724 | ||||||||||
Industrial Gases – 0.5% | ||||||||||||
102,207 | Praxair, Inc. | 8,208,244 | ||||||||||
Medical – Biomedical and Genetic – 1.9% | ||||||||||||
205,893 | Celgene Corp.* | 11,464,122 | ||||||||||
443,615 | Gilead Sciences, Inc.* | 19,199,658 | ||||||||||
61,014 | OSI Pharmaceuticals, Inc.* | 1,893,264 | ||||||||||
32,557,044 | ||||||||||||
Medical – Drugs – 4.4% | ||||||||||||
244,617 | Abbott Laboratories | 13,206,872 | ||||||||||
1,210,964 | Bristol-Myers Squibb Co. | 30,576,841 | ||||||||||
175,018 | Roche Holding A.G.** | 29,800,761 | ||||||||||
73,584,474 | ||||||||||||
Medical – HMO – 0.7% | ||||||||||||
377,210 | UnitedHealth Group, Inc. | 11,497,361 | ||||||||||
Medical Products – 3.2% | ||||||||||||
412,579 | Baxter International, Inc. | 24,210,136 | ||||||||||
327,304 | Covidien PLC (U.S. Shares)** | 15,674,589 | ||||||||||
222,925 | Johnson & Johnson | 14,358,599 | ||||||||||
54,243,324 | ||||||||||||
Metal Processors and Fabricators – 0.4% | ||||||||||||
62,260 | Precision Castparts Corp. | 6,870,391 | ||||||||||
Multi-Line Insurance – 0.4% | ||||||||||||
119,000 | ACE, Ltd. (U.S. Shares)** | 5,997,600 | ||||||||||
Networking Products – 0.5% | ||||||||||||
331,918 | Cisco Systems, Inc.* | 7,946,117 | ||||||||||
Oil and Gas Drilling – 0.5% | ||||||||||||
93,262 | Transocean, Ltd. (U.S. Shares)** | 7,722,094 |
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Oil Companies – Exploration and Production – 2.2% | ||||||||||||
613,558 | EnCana Corp. (U.S. Shares) | $ | 19,873,144 | |||||||||
202,778 | Occidental Petroleum Corp. | 16,495,990 | ||||||||||
36,369,134 | ||||||||||||
Oil Companies – Integrated – 3.4% | ||||||||||||
613,558 | Cenovus Energy, Inc. | 15,461,662 | ||||||||||
351,980 | Hess Corp. | 21,294,789 | ||||||||||
496,294 | Petroleo Brasileiro S.A. (U.S. Shares) | 21,037,903 | ||||||||||
57,794,354 | ||||||||||||
Optical Supplies – 0.3% | ||||||||||||
31,395 | Alcon, Inc. (U.S. Shares)** | 5,159,768 | ||||||||||
Power Converters and Power Supply Equipment – 0.2% | ||||||||||||
221,521 | Suntech Power Holdings Co., Ltd. (ADR)* | 3,683,894 | ||||||||||
Real Estate Operating/Development – 0.3% | ||||||||||||
1,275,000 | Hang Lung Properties, Ltd. | 4,981,122 | ||||||||||
Retail – Building Products – 0.9% | ||||||||||||
506,747 | Home Depot, Inc. | 14,660,191 | ||||||||||
Retail – Drug Store – 0.8% | ||||||||||||
446,838 | CVS Caremark Corp.** | 14,392,652 | ||||||||||
Retail – Jewelry – 0.2% | ||||||||||||
61,060 | Tiffany & Co. | 2,625,580 | ||||||||||
Retail – Regional Department Stores – 0.4% | ||||||||||||
119,000 | Kohl’s Corp.* | 6,417,670 | ||||||||||
Semiconductor Components/Integrated Circuits – 0.3% | ||||||||||||
258,830 | Marvell Technology Group, Ltd. | 5,370,723 | ||||||||||
Soap and Cleaning Preparations – 1.8% | ||||||||||||
571,489 | Reckitt Benckiser Group PLC** | 30,950,447 | ||||||||||
Telecommunication Equipment – Fiber Optics – 1.0% | ||||||||||||
869,603 | Corning, Inc. | 16,792,034 | ||||||||||
Television – 0.7% | ||||||||||||
863,501 | CBS Corp. – Class B | 12,132,189 | ||||||||||
Tobacco – 2.4% | ||||||||||||
473,020 | Altria Group, Inc. | 9,285,383 | ||||||||||
656,930 | Philip Morris International, Inc. | 31,657,456 | ||||||||||
40,942,839 | ||||||||||||
Transportation – Railroad – 1.9% | ||||||||||||
389,067 | Canadian National Railway Co. (U.S. Shares) | 21,149,682 | ||||||||||
169,168 | Union Pacific Corp. | 10,809,835 | ||||||||||
31,959,517 | ||||||||||||
Wireless Equipment – 1.1% | ||||||||||||
387,414 | QUALCOMM, Inc. | 17,921,772 | ||||||||||
Total Common Stock (cost $775,132,190) | 981,224,321 | |||||||||||
Corporate Bonds – 35.6% | ||||||||||||
Advertising Services – 0.2% | ||||||||||||
$ | 580,000 | WPP Finance UK, 5.8750%, 6/15/14** | 598,968 | |||||||||
2,348,000 | WPP Finance UK, 8.0000%, 9/15/14** | 2,670,287 | ||||||||||
3,269,255 | ||||||||||||
Agricultural Chemicals – 0.1% | ||||||||||||
2,080,000 | Mosaic Co., 7.6250%, 12/1/16 (144A) | 2,273,515 | ||||||||||
Apparel Manufacturers – 0.1% | ||||||||||||
2,240,000 | Hanesbrands, Inc., 3.8308%, 12/15/14‡ | 2,119,600 | ||||||||||
Automotive – Cars and Light Trucks – 0.4% | ||||||||||||
$ | 4,044,000 | Daimler Finance North America LLC 6.5000%, 11/15/13 | 4,433,175 | |||||||||
1,755,000 | Daimler Finance North America LLC 8.5000%, 1/18/31 | 2,156,619 | ||||||||||
6,589,794 | ||||||||||||
Automotive – Medium and Heavy Duty Trucks – 0.4% | ||||||||||||
5,870,000 | Volvo A.B. (U.S. Shares) 5.9500%, 4/1/15 (144A) | 6,057,335 | ||||||||||
Beverages – Non-Alcoholic – 0.5% | ||||||||||||
1,730,000 | Dr. Pepper Snapple Group, Inc. 2.3500%, 12/21/12 | 1,731,842 | ||||||||||
3,120,000 | Dr. Pepper Snapple Group, Inc. 6.1200%, 5/1/13 | 3,414,587 | ||||||||||
1,140,000 | Dr. Pepper Snapple Group, Inc. 6.8200%, 5/1/18 | 1,278,873 | ||||||||||
1,250,000 | PepsiCo, Inc., 3.7500%, 3/1/14 | 1,291,749 | ||||||||||
7,717,051 | ||||||||||||
Beverages – Wine and Spirits – 0.1% | ||||||||||||
2,325,000 | Brown-Forman Corp., 5.0000%, 2/1/14 | 2,443,538 | ||||||||||
Brewery – 1.1% | ||||||||||||
4,395,000 | Anheuser-Busch InBev Worldwide, Inc. 7.2000%, 1/15/14 (144A) | 4,984,638 | ||||||||||
5,900,000 | Anheuser-Busch InBev Worldwide, Inc. 7.7500%, 1/15/19 (144A) | 6,907,690 | ||||||||||
6,155,000 | Anheuser-Busch InBev Worldwide, Inc. 5.3750%, 1/15/20 (144A) | 6,279,693 | ||||||||||
18,172,021 | ||||||||||||
Building – Residential and Commercial – 0.3% | ||||||||||||
1,400,000 | D.R. Horton, Inc., 7.8750%, 8/15/11 | 1,477,000 | ||||||||||
2,020,000 | MDC Holdings, Inc., 5.3750%, 12/15/14 | 2,004,828 | ||||||||||
1,400,000 | Ryland Group, 5.3750%, 5/15/12 | 1,421,000 | ||||||||||
4,902,828 | ||||||||||||
Building Products – Cement and Aggregate – 0.2% | ||||||||||||
765,000 | CRH America, Inc., 5.6250%, 9/30/11 | 804,166 | ||||||||||
1,415,000 | CRH America, Inc., 6.9500%, 3/15/12 | 1,532,742 | ||||||||||
1,515,000 | Martin Marietta Materials, Inc. 6.6000%, 4/15/18 | 1,559,504 | ||||||||||
3,896,412 | ||||||||||||
Cable Television – 0.6% | ||||||||||||
880,000 | COX Communications, Inc. 6.2500%, 6/1/18 (144A) | 936,660 | ||||||||||
1,385,000 | COX Communications, Inc. 9.3750%, 1/15/19 (144A) | 1,752,567 | ||||||||||
2,505,000 | Time Warner Cable, Inc., 6.7500%, 7/1/18 | 2,751,899 | ||||||||||
2,335,000 | Time Warner Cable, Inc. 5.0000%, 2/1/20 | 2,264,322 | ||||||||||
2,085,000 | Time Warner Cable, Inc. 6.7500%, 6/15/39 | 2,183,631 | ||||||||||
9,889,079 | ||||||||||||
Casino Hotels – 0.1% | ||||||||||||
1,385,000 | Ameristar Casinos, Inc. 9.2500%, 6/1/14 (144A) | 1,436,938 | ||||||||||
Casino Services – 0.3% | ||||||||||||
5,195,000 | International Game Technology 7.5000%, 6/15/19 | 5,629,458 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 11
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Cellular Telecommunications – 0.4% | ||||||||||||
$ | 2,725,000 | America Movil S.A.B. de C.V. 5.0000%, 10/16/19 (144A) | $ | 2,664,445 | ||||||||
1,925,000 | Cellco Partnership / Verizon Wireless Capital LLC, 5.2500%, 2/1/12 | 2,041,703 | ||||||||||
2,260,000 | Cellco Partnership / Verizon Wireless Capital LLC, 7.3750%, 11/15/13 | 2,595,985 | ||||||||||
7,302,133 | ||||||||||||
Chemicals – Diversified – 0.7% | ||||||||||||
3,390,000 | Dow Chemical Co., 7.6000%, 5/15/14 | 3,857,454 | ||||||||||
6,655,000 | Dow Chemical Co., 8.5500%, 5/15/19 | 7,940,380 | ||||||||||
11,797,834 | ||||||||||||
Coatings and Paint Products – 0.4% | ||||||||||||
4,157,000 | RPM International, Inc. 6.1250%, 10/15/19 | 4,182,262 | ||||||||||
3,170,000 | Sherwin-Williams Co. 3.1250%, 12/15/14 | 3,130,822 | ||||||||||
7,313,084 | ||||||||||||
Commercial Banks – 1.8% | ||||||||||||
6,950,000 | American Express Bank FSB 5.5000%, 4/16/13 | 7,408,207 | ||||||||||
2,730,000 | BB&T Corp., 5.7000%, 4/30/14 | 2,955,083 | ||||||||||
2,710,000 | BB&T Corp., 6.8500%, 4/30/19 | 3,039,544 | ||||||||||
3,005,000 | Credit Suisse New York 5.0000%, 5/15/13** | 3,204,637 | ||||||||||
4,835,000 | Credit Suisse New York 5.5000%, 5/1/14** | 5,246,947 | ||||||||||
8,040,000 | Discover Bank, 8.7000%, 11/18/19 | 8,613,685 | ||||||||||
30,468,103 | ||||||||||||
Computer Services – 0.5% | ||||||||||||
6,465,000 | Affiliated Computer Services, Inc. 4.7000%, 6/1/10 | 6,521,569 | ||||||||||
1,720,000 | Affiliated Computer Services, Inc. 5.2000%, 6/1/15 | 1,773,750 | ||||||||||
8,295,319 | ||||||||||||
Computers – Memory Devices – 0.4% | ||||||||||||
3,889,000 | Seagate Technology, 6.3750%, 10/1/11 | 3,957,058 | ||||||||||
2,595,000 | Seagate Technology 10.0000%, 5/1/14 (144A) | 2,867,475 | ||||||||||
6,824,533 | ||||||||||||
Consulting Services – 0% | ||||||||||||
510,000 | FTI Consulting Inc., 7.7500%, 10/1/16 | 516,375 | ||||||||||
Containers – Paper and Plastic – 0.1% | ||||||||||||
1,050,000 | Rock-Tenn Co., 9.2500%, 3/15/16 | 1,140,563 | ||||||||||
180,000 | Rock-Tenn Co. 9.2500%, 3/15/16 (144A) | 195,525 | ||||||||||
1,336,088 | ||||||||||||
Cosmetics and Toiletries – 0.1% | ||||||||||||
875,000 | Estee Lauder Cos., Inc. 7.7500%, 11/1/13 | 1,016,539 | ||||||||||
Dialysis Centers – 0.2% | ||||||||||||
3,520,000 | DaVita, Inc., 6.6250%, 3/15/13 | 3,528,800 | ||||||||||
Diversified Banking Institutions – 3.2% | ||||||||||||
$ | 6,615,000 | Bank of America Corp. 7.3750%, 5/15/14 | 7,506,132 | |||||||||
1,360,000 | Bank of America Corp. 5.4200%, 3/15/17 | 1,342,459 | ||||||||||
1,650,000 | Bank of America Corp., 5.6500%, 5/1/18 | 1,675,760 | ||||||||||
4,125,000 | Citigroup, Inc., 5.6250%, 8/27/12 | 4,242,847 | ||||||||||
3,385,000 | Citigroup, Inc., 5.3000%, 10/17/12 | 3,526,300 | ||||||||||
3,350,000 | Citigroup, Inc., 6.0100%, 1/15/15 | 3,420,678 | ||||||||||
7,200,000 | Citigroup, Inc., 8.5000%, 5/22/19 | 8,314,221 | ||||||||||
1,250,000 | Goldman Sachs Group, Inc. 3.6250%, 8/1/12 | 1,287,881 | ||||||||||
1,255,000 | Goldman Sachs Group, Inc. 5.4500%, 11/1/12 | 1,349,350 | ||||||||||
2,420,000 | Goldman Sachs Group, Inc. 6.0000%, 5/1/14 | 2,646,919 | ||||||||||
1,250,000 | Goldman Sachs Group, Inc. 6.2500%, 9/1/17 | 1,340,518 | ||||||||||
3,175,000 | JPMorgan Chase & Co. 6.0000%, 1/15/18 | 3,413,109 | ||||||||||
1,135,000 | Morgan Stanley, 6.7500%, 4/15/11 | 1,202,513 | ||||||||||
1,200,000 | Morgan Stanley, 5.2500%, 11/2/12 | 1,276,740 | ||||||||||
6,280,000 | Morgan Stanley, 4.7500%, 4/1/14 | 6,316,091 | ||||||||||
1,750,000 | Morgan Stanley, 6.6250%, 4/1/18 | 1,892,044 | ||||||||||
3,570,000 | Morgan Stanley, 5.6250%, 9/23/19 | 3,596,097 | ||||||||||
54,349,659 | ||||||||||||
Diversified Financial Services – 1.1% | ||||||||||||
5,025,000 | American Express Travel Related Services Co., Inc., 5.2500%, 11/21/11 (144A) | 5,269,601 | ||||||||||
1,465,000 | General Electric Capital Corp. 4.8000%, 5/1/13 | 1,531,321 | ||||||||||
2,095,000 | General Electric Capital Corp. 5.9000%, 5/13/14 | 2,264,846 | ||||||||||
9,240,000 | General Electric Capital Corp. 6.0000%, 8/7/19 | 9,591,313 | ||||||||||
18,657,081 | ||||||||||||
Diversified Minerals – 1.0% | ||||||||||||
1,629,000 | Teck Resources, Ltd., 7.0000%, 9/15/12 | 1,720,631 | ||||||||||
4,945,000 | Teck Resources, Ltd., 9.7500%, 5/15/14 | 5,705,294 | ||||||||||
1,415,000 | Teck Resources, Ltd., 5.3750%, 10/1/15 | 1,388,469 | ||||||||||
1,260,000 | Teck Resources, Ltd., 10.2500%, 5/15/16 | 1,467,900 | ||||||||||
2,485,000 | Teck Resources, Ltd., 10.7500%, 5/15/19 | 2,969,575 | ||||||||||
4,090,000 | Teck Resources, Ltd., 6.1250%, 10/1/35 | 3,660,550 | ||||||||||
16,912,419 | ||||||||||||
Diversified Operations – 1.1% | ||||||||||||
840,000 | Kansas City Southern Railway 13.0000%, 12/15/13 | 974,400 | ||||||||||
6,608,000 | Tyco Electronics Group S.A. 6.0000%, 10/1/12** | 7,011,101 | ||||||||||
4,075,000 | Tyco Electronics Group S.A. 5.9500%, 1/15/14** | 4,262,348 | ||||||||||
1,880,000 | Tyco Electronics Group S.A. 6.5500%, 10/1/17** | 1,943,847 | ||||||||||
3,350,000 | Tyco Electronics Group S.A. 7.1250%, 10/1/37** | 3,454,322 | ||||||||||
709,000 | Tyco International Finance S.A. 4.1250%, 10/15/14** | 724,758 | ||||||||||
18,370,776 |
See Notes to Schedule of Investments and Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Electric – Generation – 0.1% | ||||||||||||
$ | 2,015,000 | Allegheny Energy Supply Co. LLC 8.2500%, 4/15/12 (144A) | $ | 2,204,555 | ||||||||
Electric – Integrated – 0.7% | ||||||||||||
2,760,000 | CMS Energy Corp., 6.3000%, 2/1/12 | 2,809,131 | ||||||||||
1,935,000 | CMS Energy Corp., 1.2344%, 1/15/13‡ | 1,741,500 | ||||||||||
1,395,000 | Pacific Gas & Electric Co. 4.2000%, 3/1/11 | 1,439,538 | ||||||||||
1,860,000 | PPL Energy Supply LLC 5.7000%, 10/15/15 | 1,934,567 | ||||||||||
2,895,000 | Virginia Electric and Power Co. 5.1000%, 11/30/12 | 3,126,586 | ||||||||||
11,051,322 | ||||||||||||
Electronic Components – Semiconductors – 0.3% | ||||||||||||
4,055,000 | National Semiconductor Corp. 6.1500%, 6/15/12 | 4,247,398 | ||||||||||
1,448,000 | National Semiconductor Corp. 6.6000%, 6/15/17 | 1,483,273 | ||||||||||
5,730,671 | ||||||||||||
Electronic Connectors – 0.4% | ||||||||||||
5,910,000 | Amphenol Corp., 4.7500%, 11/15/14 | 5,912,074 | ||||||||||
Electronics – Military – 0.9% | ||||||||||||
3,265,000 | L-3 Communications Corp. 6.1250%, 7/15/13 | 3,297,650 | ||||||||||
2,140,000 | L-3 Communications Corp. 6.1250%, 1/15/14 | 2,153,375 | ||||||||||
3,613,000 | L-3 Communications Corp. 6.3750%, 10/15/15 | 3,626,549 | ||||||||||
5,710,000 | L-3 Communications Corp. 5.2000%, 10/15/19 (144A) | 5,647,966 | ||||||||||
14,725,540 | ||||||||||||
Enterprise Software/Services – 0.3% | ||||||||||||
2,912,000 | BMC Software, Inc., 7.2500%, 6/1/18 | 3,171,305 | ||||||||||
2,375,000 | CA, Inc., 5.3750%, 12/1/19 | 2,388,324 | ||||||||||
5,559,629 | ||||||||||||
Fiduciary Banks – 0.2% | ||||||||||||
3,215,000 | Northern Trust Corp., 4.6250%, 5/1/14 | 3,425,968 | ||||||||||
Finance – Auto Loans – 0.9% | ||||||||||||
1,745,000 | Ford Motor Credit Co. LLC 9.7500%, 9/15/10 | 1,800,577 | ||||||||||
3,900,000 | Ford Motor Credit Co. LLC 7.3750%, 2/1/11 | 3,979,505 | ||||||||||
2,005,000 | Ford Motor Credit Co. LLC 7.2500%, 10/25/11 | 2,024,833 | ||||||||||
2,163,000 | Ford Motor Credit Co. LLC 7.5000%, 8/1/12 | 2,181,295 | ||||||||||
1,755,000 | Ford Motor Credit Co. LLC 8.0000%, 6/1/14 | 1,802,013 | ||||||||||
3,145,000 | PACCAR Financial Corp. 1.9500%, 12/17/12 | 3,112,446 | ||||||||||
14,900,669 | ||||||||||||
Finance – Credit Card – 0.5% | ||||||||||||
1,475,000 | American Express Co., 7.0000%, 3/19/18 | 1,624,376 | ||||||||||
3,165,000 | American Express Co., 8.1250%, 5/20/19 | 3,750,718 | ||||||||||
920,000 | American Express Co., 6.8000%, 9/1/66‡ | 823,400 | ||||||||||
$ | 1,735,000 | American Express Credit Co. 7.3000%, 8/20/13 | 1,949,934 | |||||||||
8,148,428 | ||||||||||||
Finance – Investment Bankers/Brokers – 1.0% | ||||||||||||
5,175,000 | Charles Schwab Corp., 4.9500%, 6/1/14 | 5,459,284 | ||||||||||
3,700,000 | Jefferies Group, Inc., 8.5000%, 7/15/19 | 4,044,577 | ||||||||||
970,000 | Jefferies Group, Inc., 3.8750%, 11/1/29 | 957,875 | ||||||||||
162,000 | Lazard Group LLC, 7.1250%, 5/15/15 | 168,179 | ||||||||||
2,895,000 | Lazard Group LLC, 6.8500%, 6/15/17 | 2,913,485 | ||||||||||
1,420,000 | TD Ameritrade Holding Corp. 4.1500%, 12/1/14 | 1,400,018 | ||||||||||
1,775,000 | TD Ameritrade Holding Corp. 5.6000%, 12/1/19 | 1,763,221 | ||||||||||
16,706,639 | ||||||||||||
Finance – Other Services – 0.4% | ||||||||||||
2,377,000 | Cantor Fitzgerald L.P. 7.8750%, 10/15/19 (144A) | 2,326,263 | ||||||||||
3,765,000 | CME Group, Inc., 5.7500%, 2/15/14 | 4,118,048 | ||||||||||
6,444,311 | ||||||||||||
Food – Meat Products – 0.1% | ||||||||||||
1,750,000 | Smithfield Foods, Inc., 7.0000%, 8/1/11 | 1,745,625 | ||||||||||
Food – Miscellaneous/Diversified – 0.1% | ||||||||||||
1,536,000 | General Mills, Inc., 5.2500%, 8/15/13 | 1,657,098 | ||||||||||
635,000 | Kellogg Co., 4.2500%, 3/6/13 | 665,674 | ||||||||||
2,322,772 | ||||||||||||
Food – Retail – 0.2% | ||||||||||||
2,840,000 | Delhaize Group, 5.8750%, 2/1/14** | 3,050,197 | ||||||||||
Instruments – Scientific – 0.2% | ||||||||||||
1,185,000 | Thermo Fisher Scientific, Inc. 2.1500%, 12/28/12 (144A) | 1,168,640 | ||||||||||
2,455,000 | Thermo Fisher Scientific, Inc. 3.2500%, 11/18/14 (144A) | 2,406,887 | ||||||||||
3,575,527 | ||||||||||||
Investment Management and Advisory Services – 0.7% | ||||||||||||
3,450,000 | Ameriprise Financial, Inc. 7.3000%, 6/28/19 | 3,836,607 | ||||||||||
2,510,000 | Ameriprise Financial, Inc. 7.5180%, 6/1/66‡ | 2,208,800 | ||||||||||
2,925,000 | BlackRock, Inc., 3.5000%, 12/10/14 | 2,888,268 | ||||||||||
2,925,000 | BlackRock, Inc., 5.0000%, 12/10/19 | 2,874,342 | ||||||||||
11,808,017 | ||||||||||||
Life and Health Insurance – 0.7% | ||||||||||||
1,955,000 | Aflac, Inc., 6.9000%, 12/17/39 | 1,925,992 | ||||||||||
4,005,000 | Prudential Financial, Inc. 3.6250%, 9/17/12 | 4,064,246 | ||||||||||
1,405,000 | Prudential Financial, Inc. 4.7500%, 6/13/15 | 1,396,667 | ||||||||||
4,680,000 | Prudential Financial, Inc. 7.3750%, 6/15/19 | 5,247,061 | ||||||||||
12,633,966 | ||||||||||||
Medical – Biomedical and Genetic – 0.1% | ||||||||||||
1,288,000 | Bio-Rad Laboratories, Inc. 6.1250%, 12/15/14 | 1,288,000 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 13
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Medical – Generic Drugs – 0.4% | ||||||||||||
$ | 2,810,000 | Watson Pharmaceuticals, Inc. 5.0000%, 8/15/14 | $ | 2,868,948 | ||||||||
3,115,000 | Watson Pharmaceuticals, Inc. 6.1250%, 8/15/19 | 3,214,038 | ||||||||||
6,082,986 | ||||||||||||
Medical – Hospitals – 0.5% | ||||||||||||
2,355,000 | HCA, Inc., 8.7500%, 9/1/10 | 2,410,931 | ||||||||||
4,265,000 | HCA, Inc., 9.2500%, 11/15/16 | 4,579,544 | ||||||||||
1,246,000 | HCA, Inc., 8.5000%, 4/15/19 (144A) | 1,342,565 | ||||||||||
8,333,040 | ||||||||||||
Medical – Wholesale Drug Distributors – 0.2% | ||||||||||||
1,630,000 | McKesson Corp., 6.5000%, 2/15/14 | 1,803,048 | ||||||||||
1,400,000 | McKesson Corp., 7.5000%, 2/15/19 | 1,660,236 | ||||||||||
3,463,284 | ||||||||||||
Medical Instruments – 0.5% | ||||||||||||
1,635,000 | Beckman Coulter, Inc., 6.0000%, 6/1/15 | 1,782,555 | ||||||||||
3,310,000 | Boston Scientific Corp. 4.5000%, 1/15/15 | 3,316,755 | ||||||||||
1,630,000 | Boston Scientific Corp. 6.0000%, 1/15/20 | 1,665,497 | ||||||||||
1,570,000 | Boston Scientific Corp. 7.3750%, 1/15/40 | 1,686,755 | ||||||||||
8,451,562 | ||||||||||||
Medical Labs and Testing Services – 0.6% | ||||||||||||
1,390,000 | Laboratory Corp. of America Holdings 5.6250%, 12/15/15 | 1,453,302 | ||||||||||
5,015,000 | Roche Holdings, Inc. 4.5000%, 3/1/12 (144A) | 5,267,340 | ||||||||||
3,015,000 | Roche Holdings, Inc. 6.0000%, 3/1/19 (144A) | 3,313,036 | ||||||||||
10,033,678 | ||||||||||||
Medical Products – 0.6% | ||||||||||||
2,590,000 | Carefusion Corp. 4.1250%, 8/1/12 (144A) | 2,670,083 | ||||||||||
1,925,000 | Carefusion Corp. 5.1250%, 8/1/14 (144A) | 2,023,587 | ||||||||||
2,045,000 | Carefusion Corp. 6.3750%, 8/1/19 (144A) | 2,189,215 | ||||||||||
3,265,000 | Hospira, Inc., 6.4000%, 5/15/15 | 3,613,774 | ||||||||||
10,496,659 | ||||||||||||
Metal – Copper – 0.1% | ||||||||||||
1,144,000 | Freeport-McMoRan Copper & Gold, Inc. 8.3750%, 4/1/17 | 1,252,680 | ||||||||||
Multi-Line Insurance – 0.4% | ||||||||||||
2,745,000 | MetLife, Inc., 6.7500%, 6/1/16 | 3,073,964 | ||||||||||
3,140,000 | MetLife, Inc., 7.7170%, 2/15/19 | 3,689,923 | ||||||||||
6,763,887 | ||||||||||||
Non-Hazardous Waste Disposal – 0.2% | ||||||||||||
3,740,000 | Allied Waste North America, Inc. 7.1250%, 5/15/16 | 3,983,100 | ||||||||||
Office Automation and Equipment – 0.2% | ||||||||||||
620,000 | Xerox Corp., 5.6500%, 5/15/13 | 646,016 | ||||||||||
1,321,000 | Xerox Corp., 8.2500%, 5/15/14 | 1,515,350 | ||||||||||
815,000 | Xerox Corp., 5.6250%, 12/15/19 | 813,862 | ||||||||||
$ | 1,175,000 | Xerox Corp., 6.7500%, 12/15/39 | 1,183,850 | |||||||||
4,159,078 | ||||||||||||
Oil – Field Services – 0.1% | ||||||||||||
1,515,000 | Weatherford International, Ltd. 9.6125%, 3/1/19** | 1,888,755 | ||||||||||
Oil and Gas Drilling – 0.4% | ||||||||||||
1,880,000 | Nabors Industries, Inc., 9.2500%, 1/15/19 | 2,302,466 | ||||||||||
3,524,000 | Rowan Companies, Inc., 7.8750%, 8/1/19 | 3,920,771 | ||||||||||
6,223,237 | ||||||||||||
Oil Companies – Exploration and Production – 0.6% | ||||||||||||
3,270,000 | Anadarko Petroleum Corp. 5.9500%, 9/15/16 | 3,537,149 | ||||||||||
4,960,000 | Forest Oil Corp., 8.0000%, 12/15/11 | 5,170,800 | ||||||||||
1,190,000 | Newfield Exploration Co. 7.6250%, 3/1/11 | 1,228,675 | ||||||||||
9,936,624 | ||||||||||||
Oil Refining and Marketing – 0% | ||||||||||||
255,000 | Frontier Oil Corp., 8.5000%, 9/15/16 | 265,200 | ||||||||||
Pharmacy Services – 0.6% | ||||||||||||
4,400,000 | Express Scripts, Inc., 5.2500%, 6/15/12 | 4,675,445 | ||||||||||
3,755,000 | Express Scripts, Inc., 6.2500%, 6/15/14 | 4,097,193 | ||||||||||
1,610,000 | Express Scripts, Inc., 7.2500%, 6/15/19 | 1,829,256 | ||||||||||
10,601,894 | ||||||||||||
Pipelines – 0.7% | ||||||||||||
2,440,000 | Enterprise Products Operating LLC 4.6000%, 8/1/12 | 2,576,840 | ||||||||||
896,000 | Kinder Morgan Energy Partners L.P. 5.9500%, 2/15/18 | 949,057 | ||||||||||
4,275,000 | Kinder Morgan Finance Co. ULC 5.7000%, 1/5/16 | 4,104,000 | ||||||||||
1,900,000 | Midcontinent Express Pipeline LLC 5.4500%, 9/15/14 (144A) | 1,943,983 | ||||||||||
1,200,000 | Plains All American Pipeline L.P. 4.2500%, 9/1/12 | 1,238,381 | ||||||||||
950,000 | Plains All American Pipeline L.P. 8.7500%, 5/1/19 | 1,120,139 | ||||||||||
11,932,400 | ||||||||||||
Property Trust – 0.3% | ||||||||||||
4,215,000 | WEA Finance LLC / WT Finance Aust Pty Ltd., 5.7500%, 9/2/15 (144A) | 4,444,465 | ||||||||||
Real Estate Management/Services – 0.3% | ||||||||||||
2,380,000 | AMB Property L.P., 6.1250%, 12/1/16 | 2,350,222 | ||||||||||
2,390,000 | AMB Property L.P., 6.6250%, 12/1/19 | 2,344,181 | ||||||||||
4,694,403 | ||||||||||||
Reinsurance – 0.5% | ||||||||||||
6,030,000 | Berkshire Hathaway Finance Corp. 4.0000%, 4/15/12 | 6,319,259 | ||||||||||
2,725,000 | Berkshire Hathaway Finance Corp. 5.0000%, 8/15/13 | 2,930,203 | ||||||||||
9,249,462 | ||||||||||||
REIT – Health Care – 0.3% | ||||||||||||
3,494,000 | HCP, Inc., 6.4500%, 6/25/12 | 3,597,237 | ||||||||||
1,190,000 | HCP, Inc., 5.6500%, 12/15/13 | 1,192,071 | ||||||||||
4,789,308 |
See Notes to Schedule of Investments and Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
REIT – Regional Malls – 0.1% | ||||||||||||
$ | 1,430,000 | Simon Property Group L.P. 6.7500%, 5/15/14 | $ | 1,523,922 | ||||||||
REIT – Warehouse/Industry – 0.1% | ||||||||||||
1,350,000 | ProLogis, 7.3750%, 10/30/19 | 1,331,647 | ||||||||||
Resorts and Theme Parks – 0.1% | ||||||||||||
970,000 | Vail Resorts, Inc., 6.7500%, 2/15/14 | 962,725 | ||||||||||
Retail – Apparel and Shoe – 0.6% | ||||||||||||
550,000 | Limited Brands, Inc., 6.1250%, 12/1/12 | 563,750 | ||||||||||
2,670,000 | Limited Brands, Inc., 6.7500%, 6/1/14 | 2,981,854 | ||||||||||
2,015,000 | Limited Brands, Inc., 6.9000%, 7/15/17 | 2,012,481 | ||||||||||
1,660,000 | Limited Brands, Inc. 8.5000% 6/15/19 (144A) | 1,805,250 | ||||||||||
2,225,000 | Limited Brands, Inc., 7.6000%, 7/15/37 | 1,980,250 | ||||||||||
9,343,585 | ||||||||||||
Retail – Computer Equipment – 0% | ||||||||||||
620,000 | GameStop Corp., 8.0000%, 10/1/12 | 642,475 | ||||||||||
Retail – Office Supplies – 0.1% | ||||||||||||
1,505,000 | Staples, Inc., 7.7500%, 4/1/11 | 1,617,288 | ||||||||||
Retail – Regional Department Stores – 0.9% | ||||||||||||
1,195,000 | J.C. Penney Co. Inc., 9.0000%, 8/1/12 | 1,347,363 | ||||||||||
2,000,000 | J.C. Penney Co. Inc., 5.8750%, 1/15/13 | 2,055,000 | ||||||||||
4,060,000 | J.C. Penney Co. Inc., 5.7500%, 7/15/14 | 4,070,149 | ||||||||||
1,481,000 | J.C. Penney Co. Inc., 6.8750%, 10/15/15 | 1,562,455 | ||||||||||
2,095,000 | J.C. Penney Co. Inc., 5.9000%, 12/1/16 | 2,042,625 | ||||||||||
1,435,000 | J.C. Penney Co. Inc., 5.7500%, 2/15/18 | 1,415,269 | ||||||||||
537,000 | J.C. Penney Co. Inc., 6.3750%, 10/15/36 | 476,856 | ||||||||||
1,725,000 | J.C. Penney Co. Inc., 7.4000%, 4/1/37 | 1,712,063 | ||||||||||
14,681,780 | ||||||||||||
Retail – Restaurants – 0.4% | ||||||||||||
4,208,000 | Brinker International, 5.7500%, 6/1/14 | 4,126,226 | ||||||||||
2,765,000 | Darden Restaurants Inc. 5.6250%, 10/15/12 | 2,951,231 | ||||||||||
7,077,457 | ||||||||||||
Special Purpose Entity – 0.3% | ||||||||||||
1,800,000 | Harley-Davidson Funding Corp. 5.7500%, 12/15/14 (144A) | 1,827,482 | ||||||||||
1,070,000 | Petroplus Finance, Ltd. 6.7500%, 5/1/14 (144A) | 1,005,800 | ||||||||||
2,023,000 | Petroplus Finance, Ltd. 7.0000%, 5/1/17 (144A) | 1,820,700 | ||||||||||
4,653,982 | ||||||||||||
Steel – Producers – 0.2% | ||||||||||||
955,000 | ArcelorMittal, 5.3750%, 6/1/13** | 1,007,765 | ||||||||||
800,000 | ArcelorMittal, 9.0000%, 2/15/15** | 944,877 | ||||||||||
1,230,000 | ArcelorMittal, 6.1250%, 6/1/18** | 1,269,158 | ||||||||||
3,221,800 | ||||||||||||
Super-Regional Banks – 0.4% | ||||||||||||
2,150,000 | Capital One Financial Corp. 7.3750%, 5/23/14 | 2,434,299 | ||||||||||
1,765,000 | National City Corp., 6.8750%, 5/15/19 | 1,868,254 | ||||||||||
1,715,000 | Wells Fargo Capital, 7.7000%, 9/26/99‡ | 1,663,550 | ||||||||||
5,966,103 | ||||||||||||
Telephone – Integrated – 0.8% | ||||||||||||
$ | 4,865,000 | Qwest Communications International, Inc. 7.2500%, 2/15/11 | 4,889,325 | |||||||||
8,150,000 | Sprint Capital Corp., 7.6250%, 1/30/11 | 8,343,563 | ||||||||||
13,232,888 | ||||||||||||
Television – 0.8% | ||||||||||||
2,255,000 | CBS Corp., 6.6250%, 5/15/11 | 2,363,141 | ||||||||||
3,315,000 | CBS Corp., 8.2000%, 5/15/14 | 3,768,552 | ||||||||||
5,705,000 | CBS Corp., 8.8750%, 5/15/19 | 6,825,028 | ||||||||||
1,320,000 | CBS Corp., 5.5000%, 5/15/33 | 1,105,629 | ||||||||||
14,062,350 | ||||||||||||
Transportation – Railroad – 0.1% | ||||||||||||
1,340,647 | CSX Corp., 8.3750%, 10/15/14 | 1,544,653 | ||||||||||
920,000 | Kansas City Southern de Mexico S.A. de C.V., 7.6250%, 12/1/13 | 906,200 | ||||||||||
2,450,853 | ||||||||||||
Wireless Equipment – 0% | ||||||||||||
700,000 | American Tower Corp. 4.6250%, 4/1/15 (144A) | 708,019 | ||||||||||
Total Corporate Bonds (cost $561,242,138) | 600,842,053 | |||||||||||
Preferred Stock – 0.5% | ||||||||||||
Diversified Banking Institutions – 0.1% | ||||||||||||
8,900 | Citigroup, Inc., convertible 7.5000% (T-DECS) | 928,626 | ||||||||||
Food – Miscellaneous/Diversified – 0.1% | ||||||||||||
10 | H.J. Heinz Finance Co., 8.0000% (144A) | 1,037,500 | ||||||||||
Metal – Copper – 0.3% | ||||||||||||
56,295 | Freeport-McMoRan Copper & Gold, Inc. convertible, 6.7500% | 6,485,184 | ||||||||||
Total Preferred Stock (cost $4,777,030) | 8,451,310 | |||||||||||
U.S. Treasury Notes/Bonds – 4.3% | ||||||||||||
$ | 16,000,000 | 1.3750%, 2/15/12 | 16,046,256 | |||||||||
3,740,000 | 1.3750%, 9/15/12 | 3,722,467 | ||||||||||
2,899,438 | 0.6250%, 4/15/13çç | 2,948,366 | ||||||||||
12,705,000 | 2.7500%, 10/31/13 | 13,011,711 | ||||||||||
5,630,000 | 1.7500%, 1/31/14 | 5,523,120 | ||||||||||
17,045,000 | 1.8750%, 2/28/14 | 16,764,030 | ||||||||||
5,329,000 | 2.6250%, 6/30/14 | 5,367,721 | ||||||||||
2,384,000 | 2.6250%, 7/31/14 | 2,395,920 | ||||||||||
2,250,000 | 2.3750%, 8/31/14 | 2,233,476 | ||||||||||
1,505,000 | 2.3750%, 9/30/14 | 1,492,298 | ||||||||||
1,790,000 | 2.1250%, 11/30/14 | 1,747,631 | ||||||||||
1,615,000 | 3.3750%, 11/15/19 | 1,553,436 | ||||||||||
Total U.S. Treasury Notes/Bonds (cost $73,051,214) | 72,806,432 | |||||||||||
Money Market – 0.6% | ||||||||||||
9,300,583 | Janus Cash Liquidity Fund LLC, 0% (cost $9,300,583) | 9,300,583 | ||||||||||
Total Investments (total cost $1,423,503,155) – 99.2% | 1,672,624,699 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.8% | 13,774,685 | |||||||||||
Net Assets – 100% | $ | 1,686,399,384 | ||||||||||
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 15
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2009
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 7,321,236 | 0.5% | |||||
Belgium | 31,937,336 | 1.9% | ||||||
Bermuda | 8,197,223 | 0.5% | ||||||
Brazil | 38,713,164 | 2.3% | ||||||
Canada | 88,628,607 | 5.3% | ||||||
Cayman Islands | 10,508,427 | 0.6% | ||||||
Germany | 3,136,598 | 0.2% | ||||||
Hong Kong | 10,793,634 | 0.7% | ||||||
India | 8,552,628 | 0.5% | ||||||
Ireland | 15,674,589 | 0.9% | ||||||
Luxembourg | 20,618,176 | 1.2% | ||||||
Mexico | 3,570,645 | 0.2% | ||||||
Sweden | 6,057,335 | 0.4% | ||||||
Switzerland | 129,031,354 | 7.7% | ||||||
United Kingdom | 56,724,151 | 3.4% | ||||||
United States†† | 1,233,159,596 | 73.7% | ||||||
Total | $ | 1,672,624,699 | 100.0% |
†† | Includes Cash Equivalents (73.2% excluding Cash Equivalents). |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value U.S. $ | Gain/(Loss) | |||||||||
British Pound 1/14/10 | 7,000,000 | $ | 11,301,503 | $ | 270,857 | |||||||
British Pound 1/21/10 | 9,100,000 | 14,691,277 | 592,264 | |||||||||
Euro 1/14/10 | 5,100,000 | 7,316,338 | 282,968 | |||||||||
Euro 2/4/10 | 1,800,000 | 2,582,143 | 73,289 | |||||||||
Swiss Franc 1/14/10 | 290,000 | 280,624 | (702) | |||||||||
Swiss Franc 1/21/10 | 25,200,000 | 24,386,940 | 642,609 | |||||||||
Total | $ | 60,558,825 | $ | 1,861,285 |
See Notes to Schedule of Investments and Financial Statements.
16 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Balanced | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 1,423,503 | ||||
Unaffiliated investments at value | $ | 1,663,324 | ||||
Affiliated money market investments | 9,301 | |||||
Cash | 136 | |||||
Receivables: | ||||||
Investments sold | 3,141 | |||||
Portfolio shares sold | 683 | |||||
Dividends | 2,257 | |||||
Interest | 8,400 | |||||
Non-interested Trustees’ deferred compensation | 41 | |||||
Other assets | 22 | |||||
Forward currency contracts | 1,862 | |||||
Total Assets | 1,689,167 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | 1,063 | |||||
Portfolio shares repurchased | 673 | |||||
Advisory fees | 781 | |||||
Transfer agent fees and expenses | 2 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 139 | |||||
Non-interested Trustees’ fees and expenses | 3 | |||||
Non-interested Trustees’ deferred compensation fees | 41 | |||||
Accrued expenses and other payables | 65 | |||||
Forward currency contracts | 1 | |||||
Total Liabilities | 2,768 | |||||
Net Assets | $ | 1,686,399 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 1,451,055 | ||||
Undistributed net investment income/(loss)* | 8,504 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (24,150) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 250,990 | |||||
Total Net Assets | $ | 1,686,399 | ||||
Net Assets – Institutional Shares | $ | 1,020,287 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 37,961 | |||||
Net Asset Value Per Share | $ | 26.88 | ||||
Net Assets – Service Shares | $ | 666,112 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 23,852 | |||||
Net Asset Value Per Share | $ | 27.93 |
* | See Note 5 in the Notes to the Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 17
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Balanced | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 38,505 | ||||
Dividends | 16,265 | |||||
Dividends from affiliates | 59 | |||||
Foreign tax withheld | (848) | |||||
Total Investment Income | 53,981 | |||||
Expenses: | ||||||
Advisory fees | 8,254 | |||||
Transfer agent fees and expenses | 5 | |||||
Custodian fees | 52 | |||||
Non-interested Trustees’ fees and expenses | 48 | |||||
Audit fees | 31 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 1,386 | |||||
Other expenses | 216 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 9,992 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 9,992 | |||||
Net Investment Income/(Loss) | 43,989 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (290) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 303,095 | |||||
Net Gain/(Loss) on Investments | 302,805 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 346,794 |
See Notes to Financial Statements.
18 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Balanced | ||||||||||
For each fiscal year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 43,989 | $ | 45,580 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (290) | 34,680 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 303,095 | (367,785) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 346,794 | (287,525) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (28,280) | (29,933) | ||||||||
Service Shares | (15,590) | (13,283) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | (36,120) | (81,125) | ||||||||
Service Shares | (20,147) | (37,721) | ||||||||
Net (Decrease) from Dividends and Distributions | (100,137) | (162,062) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 27,049 | 24,257 | ||||||||
Service Shares | 148,534 | 104,030 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 64,400 | 111,058 | ||||||||
Service Shares | 35,737 | 51,004 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (151,608) | (240,932) | ||||||||
Service Shares | (90,516) | (108,293) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 33,596 | (58,876) | ||||||||
Net Increase/(Decrease) in Net Assets | 280,253 | (508,463) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 1,406,146 | 1,914,609 | ||||||||
End of period | $ | 1,686,399 | $ | 1,406,146 | ||||||
Undistributed net investment income/(loss)* | $ | 8,504 | $ | 8,280 |
* | See Note 5 in Notes to Financial Statements |
See Notes to Financial Statements.
Janus Aspen Series | 19
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during
each fiscal year ended December 31
each fiscal year ended December 31
Janus Aspen Balanced Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $22.90 | $30.04 | $27.89 | $25.74 | $24.39 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .78 | .81 | .82 | .61 | .61 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 4.91 | (5.23) | 2.09 | 2.12 | 1.31 | |||||||||||||||||
Total from Investment Operations | 5.69 | (4.42) | 2.91 | 2.73 | 1.92 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.75) | (.74) | (.76) | (.58) | (.57) | |||||||||||||||||
Distributions (from capital gains)* | (.96) | (1.98) | – | – | – | |||||||||||||||||
Total Distributions | (1.71) | (2.72) | (.76) | (.58) | (.57) | |||||||||||||||||
Net Asset Value, End of Period | $26.88 | $22.90 | $30.04 | $27.89 | $25.74 | |||||||||||||||||
Total Return | 25.89% | (15.81)% | 10.50% | 10.72% | 7.95% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $1,020,287 | $926,938 | $1,335,428 | $1,475,350 | $1,681,985 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $946,559 | $1,150,680 | $1,417,947 | $1,554,032 | $1,887,185 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 0.57% | 0.57% | 0.57% | 0.58% | 0.57% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 0.57% | 0.57% | 0.57% | 0.57% | 0.56% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 3.03% | 2.77% | 2.54% | 2.04% | 2.01% | |||||||||||||||||
Portfolio Turnover Rate | 169% | 120% | 54% | 52% | 52% |
Service Shares
For a share outstanding during
each fiscal year ended December 31
each fiscal year ended December 31
Janus Aspen Balanced Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $23.76 | $31.07 | $28.83 | $26.61 | $25.24 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .73 | .72 | .70 | .49 | .45 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 5.11 | (5.37) | 2.24 | 2.27 | 1.46 | |||||||||||||||||
Total from Investment Operations | 5.84 | (4.65) | 2.94 | 2.76 | 1.91 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.71) | (.68) | (.70) | (.54) | (.54) | |||||||||||||||||
Distributions (from capital gains)* | (.96) | (1.98) | – | – | – | |||||||||||||||||
Total Distributions | (1.67) | (2.66) | (.70) | (.54) | (.54) | |||||||||||||||||
Net Asset Value, End of Period | $27.93 | $23.76 | $31.07 | $28.83 | $26.61 | |||||||||||||||||
Total Return | 25.53% | (16.00)% | 10.25% | 10.46% | 7.62% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $666,112 | $479,208 | $579,181 | $509,087 | $559,467 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $554,206 | $542,837 | $545,997 | $515,319 | $526,693 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 0.82% | 0.82% | 0.82% | 0.83% | 0.82% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 0.82% | 0.82% | 0.82% | 0.82% | 0.82% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 2.77% | 2.53% | 2.27% | 1.79% | 1.77% | |||||||||||||||||
Portfolio Turnover Rate | 169% | 120% | 54% | 52% | 52% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(2) | See “Explanations of Charts, Tables and Financial Statements.” |
See Notes to Financial Statements.
20 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Balanced Index | An internally-calculated, hypothetical combination of unmanaged indices that combines total returns from the S&P 500® Index (55%) and Barclays Capital U.S. Government/Credit Bond Index (45%). | |
Barclays Capital U.S. Aggregate Bond Index | Is an unmanaged market value weighted index for U.S. dollar-denominated investment-grade debt issues, including government, corporate, mortgage-backed, and asset-backed securities with maturities of at least one year. | |
Barclays Capital U.S. Government/Credit Bond Index | Is composed of all bonds that are investment grade with at least one year until maturity. | |
Lipper Variable Annuity Mixed-Asset Target Allocation Moderate Funds | Funds that, by portfolio practice, maintain a mix of between 40%-60% equity securities, with the remainder invested in bonds, cash, and cash equivalents. | |
S&P 500® Index | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
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. | |
ADR | American Depositary Receipt | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
T-DECS | Tangible Dividend Enhanced Common Stock | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. | |
VVPR Strip | The Voter Verified Paper Record (VVPR) strip is a coupon which, if presented along with the dividend coupon of the ordinary share, allows the benefit of a reduced withholding tax on the dividends paid by the company. This strip is quoted separately from the ordinary share and is freely negotiable. |
* | Non-income producing security. | |
** | A portion of this security has been segregated by the custodian 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. | |
‡ | Rate is subject to change. Rate shown reflects current rate. | |
ÇÇ | Security is a U.S. Treasury Inflation-Protected Security (TIPS). |
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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Balanced Portfolio | |||||||||||
Common Stock | |||||||||||
Aerospace and Defense | $ | 10,685,804 | $ | 10,352,985 | $ | – | |||||
Agricultural Chemicals | 8,823,359 | 20,580,696 | – | ||||||||
Brewery | – | 28,887,139 | – | ||||||||
Casino Hotels | 2,135,585 | 7,321,236 | – | ||||||||
Cellular Telecommunications | – | 6,203,244 | – | ||||||||
Commercial Banks | – | 27,225,385 | – | ||||||||
Diversified Banking Institutions | 66,558,421 | 22,767,225 | – | ||||||||
Diversified Operations | 21,364,846 | 5,812,512 | – |
Janus Aspen Series | 21
Table of Contents
Notes to Schedule of Investments (continued)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Food – Miscellaneous/Diversified | – | 26,662,871 | – | ||||||||
Food – Retail | – | 4,950,724 | – | ||||||||
Medical – Drugs | 43,783,713 | 29,800,761 | – | ||||||||
Oil Companies – Integrated | 36,756,451 | 21,037,903 | – | ||||||||
Power Converters and Power Supply Equipment | – | 3,683,894 | – | ||||||||
Real Estate Operating/Development | – | 4,981,122 | – | ||||||||
Soap and Cleaning Preparations | – | 30,950,447 | – | ||||||||
All Other | 539,897,998 | – | – | ||||||||
Corporate Bonds | – | 600,842,053 | – | ||||||||
Preferred Stock | – | 8,451,310 | – | ||||||||
U.S. Treasury Notes/Bonds | – | 72,806,432 | – | ||||||||
Money Market | – | 9,300,583 | – | ||||||||
Total Investments in Securities | $ | 730,006,177 | $ | 942,618,522 | $ | – | |||||
Other Financial Instruments(a): | $ | – | $ | 1,861,285 | $ | – | |||||
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Aggregate collateral segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, option contracts, short sales, swap agreements, and/or securities with extended settlement dates as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Balanced Portfolio | $ | 265,174,705 | |||
The interest rate on floating rate notes is based on an index or market interest rates and is subject to change. Rates in the security description are as of December 31, 2009.
22 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
shares bears expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
24 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
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’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
26 | DECEMBER 31, 2009
Table of Contents
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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
28 | DECEMBER 31, 2009
Table of Contents
Portfolio to cover the Portfolio’s exposure to the counterparty.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as hedging instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 1,861,987 | Forward currency contracts | $ | 702 | ||||||
Total | $ | 1,861,987 | $ | 702 | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward | ||||||||||||||||||||
Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | (5,939,471 | ) | $ | (5,939,471 | ) | ||||||||
Total | $ | – | $ | – | $ | – | $ | (5,939,471 | ) | $ | (5,939,471 | ) | ||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward | ||||||||||||||||||||
Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | 3,279,576 | $ | 3,279,576 | ||||||||||
Total | $ | – | $ | – | $ | – | $ | 3,279,576 | $ | 3,279,576 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
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.
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
Bank Loans
The Portfolio may invest in bank loans, which include institutionally-traded floating rate securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Portfolio has the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the loan agreement and only upon receipt by the Lender of payments from the borrower. The Portfolio generally has no right to enforce
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
compliance with the terms of the loan agreement with the borrower. Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with general interest rate changes and/or issuer credit quality. The interest rates paid on a floating rate security in which the Portfolio invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year London Interbank Offered Rate (“LIBOR”). LIBOR is a short-term interest rate that banks charge one another and is generally representative of the most competitive and current cash rates.
The Portfolio may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Portfolio may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Portfolio utilizes an independent third party to value individual bank loans on a daily basis.
The average monthly value of borrowings outstanding under bank loan arrangements and the related rate range during the fiscal year ended December 31, 2009 are indicated in the table below:
Portfolio | Average Monthly Value | Rates | ||||||
Janus Aspen Balanced Portfolio | $ | 297,628 | 0% | |||||
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Floating Rate Loans
The Portfolio may invest in floating rate loans. Floating rate loans are debt securities that have floating interest rates, which adjust periodically, and are tied to a benchmark lending rate such as the LIBOR. In other cases, the lending rate could be tied to the prime rate
30 | DECEMBER 31, 2009
Table of Contents
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 condition is troubled or uncertain and companies that are highly leveraged. The Portfolio may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loans may include fully funded term loans or revolving lines of credit.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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. Fannie Maes and Freddie Macs are not backed by the full faith and credit of the U.S. Government. 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 securities 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. In addition, mortgage-backed securities may be supported by some form of government or private guarantee and/or insurance. However, there is no assurance that the guarantors or insurers will meet their obligations.
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, may shorten the effective maturities of these securities and may result in a 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 a Portfolio’s sensitivity to interest changes and causing its price to decline.
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.
Janus Aspen Series | 31
Table of Contents
Notes to Financial Statements (continued)
Securities Lending
Under procedures adopted by the Trustees, the Portfolio may seek to earn additional income by lending securities to qualified parties (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
Securities Traded on a To-Be-Announced Basis
The Portfolio may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Portfolio commits to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in Ginnie Mae, Fannie Mae and/or Freddie Mac transactions.
Securities purchased on a TBA basis are not settled until they are delivered to the Portfolio, normally 15 to 45 days later. Beginning on the date the Portfolio enters into a TBA transaction, cash, U.S. Government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
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 managers anticipate 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 sales of stocks, futures, swaps, structured notes, 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
32 | DECEMBER 31, 2009
Table of Contents
sales held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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.
When-Issued Securities
The Portfolio may purchase or sell securities on a when-issued or forward commitment basis. 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 and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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
Janus Aspen Series | 33
Table of Contents
Notes to Financial Statements (continued)
Deferred Plan. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Balanced Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 775,123,914 | $ | 765,823,331 | $ | 59,163 | $ | 9,300,583 | ||||||
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Balanced Portfolio | $ | 8,600,804 | $ | – | $ | (21,642,932) | $ | (46,287) | $ | (42,884) | $ | 248,475,676 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The
34 | DECEMBER 31, 2009
Table of Contents
following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
Portfolio | December 31, 2017 | Accumulated Capital Losses | ||||||||||||
Janus Aspen Balanced Portfolio | $ | (21,642,932) | $ | (21,642,932) | ||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Balanced Portfolio | $ | 1,424,149,023 | $ | 282,494,202 | $ | (34,018,526) | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Balanced Portfolio | $ | 43,869,917 | $ | 56,267,306 | $ | – | $ | – | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Balanced Portfolio | $ | 43,818,378 | $ | 118,243,775 | $ | – | $ | – | |||||||||
Janus Aspen Series | 35
Table of Contents
Notes to Financial Statements (continued)
6. | Capital Share Transactions |
For each fiscal year ended | Janus Aspen Balanced Portfolio | |||||||||
December 31 (all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 1,104 | 870 | ||||||||
Reinvested dividends and distributions | 2,688 | 4,217 | ||||||||
Shares repurchased | (6,301) | (9,068) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (2,509) | (3,981) | ||||||||
Shares Outstanding, Beginning of Period | 40,470 | 44,451 | ||||||||
Shares Outstanding, End of Period | 37,961 | 40,470 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 5,855 | 3,640 | ||||||||
Reinvested dividends and distributions | 1,434 | 1,868 | ||||||||
Shares repurchased | (3,609) | (3,977) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 3,680 | 1,531 | ||||||||
Shares Outstanding, Beginning of Period | 20,172 | 18,641 | ||||||||
Shares Outstanding, End of Period | 23,852 | 20,172 |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 | $ | 1,793,445,746 | $ | 1,669,067,089 | $ | 705,593,579 | $ | 842,313,962 | ||||||
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at
36 | DECEMBER 31, 2009
Table of Contents
the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
Janus Aspen Series | 37
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Balanced Portfolio:
of Janus Aspen Balanced Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Balanced Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
38 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 39
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
40 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 41
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
42 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
Janus Aspen Series | 43
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
44 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Balanced Portfolio | $ | 56,267,306 | ||||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Balanced Portfolio | 21% | |||||||||
Janus Aspen Series | 45
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
46 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 47
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Marc Pinto 151 Detroit Street Denver, CO 80206 DOB: 1961 | Executive Vice President and Co-Portfolio Manager Janus Aspen Balanced Portfolio | 5/05-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. | |||
Gibson Smith 151 Detroit Street Denver, CO 80206 DOB: 1968 | Executive Vice President and Co-Portfolio Manager Janus Aspen Balanced Portfolio | 5/05-Present | Co-Chief Investment Officer and Executive Vice President of Janus Capital; Executive Vice President of Janus Distributors LLC and Janus Services LLC; and Portfolio Manager for other Janus accounts. Formerly, Vice President (2003-2006) of Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
48 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 49
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81113 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
(formerly named Janus Aspen Mid Cap Growth Portfolio)
HIGHLIGHTS
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 9 | |
Statement of Operations | 10 | |
Statements of Changes in Net Assets | 11 | |
Financial Highlights | 12 | |
Notes to Schedule of Investments | 13 | |
Notes to Financial Statements | 14 | |
Report of Independent Registered Public Accounting Firm | 28 | |
Additional Information | 29 | |
Explanations of Charts, Tables and Financial Statements | 32 | |
Trustees and Officers | 35 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of the manager’s best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
Portfolio Snapshot We believe that investing in companies with predictable and sustainable growth 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 long-term growth over time. | Brian Demain portfolio manager |
Performance Overview
During the 12 months ended December 31, 2009, Janus Aspen Enterprise Portfolio’s Institutional Shares and Service Shares returned 44.83% and 44.44%, respectively. Meanwhile, the Portfolio’s primary benchmark, the Russell Midcap® Growth Index, returned 46.29%. The Portfolio’s secondary benchmark, the S&P MidCap 400 Index, returned 37.38% for the same time period.
Economic Overview
Equity markets began the year in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a modest pullback in October, broad indices finished the period significantly higher. For the year, mid cap stocks easily outpaced small and large cap stocks, while growth-style indices also outperformed value index. Within our benchmark, the information technology sector was the largest contributor to performance followed by consumer discretionary. Telecommunications and utilities were the smallest contributors to performance. Commodity prices generally were strongly higher during the year led by industrials metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Detractors from Relative Performance
Following a weak start to the year, we exited our position in managed care company Coventry Health Care, Inc. early in 2009 amid the uncertainty surrounding health care reform and management’s ability to control costs. Similarly, Microsemi Corp., an analog semiconductor manufacturer, was also sold earlier in the year, after concerns about the CEO’s credibility weighed on the stock. We felt the uncertainty was too high given the credibility issues and moved onto to more attractive risk/reward opportunities.
Biopharmaceutical holding Gilead Sciences, Inc. also detracted from performance. Despite uncertainty surrounding health care reform, we believe Gilead has a strong differentiated drug franchise with its HIV-fighting drug Truvada. We also think the market for this drug is large and growing given indications of increased effectiveness when used earlier in treatment.
Contributors to Relative Performance
Crown Castle International Corp., a wireless tower company and long-term holding in the Portfolio, performed well with strong quarterly results, which were highlighted by growing numbers of tenants on its towers. We think this could continue as wireless service providers work to upgrade their networks in order to meet growing demand for data transmission. We also believe Crown will be able to improve its free cash flow and generate strong returns on invested capital. Its historically predictable, long-term contract-driven revenue base remains attractive to us.
Li & Fung, Ltd., a Hong Kong-based apparel outsourcer, benefited for much of the year from the rebound in consumer sentiment, particularly in the U.S. While consumer spending is likely to remain soft in our view, we think the company is managing the macroeconomic environment quite well as it continues to win customers. We think the cost savings it offers clients is its main appeal, which could help Li & Fung continue to gain market share and grow free cash flow.
tw telecom, inc. (formerly Time Warner Telecom), a provider of managed network services, benefited from good quarterly results and increased optimism in the U.S. economic recovery. We think tw telecom managed the downturn well. We like its historically stable recurring cash flows and long-term growth potential. We also think the company can leverage its asset base to generate strong incremental returns on capital.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Please see the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
Outlook
The economic environment in the U.S. and abroad has continued to improve. From industrial and manufacturing to consumer confidence, many economic indicators suggested a much better environment than a year ago and we think a lot of the improvement has been discounted by the market. Conditions are much improved from a year ago, but we think the U.S. economy remains somewhat challenged over the near-term. And while the financial system has stabilized, we think there are a number of key fundamental and structural issues that create some uncertainty. These include questions around the magnitude of consumer deleveraging, the large U.S. government fiscal deficit and the housing market. In our view, all remain unresolved and we are monitoring each of these very closely.
Against this uncertain macroeconomic backdrop, we remain focused on finding what we think are the best long-term investment opportunities. We are looking for sustainable and predictable growth companies, with strong management teams, flexible margin structures and high or improving returns on invested capital. We look to pay a reasonable price for these companies, and sell them if they achieve our price target or if the fundamental story changes materially. Strong secular growth companies should be able to maintain a reasonable level of earnings in a challenging economy, and should be able to grow earnings in a strong economy. We are finding these types of opportunities across all sectors.
Thank you for your investment in Janus Aspen Enterprise Portfolio.
Janus Aspen Enterprise Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Crown Castle International Corp. | 3.18% | |||
Li & Fung, Ltd. | 2.12% | |||
tw telecom, inc. | 1.84% | |||
Lamar Advertising Co. – Class A | 1.82% | |||
Amphenol Corp. – Class A | 1.67% |
5 Bottom Performers – Holdings
Contribution | ||||
Coventry Health Care, Inc. | –0.36% | |||
Microsemi Corp. | –0.27% | |||
Gilead Sciences, Inc. | –0.25% | |||
SunPower Corp. – Class B | –0.23% | |||
Iron Mountain, Inc. | –0.21% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell Midcap® Growth | |||||||||||
Portfolio Contribution | (Average % of Equities) | Index Weighting | ||||||||||
Information Technology | 15.90% | 25.06% | 21.61% | |||||||||
Consumer Discretionary | 7.61% | 11.06% | 18.40% | |||||||||
Telecommunication Services | 5.25% | 5.93% | 1.94% | |||||||||
Health Care | 4.91% | 15.98% | 13.57% | |||||||||
Industrials | 4.34% | 18.15% | 16.01% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell Midcap® Growth | |||||||||||
Portfolio Contribution | (Average % of Equities) | Index Weighting | ||||||||||
Utilities | –0.20% | 0.64% | 3.32% | |||||||||
Consumer Staples | 0.75% | 2.24% | 6.01% | |||||||||
Materials | 1.81% | 5.22% | 4.64% | |||||||||
Energy | 2.58% | 7.03% | 7.21% | |||||||||
Financials | 3.86% | 8.70% | 7.29% |
* | 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 Series | 3
Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Crown Castle International Corp. Wireless Equipment | 4.0% | |||
Celgene Corp. Medical – Biomedical and Genetic | 3.1% | |||
Amphenol Corp. – Class A Electronic Connectors | 2.4% | |||
Atmel Corp. Semiconductor Components/Integrated Circuits | 2.2% | |||
Li & Fung, Ltd. Distribution/Wholesale | 2.1% | |||
13.8% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging Markets comprised 0.7% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Enterprise Portfolio – Institutional Shares | 44.83% | 4.88% | –4.73% | 8.83% | 0.67% | ||||||
Janus Aspen Enterprise Portfolio – Service Shares | 44.44% | 4.62% | –4.94% | 8.55% | 0.92% | ||||||
Russell Midcap® Growth Index | 46.29% | 2.40% | –0.52% | 7.67% | |||||||
S&P MidCap 400 Index | 37.38% | 3.27% | 6.36% | 10.75% | |||||||
Lipper Quartile – Institutional Shares | 2nd | 1st | 4th | 2nd | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Multi-Cap Growth Funds | 34/120 | 19/87 | 31/39 | 4/9 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
September 30, 1993 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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.
As of May 1, 2009, Janus Aspen Mid Cap Growth Portfolio changed its name to Janus Aspen Enterprise Portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – September 13, 1993 |
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in this chart.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,267.10 | $ | 3.89 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,265.30 | $ | 5.31 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.68% for Institutional Shares and 0.93% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
6 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Enterprise Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 98.7% | ||||||||||||
Advertising Sales – 1.6% | ||||||||||||
297,721 | Lamar Advertising Co. – Class A* | $ | 9,256,146 | |||||||||
Aerospace and Defense – 1.4% | ||||||||||||
199,080 | Empresa Brasileira de Aeronautica S.A. (ADR) | 4,401,659 | ||||||||||
87,560 | TransDigm Group, Inc.* | 4,158,224 | ||||||||||
8,559,883 | ||||||||||||
Aerospace and Defense – Equipment – 1.0% | ||||||||||||
67,205 | Alliant Techsystems, Inc.* | 5,932,185 | ||||||||||
Agricultural Chemicals – 1.6% | ||||||||||||
84,945 | Potash Corporation of Saskatchewan, Inc. (U.S. Shares) | 9,216,533 | ||||||||||
Agricultural Operations – 0.6% | ||||||||||||
3,496,880 | Chaoda Modern Agriculture Holdings, Ltd. | 3,710,461 | ||||||||||
Airlines – 1.4% | ||||||||||||
302,723 | Ryanair Holdings PLC (ADR)*,** | 8,119,031 | ||||||||||
Apparel Manufacturers – 0.4% | ||||||||||||
249,505 | Burberry Group PLC | 2,391,275 | ||||||||||
Applications Software – 0.4% | ||||||||||||
64,535 | Citrix Systems, Inc.* | 2,685,301 | ||||||||||
Auction House – Art Dealer – 1.0% | ||||||||||||
265,725 | Ritchie Bros. Auctioneers, Inc. (U.S. Shares) | 5,960,212 | ||||||||||
Batteries and Battery Systems – 0.9% | ||||||||||||
84,395 | Energizer Holdings, Inc.* | 5,171,726 | ||||||||||
Casino Hotels – 1.0% | ||||||||||||
853,008 | Crown, Ltd.** | 6,112,936 | ||||||||||
Commercial Services – 0.5% | ||||||||||||
77,695 | CoStar Group, Inc.* | 3,245,320 | ||||||||||
Commercial Services – Finance – 2.3% | ||||||||||||
142,455 | Global Payments, Inc. | 7,672,626 | ||||||||||
102,433 | Interactive Data Corp | 2,591,555 | ||||||||||
102,065 | Paychex, Inc. | 3,127,272 | ||||||||||
13,391,453 | ||||||||||||
Computer Aided Design – 0.4% | ||||||||||||
49,825 | ANSYS, Inc.* | 2,165,395 | ||||||||||
Computer Services – 1.5% | ||||||||||||
159,016 | IHS, Inc. – Class A* | 8,715,667 | ||||||||||
Computers – 1.2% | ||||||||||||
35,013 | Apple, Inc.* | 7,382,841 | ||||||||||
Consulting Services – 0.6% | ||||||||||||
199,749 | Gartner, Inc.* | 3,603,472 | ||||||||||
Containers – Metal and Glass – 2.6% | ||||||||||||
144,151 | Ball Corp. | 7,452,607 | ||||||||||
249,942 | Owens-Illinois, Inc.* | 8,215,593 | ||||||||||
15,668,200 | ||||||||||||
Decision Support Software – 1.9% | ||||||||||||
348,265 | MSCI, Inc.* | 11,074,827 | ||||||||||
Distribution/Wholesale – 3.2% | ||||||||||||
146,745 | Fastenal Co. | 6,110,462 | ||||||||||
3,077,860 | Li & Fung, Ltd. | 12,666,215 | ||||||||||
18,776,677 | ||||||||||||
Electric Products – Miscellaneous – 0.8% | ||||||||||||
129,655 | AMETEK, Inc. | 4,958,007 | ||||||||||
Electronic Components – Miscellaneous – 1.4% | ||||||||||||
335,675 | Tyco Electronics, Ltd. (U.S. Shares) | 8,240,821 | ||||||||||
Electronic Components – Semiconductors – 0.9% | ||||||||||||
1,917,161 | ARM Holdings PLC | 5,480,050 | ||||||||||
Electronic Connectors – 2.4% | ||||||||||||
305,045 | Amphenol Corp. – Class A | 14,086,978 | ||||||||||
Electronic Measuring Instruments – 1.8% | ||||||||||||
429,499 | Trimble Navigation, Ltd.* | 10,823,375 | ||||||||||
Enterprise Software/Services – 0.8% | ||||||||||||
202,645 | CA, Inc. | 4,551,407 | ||||||||||
Entertainment Software – 0.4% | ||||||||||||
134,685 | Electronic Arts, Inc.* | 2,390,659 | ||||||||||
Fiduciary Banks – 0.7% | ||||||||||||
78,398 | Northern Trust Corp. | 4,108,055 | ||||||||||
Finance – Other Services – 0.9% | ||||||||||||
15,643 | CME Group, Inc. | 5,255,266 | ||||||||||
Instruments – Controls – 0.7% | ||||||||||||
37,695 | Mettler-Toledo International, Inc.* | 3,957,598 | ||||||||||
Instruments – Scientific – 1.7% | ||||||||||||
206,046 | Thermo Fisher Scientific, Inc.* | 9,826,334 | ||||||||||
Internet Security – 1.8% | ||||||||||||
604,915 | Symantec Corp.* | 10,821,929 | ||||||||||
Investment Management and Advisory Services – 2.0% | ||||||||||||
83,324 | Eaton Vance Corp. | 2,533,883 | ||||||||||
380,880 | National Financial Partners Corp.* | 3,081,319 | ||||||||||
119,086 | T. Rowe Price Group, Inc. | 6,341,330 | ||||||||||
11,956,532 | ||||||||||||
Machinery – General Industrial – 1.7% | ||||||||||||
196,600 | Roper Industries, Inc. | 10,295,942 | ||||||||||
Medical – Biomedical and Genetic – 6.4% | ||||||||||||
334,945 | Celgene Corp.*,** | 18,649,737 | ||||||||||
52,105 | Genzyme Corp.* | 2,553,666 | ||||||||||
135,642 | Gilead Sciences, Inc.* | 5,870,585 | ||||||||||
70,980 | Millipore Corp.* | 5,135,403 | ||||||||||
130,920 | Myriad Genetics, Inc.* | 3,417,012 | ||||||||||
60,500 | Vertex Pharmaceuticals, Inc.* | 2,592,425 | ||||||||||
38,218,828 | ||||||||||||
Medical – Drugs – 0.7% | ||||||||||||
70,220 | Shire PLC (ADR) | 4,121,914 | ||||||||||
Medical Information Systems – 0.4% | ||||||||||||
52,255 | Athenahealth, Inc.* | 2,364,016 | ||||||||||
Medical Instruments – 2.7% | ||||||||||||
317,830 | St. Jude Medical, Inc.* | 11,689,787 | ||||||||||
59,060 | Techne Corp. | 4,049,154 | ||||||||||
15,738,941 | ||||||||||||
Medical Products – 4.7% | ||||||||||||
245,980 | Covidien PLC (U.S. Shares)** | 11,779,981 | ||||||||||
101,810 | Henry Schein, Inc.* | 5,355,206 | ||||||||||
229,820 | Varian Medical Systems, Inc.* | 10,767,067 | ||||||||||
27,902,254 | ||||||||||||
Metal Processors and Fabricators – 1.7% | ||||||||||||
90,260 | Precision Castparts Corp. | 9,960,191 | ||||||||||
Networking Products – 1.0% | ||||||||||||
224,050 | Juniper Networks, Inc.* | 5,975,414 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Enterprise Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Oil Companies – Exploration and Production – 3.1% | ||||||||||||
72,184 | EOG Resources, Inc. | $ | 7,023,503 | |||||||||
228,595 | Ultra Petroleum Corp. (U.S. Shares)* | 11,397,747 | ||||||||||
18,421,250 | ||||||||||||
Oil Companies – Integrated – 1.0% | ||||||||||||
101,015 | Hess Corp. | 6,111,408 | ||||||||||
Oil Field Machinery and Equipment – 0.9% | ||||||||||||
164,770 | Dresser-Rand Group, Inc.* | 5,208,380 | ||||||||||
Physical Practice Management – 0.3% | ||||||||||||
27,341 | Mednax, Inc.* | 1,643,468 | ||||||||||
Pipelines – 1.7% | ||||||||||||
186,872 | Kinder Morgan Management LLC* | 10,210,686 | ||||||||||
Printing – Commercial – 1.4% | ||||||||||||
146,548 | VistaPrint NV (U.S. Shares)** | 8,303,410 | ||||||||||
Real Estate Management/Services – 1.4% | ||||||||||||
134,117 | Jones Lang LaSalle, Inc. | 8,100,667 | ||||||||||
Reinsurance – 1.6% | ||||||||||||
2,807 | Berkshire Hathaway, Inc. – Class B* | 9,223,802 | ||||||||||
Retail – Apparel and Shoe – 0.7% | ||||||||||||
244,500 | American Eagle Outfitters, Inc. | 4,151,610 | ||||||||||
Retail – Automobile – 0.7% | ||||||||||||
119,585 | Copart, Inc.* | 4,380,399 | ||||||||||
Retail – Office Supplies – 0.8% | ||||||||||||
198,140 | Staples, Inc. | 4,872,263 | ||||||||||
Retail – Regional Department Stores – 0.8% | ||||||||||||
82,830 | Kohl’s Corp.* | 4,467,022 | ||||||||||
Semiconductor Components/Integrated Circuits – 2.2% | ||||||||||||
2,870,825 | Atmel Corp.* | 13,234,503 | ||||||||||
Semiconductor Equipment – 2.0% | ||||||||||||
323,242 | KLA-Tencor Corp. | 11,688,431 | ||||||||||
Telecommunication Equipment – 0.8% | ||||||||||||
178,460 | CommScope, Inc.* | 4,734,544 | ||||||||||
Telecommunication Equipment – Fiber Optics – 0.7% | ||||||||||||
227,140 | Corning, Inc. | 4,386,073 | ||||||||||
Telecommunication Services – 4.3% | ||||||||||||
389,037 | Amdocs, Ltd. (U.S. Shares) | 11,099,225 | ||||||||||
279,301 | SAVVIS, Inc.* | 3,924,179 | ||||||||||
627,945 | tw telecom, inc.* | 10,762,977 | ||||||||||
25,786,381 | ||||||||||||
Toys – 1.3% | ||||||||||||
393,581 | Mattel, Inc. | 7,863,748 | ||||||||||
Transactional Software – 1.4% | ||||||||||||
233,880 | Solera Holdings, Inc. | 8,422,019 | ||||||||||
Transportation – Railroad – 1.3% | ||||||||||||
140,875 | Canadian National Railway Co. (U.S. Shares) | 7,657,965 | ||||||||||
Transportation – Services – 2.0% | ||||||||||||
108,015 | C.H. Robinson Worldwide, Inc. | 6,343,721 | ||||||||||
153,322 | Expeditors International of Washington, Inc. | 5,324,873 | ||||||||||
11,668,594 | ||||||||||||
Transportation – Truck – 1.0% | ||||||||||||
151,560 | Landstar System, Inc. | 5,875,981 | ||||||||||
Vitamins and Nutrition Products – 0.7% | ||||||||||||
93,910 | Mead Johnson Nutrition Co. – Class A | 4,103,867 | ||||||||||
Web Hosting/Design – 1.5% | ||||||||||||
81,618 | Equinix, Inc.* | 8,663,751 | ||||||||||
Wireless Equipment – 4.0% | ||||||||||||
604,100 | Crown Castle International Corp.* | 23,584,063 | ||||||||||
Total Common Stock (cost $456,164,150) | 584,938,337 | |||||||||||
Money Market – 1.6% | ||||||||||||
9,590,021 | Janus Cash Liquidity Fund LLC, 0% (cost $9,590,021) | 9,590,021 | ||||||||||
Total Investments (total cost $465,754,171) – 100.3% | 594,528,358 | |||||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.3)% | (1,612,597) | |||||||||||
Net Assets – 100% | $ | 592,915,761 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 6,112,936 | 1.0% | |||||
Bermuda | 12,666,215 | 2.1% | ||||||
Brazil | 4,401,659 | 0.7% | ||||||
Canada | 34,232,456 | 5.8% | ||||||
Cayman Islands | 3,710,461 | 0.6% | ||||||
Guernsey | 11,099,225 | 1.9% | ||||||
Ireland | 19,899,013 | 3.4% | ||||||
Jersey | 4,121,914 | 0.7% | ||||||
Netherlands | 8,303,410 | 1.4% | ||||||
Switzerland | 8,240,821 | 1.4% | ||||||
United Kingdom | 7,871,325 | 1.3% | ||||||
United States†† | 473,868,923 | 79.7% | ||||||
Total | $ | 594,528,358 | 100.0% |
†† | Includes Cash Equivalents (78.1% excluding Cash Equivalents). |
Forward Currency Contracts, Open
Currency Sold | ||||||||||||
and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
Australian Dollar 1/14/10 | 1,320,000 | $ | 1,185,560 | $ | 20,656 | |||||||
Australian Dollar 1/21/10 | 2,400,000 | 2,153,789 | 79,723 | |||||||||
Australian Dollar 2/4/10 | 2,665,000 | 2,387,759 | 21,161 | |||||||||
Euro 1/14/10 | 100,000 | 143,458 | 5,548 | |||||||||
Euro 1/21/10 | 2,881,387 | 4,133,523 | 182,276 | |||||||||
Euro 2/4/10 | 1,450,000 | 2,080,060 | 59,038 | |||||||||
Total | $ | 12,084,149 | $ | 368,402 |
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Enterprise | |||||
(all numbers in thousands except net asset value per share) | Portfolio(1) | |||||
Assets: | ||||||
Investments at cost | $ | 465,754 | ||||
Unaffiliated investments at value | $ | 584,938 | ||||
Affiliated money market investments | 9,590 | |||||
Cash | – | |||||
Receivables: | ||||||
Investments sold | 389 | |||||
Portfolio shares sold | 74 | |||||
Dividends | 278 | |||||
Non-interested Trustees’ deferred compensation | 15 | |||||
Other assets | 10 | |||||
Forward currency contracts | 368 | |||||
Total Assets | 595,662 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | 1,208 | |||||
Portfolio shares repurchased | 1,080 | |||||
Advisory fees | 318 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 46 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Non-interested Trustees’ deferred compensation fees | 15 | |||||
Accrued expenses and other payables | 76 | |||||
Total Liabilities | 2,746 | |||||
Net Assets | $ | 592,916 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 656,987 | ||||
Undistributed net investment income/(loss)* | 224 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (193,436) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 129,141 | |||||
Total Net Assets | $ | 592,916 | ||||
Net Assets – Institutional Shares | $ | 371,092 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 12,052 | |||||
Net Asset Value Per Share | $ | 30.79 | ||||
Net Assets – Service Shares | $ | 221,824 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 7,419 | |||||
Net Asset Value Per Share | $ | 29.90 |
* | See Note 5 in the Notes to the Financial Statements. | |
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Enterprise | |||||
(all numbers in thousands) | Portfolio(1) | |||||
Investment Income: | ||||||
Interest | $ | 19 | ||||
Dividends | 3,623 | |||||
Dividends from affiliates | 12 | |||||
Foreign tax withheld | (44) | |||||
Total Investment Income | 3,610 | |||||
Expenses: | ||||||
Advisory fees | 3,254 | |||||
Transfer agent fees and expenses | 5 | |||||
Registration fees | 36 | |||||
Audit fees | 45 | |||||
Custodian fees | 29 | |||||
Non-interested Trustees’ fees and expenses | 17 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 492 | |||||
Other expenses | 162 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 4,040 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 4,040 | |||||
Net Investment Income/(Loss) | (430) | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (82,369) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 273,818 | |||||
Net Gain/(Loss) on Investments | 191,449 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 191,019 |
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
See Notes to Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Enterprise | ||||||||||
For the fiscal year ended December 31, 2009 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (430) | $ | 1,677 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (82,369) | 57,135 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 273,818 | (446,761) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 191,019 | (387,949) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | – | (1,113) | ||||||||
Service Shares | – | (189) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | (26,158) | ||||||||
Service Shares | – | (17,656) | ||||||||
Net Decrease from Dividends and Distributions | – | (45,116) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 29,154 | 45,996 | ||||||||
Service Shares | 29,876 | 82,855 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | – | 27,271 | ||||||||
Service Shares | – | 16,957 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (54,964) | (101,908) | ||||||||
Service Shares | (67,362) | (107,899) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (63,296) | (36,728) | ||||||||
Net Increase/(Decrease) in Net Assets | 127,723 | (469,793) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 465,193 | 934,986 | ||||||||
End of period | $ | 592,916 | $ | 465,193 | ||||||
Undistributed net investment income/(loss)* | $ | 224 | $ | 241 |
* | See Note 5 in Notes to Financial Statements | |
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Enterprise Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $21.26 | $39.96 | $32.97 | $29.02 | $25.84 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .05 | .13 | .12 | .03 | .08 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 9.48 | (16.82) | 7.15 | 3.92 | 3.10 | |||||||||||||||||
Total from Investment Operations | 9.53 | (16.69) | 7.27 | 3.95 | 3.18 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | (.08) | (.08) | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | (1.93) | (.20) | – | – | |||||||||||||||||
Total Distributions | – | (2.01) | (.28) | – | – | |||||||||||||||||
Net Asset Value, End of Period | $30.79 | $21.26 | $39.96 | $32.97 | $29.02 | |||||||||||||||||
Total Return | 44.83% | (43.75)% | 22.10% | 13.61% | 12.31% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $371,092 | $279,088 | $565,996 | $523,173 | $532,085 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $311,752 | $453,662 | $550,938 | $525,467 | $706,963 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.70% | 0.67% | 0.68% | 0.69% | 0.67% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.70% | 0.67% | 0.68% | 0.69% | 0.67% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.02% | 0.32% | 0.27% | (0.03)% | (0.01)% | |||||||||||||||||
Portfolio Turnover Rate | 36% | 60% | 45% | 41% | 32% |
Service Shares
For a share outstanding each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Enterprise Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $20.70 | $38.97 | $32.19 | $28.41 | $25.36 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | (.09) | .02 | .04 | (.09) | (.05) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 9.29 | (16.34) | 6.96 | 3.87 | 3.10 | |||||||||||||||||
Total from Investment Operations | 9.20 | (16.32) | 7.00 | 3.78 | 3.05 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | (.02) | (.02) | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | (1.93) | (.20) | – | – | |||||||||||||||||
Total Distributions | – | (1.95) | (.22) | – | – | |||||||||||||||||
Net Asset Value, End of Period | $29.90 | $20.70 | $38.97 | $32.19 | $28.41 | |||||||||||||||||
Total Return | 44.44% | (43.88)% | 21.80% | 13.31% | 12.03% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $221,824 | $186,105 | $368,990 | $254,484 | $256,225 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $196,683 | $300,898 | $300,362 | $253,611 | $244,487 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.95% | 0.92% | 0.93% | 0.94% | 0.92% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.95% | 0.92% | 0.93% | 0.94% | 0.92% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.25)% | 0.07% | 0.01% | (0.28)% | (0.23)% | |||||||||||||||||
Portfolio Turnover Rate | 36% | 60% | 45% | 41% | 32% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. | |
(2) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(3) | See “Explanations of Charts, Tables and Financial Statements.” |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Multi-Cap Growth Funds | Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating more than 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap funds typically have between 25% to 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Multi-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. | |
Russell Midcap® Growth Index | Measures the performance of those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. | |
S&P MidCap 400 Index | An unmanaged group of 400 domestic stocks chosen for their market size, liquidity and industry group representation. | |
ADR | American Depositary Receipt | |
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 by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Enterprise Portfolio* | |||||||||||
Common Stock | |||||||||||
Aerospace and Defense | $ | 4,158,224 | $ | 4,401,659 | $ | – | |||||
Agricultural Operations | – | 3,710,461 | – | ||||||||
Airlines | – | 8,119,031 | – | ||||||||
Apparel Manufacturers | – | 2,391,275 | – | ||||||||
Casino Hotels | – | 6,112,936 | – | ||||||||
Distribution/Wholesale | 6,110,462 | 12,666,215 | – | ||||||||
Electronic Components – Semiconductors | – | 5,480,050 | – | ||||||||
Medical – Drugs | – | 4,121,914 | – | ||||||||
All Other | 527,666,110 | – | – | ||||||||
Money Market | – | 9,590,021 | – | ||||||||
Total Investments in Securities | $ | 537,934,796 | $ | 56,593,562 | $ | – | |||||
Other Financial Instruments(a): | |||||||||||
Foreign Currency Contracts, Open | $ | – | $ | 368,402 | $ | – | |||||
* | Formerly named Janus Aspen Mid Cap Growth Portfolio. | |
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Aggregate collateral segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, option contracts, short sales, swap agreements, and/or securities with extended settlement dates as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Enterprise Portfolio(1) | $ | 39,326,558 | |||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
Janus Aspen Series | 13
Table of Contents
Notes to Financial Statements
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 (formerly named Janus Aspen Mid Cap Growth 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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf
14 | DECEMBER 31, 2009
Table of Contents
and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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.
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (continued)
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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’s ability to establish and maintain appropriate systems and trading.
16 | DECEMBER 31, 2009
Table of Contents
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option contracts to hedge against changes in interest
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the
18 | DECEMBER 31, 2009
Table of Contents
extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Derivatives not accounted for as | Asset Derivatives | Liability Derivatives | ||||||||||
hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 368,402 | Forward currency contracts | $ | – | ||||||
Total | $ | 368,402 | $ | – | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | (2,581,152 | ) | $ | (2,581,152 | ) | ||||||||
Total | $ | – | $ | – | $ | – | $ | (2,581,152 | ) | $ | (2,581,152 | ) | ||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | 1,158,642 | $ | 1,158,642 | ||||||||||
Total | $ | – | $ | – | $ | – | $ | 1,158,642 | $ | 1,158,642 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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
20 | DECEMBER 31, 2009
Table of Contents
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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Enterprise Portfolio(1) | All Asset Levels | 0.64 | ||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio |
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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
22 | DECEMBER 31, 2009
Table of Contents
actually incurred by the Portfolio. If any of a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Enterprise Portfolio(1) | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 100,650,607 | $ | 91,091,586 | $ | 12,221 | $ | 9,590,021 | ||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Enterprise Portfolio(1)(2) | $ | 239,096 | $ | – | $ | (191,472,679) | $ | (8) | $ | (15,931) | $ | 127,178,850 | ||||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. | |
(2) | Capital loss carryover is subject to annual limitations. |
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | December 31, | Accumulated | |||||||||||
Portfolio | 2010 | 2011 | 2017 | Capital Losses | ||||||||||
Janus Aspen Enterprise Portfolio(1)(2) | $ | (53,089,575) | $ | (24,166,141) | $ | (114,216,963) | $ | (191,472,679) | ||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. | |
(2) | Capital loss carryover is subject to annual limitations. |
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Enterprise Portfolio(1) | $ | 136,017,201 | ||||||||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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.
24 | DECEMBER 31, 2009
Table of Contents
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Enterprise Portfolio(1) | $ | 467,349,508 | $ | 166,438,359 | $ | (39,259,509) | |||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Enterprise Portfolio(1) | $ | – | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Enterprise Portfolio(1) | $ | 1,302,371 | $ | 43,814,507 | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
6. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Perkins Enterprise Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 1,200 | 1,323 | ||||||||
Reinvested dividends and distributions | – | 773 | ||||||||
Shares repurchased | (2,275) | (3,133) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,075) | (1,037) | ||||||||
Shares Outstanding, Beginning of Period | 13,127 | 14,164 | ||||||||
Shares Outstanding, End of Period | 12,052 | 13,127 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 1,248 | 2,525 | ||||||||
Reinvested dividends and distributions | – | 490 | ||||||||
Shares repurchased | (2,821) | (3,492) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,573) | (477) | ||||||||
Shares Outstanding, Beginning of Period | 8,992 | 9,469 | ||||||||
Shares Outstanding, End of Period | 7,419 | 8,992 |
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) was as follows:
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
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(1) | $ | 179,027,691 | $ | 249,488,107 | $ | – | $ | – | ||||||
(1) | Formerly named Janus Aspen Mid Cap Growth Portfolio. |
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, the
26 | DECEMBER 31, 2009
Table of Contents
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.
Janus Aspen Series | 27
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Enterprise Portfolio:
of Janus Aspen Enterprise Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Enterprise Portfolio (formerly Janus Aspen Mid Cap Growth Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
28 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
30 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 31
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
32 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
Janus Aspen Series | 33
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
34 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 35
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
36 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Brian Demain 151 Detroit Street Denver, CO 80206 DOB 1977 | Executive Vice President and Portfolio Manager Janus Aspen Enterprise Portfolio | 11/07-Present | Vice President of Janus Capital. Formerly, Assistant Portfolio Manager (2004-2007) for Enterprise Portfolio and Analyst (1999-2007) for Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 37
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81116 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 16 | |
Statement of Operations | 17 | |
Statements of Changes in Net Assets | 18 | |
Financial Highlights | 19 | |
Notes to Schedule of Investments | 20 | |
Notes to Financial Statements | 21 | |
Report of Independent Registered Public Accounting Firm | 36 | |
Additional Information | 37 | |
Explanations of Charts, Tables and Financial Statements | 40 | |
Designation Requirements | 43 | |
Trustees and Officers | 44 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of the managers’ best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectuses.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Flexible Bond Portfolio (unaudited)
Portfolio Snapshot We seek to identify the best opportunities across fixed income markets using a bottom-up, fundamentally-driven process that is focused on credit-oriented investments. We believe this bottom-up, fundamentally-driven process that focuses on credit can generate risk-adjusted outperformance relative to peers over time. Our comprehensive bottom-up view drives decision-making at a macro level, enabling us to make informed decisions about allocations to all sectors of the fixed income universe. | Gibson Smith co-portfolio manager | Darrell Watters co-portfolio manager |
Performance Overview
During the 12-month period ended December 31, 2009, Janus Aspen Flexible Bond Portfolio’s Institutional Shares and Service Shares returned 13.22% and 12.98%, respectively, compared to a 5.93% return for the Portfolio’s benchmark, the Barclays Capital U.S. Aggregate Bond Index.
Investment Strategy
On a microeconomic basis, we look for companies that are going through positive fundamental transformation of their capital structure through a deleveraging strategy. Since management teams tend to focus on generating returns for their equity holders (typically including management), we have to consider whether reducing debt and deleveraging the capital structure is advantageous to equity holders. We approach each credit as though we were equity holders of the company. When we uncover opportunities within the credit markets that fit our investment criteria, our in-depth research process begins.
Our investment criteria focus on the following:
Free cash flow analysis – Free cash flow is the ultimate option for management teams, as it can be used to buy back stock, increase dividends, etc. We like to see free cash flow going toward debt reduction.
Understanding management intentions – If management does everything right there is a greater chance for us to receive the coupon/interest and eventually the principal at maturity. If they do not execute and/or do things that greatly jeopardize cash flows, they could push the company into bankruptcy courts (a worst case scenario), thus, putting us in a recovery value position, with values typically in the 30-40 cents on the dollar range. Understanding the importance of capital structure management and the appropriate use of debt is essential in understanding management’s intentions.
Evaluation of the downside – We believe a core tenet to making money is not losing it! The risk of being wrong is often greater than the reward for being right. Thus, we have to focus on the individual securities that we are purchasing, understanding the potential of each security that enters the Portfolio.
Our in-house research plays a crucial role in the management of the Portfolio. A key strength is our integrated research model, which harnesses the resources of our 14 fixed income and 35 equity analysts (includes portfolio managers who also have analyst responsibilities).
Market Environment
Coming off the financial crisis of 2008, we have worked through numerous phases culminating in where we are today.
Early in the crisis, the concern with companies going bankrupt led to incredible volatility and a reduction in risk-taking across all markets. Equities and corporate bonds declined in price to valuations not seen in decades. The flight-to-quality trade that helped to push U.S. Treasuries to record low yields began to abate in January as corporate spreads dropped and Treasury yields rose.
The U.S. Federal Reserve’s (Fed) zero interest rate policy has helped to anchor the short-end of the yield curve. With the massive amount of liquidity in the system, concerns around future inflation has escalated leading to long-term rates moving higher and a steepening of the yield curve during the period. This helped the yield curve close the period near its steepest point on record as the yield difference between the 10-year and 2-year Treasury bonds stood at 270 basis points (bps) at the end of December (down from the period and record high of 285 bps on December 22, 2009).
The steepening of the yield curve provided a negative backdrop for most U.S. government-related securities, as yields rose and prices declined. U.S. Long Treasuries posted a double-digit decline and were among the worst
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
performers, while short-term Treasuries ended the period flat.
The U.S. government’s and Fed’s ongoing support for agencies (Fannie and Freddie) and the mortgage-backed securities (MBS) market (through various purchase programs) helped each group outperform the Barclays Capital U.S. Aggregate Bond Index, which finished the period with a small gain. Spreads of agencies and MBS relative to U.S. Treasuries were near historically tight levels at year end. Spread tightening within corporate credit and commercial mortgage-backed securities (CMBS) continued to be a key driver of outperformance for these segments. The top two performing groups within fixed income, high yield and CMBS, saw spreads decline over 1000 bps and 537 bps, respectively. Investment grade credit spreads narrowed 362 bps in the period. Overall spreads within corporate credit remained well above long-term averages at the end of December.
Risk assets, such as high yield bonds and stocks, started to rebound due to actions by global governments and central banks, which resulted in flooding the financial system with liquidity and in creating a myriad of programs to help with the recovery process. Signs of stability in the financial system helped facilitate the risk appetite in the markets. At the same time corporations were very aggressive in tackling their organizational structures with layoffs and significant cost cutting via wage reductions and a retreat on discretionary spending. As the economy stabilized, these aggressive cuts and disciplined cost management flowed directly into positive earnings, providing additional support to the market.
We’ve experienced a very low quality/high beta (volatility) rally in both the equity and credit markets. In general, the lower the quality and the riskier the business profile, the greater was the return during the period.
We are entering a very important phase in the markets where individual security selection will play a more important role in determining return profiles across both the equity and the fixed income markets. Many of the businesses that have rallied the most are likely not well positioned for the current environment and in many cases may struggle. But, there are many businesses that should flourish in this environment.
Contributors to Relative Performance
Our significant overweight and security selection within corporate credit were the primary contributors to relative performance. Within corporate credit rating groups, our large overweight in BBB- and BB-rated credits aided performance. Our underweights in Treasuries and U.S. agency debt were modest contributors as well.
Within corporate sectors, our overweight and security selection in industrial metals were the top contributors followed by our overweight in technology. Tyco Electronics Group S.A., a technology holding, was our largest individual contributor. The global provider of electronic components saw its bonds post strong gains during the second half of the period. We feel management is focused on maintaining its BBB credit rating; we also like the potential for the firm’s profits to be strong amid an improving semiconductor business.
Global brewer Anheuser-Busch InBev Worldwide, Inc. was among the top contributors. Management has continued to deliver on its pledge to make asset sales and pay down debt it incurred with InBev’s acquisition of Anheuser-Busch in 2008. Consistent with our philosophy, we favor the company’s bonds due to its free cash flow generation potential, cost reduction efforts and management’s commitment to paying down debt.
ArcelorMittal, the world’s largest steel maker, benefited from a turnaround and subsequent stability in steel prices, which was part of why we were attracted to the company’s credits. In addition, management is following through with its pledge to pay down debt, which we think will help it maintain its investment grade rating.
Detractors from Relative Performance
Our average underweight in CMBS was the largest detractor. While many are driven to the CMBS sector due to the higher ratings relative to high-yield bonds, we feel that better total return profiles exist with companies going through positive fundamental transformation of their capital structures with potential ratings upside offer better opportunities. On a corporate sector basis, our holdings within wirelines and real estate investment trusts were the largest detractors. Our underweighting Wells Fargo & Co. was the largest individual detractor. We have maintained an underweight in the name relative to the index as we are concerned about the bank’s West Coast real estate exposure and a lack of transparency in addressing some of Wells’ problem loans.
Edison Mission Energy, an Irvine, CA-based subsidiary of power producer and distributor Edison International, declined early in the period as natural gas prices fell and power demands slowed. We like the company’s asset base supporting its debt.
Our lack of exposure to troubled insurer American International Group (AIG) weighed on performance, as its
Janus Aspen Series | 3
Table of Contents
Janus Aspen Flexible Bond Portfolio (unaudited)
bonds continued to perform well. We have not owned AIG because we do not like the lack of transparency and disclosure as well as the uncertainty around management of this very complicated work-out situation.
Outlook
Despite the significant spread tightening we’ve seen in corporate credit relative to Treasuries, we believe there is the potential for further tightening. There are a number of fundamental and structural issues within fixed income that we see as being key drivers of returns over the near term. Government intervention and rising budget deficits have led to a large and unprecedented level of financing needs for the federal government, which has resulted in an increased issuance of Treasury bonds. Meanwhile, corporate America is in the early innings of a deleveraging cycle that we believe will lead to management teams opting for capital structures with less leverage and greater liquidity profiles. We have seen management teams focus more on paying down and building liquidity since emerging from one of the most significant financial crises in history. We think this could continue and that a shrinking supply of corporate bonds coupled with investors demand for higher yields provides a positive backdrop for further spread narrowing within corporate credit.
In addition, as we have highlighted previously, we believe that the evolution of the fixed income markets, moving from four primary sectors (credit, Treasuries, government agencies and agency MBS) to two (credit and government) result in agencies and MBS being more sensitive to interest rate movements. Given agency and MBS securities are at historically tight spreads relative to Treasuries, we prefer to express our view on interest rates using Treasuries versus taking the basis risk. The U.S. government’s support of Fannie and Freddie is likely to continue and remain a key determinant of agencies spreads. Even with the Fed’s MBS purchase program scheduled to end in March, we believe the mortgage market is likely to remain under pressure due to the fragile nature of the housing market. Because of these structural issues, we think both segments will display similar return characteristics to Treasuries and that there are very few spread alternatives to pursue outside of corporate credit.
We have often emphasized the importance of credit analysis in fixed income investing. Furthermore, we believe the corporate credit sector remains an area where fundamental bottom-up analysis combined with robust risk management can improve a manager’s potential to provide risk-adjusted outperformance within fixed income.
Thank you for entrusting your assets to us and your investment in Janus Aspen Flexible Bond Portfolio.
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Janus Aspen Flexible Bond Portfolio At A Glance
Portfolio Profile
December 31, 2009
Weighted Average Maturity | 5.9 Years | |
Average Effective Duration* | 4.4 Years | |
30-day Current Yield** | ||
Institutional Shares | 3.76% | |
Service Shares | 3.51% | |
Weighted Average Fixed Income Credit Rating | A- | |
Number of Bonds/Notes | 268 |
* | A theoretical measure of price volatility | |
** | Yield will fluctuate |
Ratings†Summary – (% of Net Assets)
December 31, 2009
AAA | 17.1% | |
AA | 6.2% | |
A | 19.5% | |
BBB | 37.4% | |
BB | 14.2% | |
B | 3.8% | |
CCC | 0.5% | |
Other | 1.3% |
† | Rated by Standard & Poor’s |
Significant Areas of Investment – (% of Net Assets)
As of December 31, 2009
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 0.5% of total net assets.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Flexible Bond Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||||
One | Five | Ten | Since | Total Annual Fund | Net Annual Fund | ||||||||
Year | Year | Year | Inception* | Operating Expenses | Operating Expenses | ||||||||
Janus Aspen Flexible Bond Portfolio – Institutional Shares | 13.22% | 6.43% | 6.69% | 7.39% | 0.60% | 0.60%(a) | |||||||
Janus Aspen Flexible Bond Portfolio – Service Shares | 12.98% | 6.16% | 6.43% | 7.17% | 0.85% | 0.85%(b) | |||||||
Barclays Capital U.S. Aggregate Bond Index | 5.93% | 4.97% | 6.33% | 6.02% | |||||||||
Lipper Quartile – Institutional Shares | 2nd | 1st | 1st | 1st | |||||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Intermediate Investment Grade Debt Funds | 33/75 | 11/60 | 5/30 | 1/12 | |||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
(a) Janus Capital contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns and yields shown include fee waivers, if any, and without such waivers, total returns and yields would have been lower
(b) Janus Capital contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns and yields shown include fee waivers, if any, and without such waivers, total returns and yields would have been lower.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio’s total operating expenses at period end did not exceed the expense limit so no waivers were in effect for the fiscal year ended December 31, 2008.
The Portfolio’s performance may be affected by risks that include those associated with non-investment grade debt securities and investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
Portfolios that invest in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Unlike owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond portfolios. The return of principal is not guaranteed due to net asset value fluctuation that is caused by changes in the price of specific bonds held in the Portfolio and selling of bonds within the Portfolio by the portfolio managers.
The Portfolio invests in Real Estate Investment Trusts (REITs) which may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic region. REITs may be subject to risks including, but not limited to: legal, political, liquidity and interest rate risks, a decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrowers. To the extent the Portfolio invests in foreign REITs, the Portfolio may be subject to fluctuations in currency rates or political or economic conditions in a particular country.
The Portfolio invests in mortgage-backed securities. Mortgage-backed securities are subject to prepayment risk (early payoff of mortgages during periods of declining interest rates) and extension risk (extending the duration of mortgage-backed securities during periods of rising interest rates). These risks may increase the volatility of these securities and affect total returns.
High-yield/high-risk bonds involve a greater risk of default and price volatility than U.S. Government and other high-quality 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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
September 30, 1993 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
If an expense waiver was in effect, it may have had 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 for index definitions.
The Portfolio’s holdings may differ significantly from the securities held in the index. The index is unmanaged and is not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – September 13, 1993 |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Flexible Bond Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,078.30 | $ | 3.09 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.23 | $ | 3.01 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,077.40 | $ | 4.40 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.97 | $ | 4.28 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.59% for Institutional Shares and 0.84% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include the effect of contractual waivers by Janus Capital. |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Corporate Bonds – 80.5% | ||||||||||||
Advertising Services – 0.4% | ||||||||||||
$ | 285,000 | WPP Finance UK, 5.8750%, 6/15/14 | $ | 294,321 | ||||||||
1,145,000 | WPP Finance UK, 8.0000%, 9/15/14 | 1,302,162 | ||||||||||
1,596,483 | ||||||||||||
Agricultural Chemicals – 0.2% | ||||||||||||
787,000 | Mosaic Co., 7.6250%, 12/1/16 (144A) | 860,219 | ||||||||||
Automotive – Cars and Light Trucks – 0.8% | ||||||||||||
1,779,000 | Daimler Finance North America LLC 6.5000%, 11/15/13 | 1,950,202 | ||||||||||
780,000 | Daimler Finance North America LLC 8.5000%, 1/18/31 | 958,498 | ||||||||||
2,908,700 | ||||||||||||
Automotive – Medium and Heavy Duty Trucks – 0.7% | ||||||||||||
2,540,000 | Volvo A.B. (U.S. Shares) 5.9500%, 4/1/15 (144A) | 2,621,062 | ||||||||||
Beverages – Non-Alcoholic – 0.8% | ||||||||||||
970,000 | Dr Pepper Snapple Group, Inc. 2.3500%, 12/21/12 | 971,033 | ||||||||||
1,145,000 | Dr. Pepper Snapple Group, Inc. 6.1200%, 5/1/13 | 1,253,110 | ||||||||||
605,000 | Dr. Pepper Snapple Group, Inc. 6.8200%, 5/1/18 | 678,700 | ||||||||||
2,902,843 | ||||||||||||
Beverages – Wine and Spirits – 0.4% | ||||||||||||
1,425,000 | Brown-Forman Corp., 5.0000%, 2/1/14 | 1,497,652 | ||||||||||
Brewery – 1.5% | ||||||||||||
1,470,000 | Anheuser-Busch InBev Worldwide, Inc. 7.2000%, 1/15/14 (144A) | 1,667,217 | ||||||||||
1,470,000 | Anheuser-Busch InBev Worldwide, Inc. 7.7500%, 1/15/19 (144A) | 1,721,069 | ||||||||||
2,315,000 | Anheuser-Busch InBev Worldwide, Inc. 5.3750%, 1/15/20 (144A) | 2,361,899 | ||||||||||
5,750,185 | ||||||||||||
Building – Residential and Commercial – 0.7% | ||||||||||||
640,000 | D.R. Horton, Inc., 7.8750%, 8/15/11 | 675,200 | ||||||||||
960,000 | MDC Holdings, Inc., 5.3750%, 12/15/14 | 952,789 | ||||||||||
640,000 | Ryland Group, 5.3750%, 5/15/12 | 649,600 | ||||||||||
370,000 | Toll Brothers Finance, Corp. 6.7500%, 11/1/19 | 362,376 | ||||||||||
2,639,965 | ||||||||||||
Building Products – Cement and Aggregate – 0.5% | ||||||||||||
365,000 | CRH America, Inc., 5.6250%, 9/30/11 | 383,687 | ||||||||||
735,000 | CRH America, Inc., 6.9500%, 3/15/12 | 796,160 | ||||||||||
755,000 | Martin Marietta Materials, Inc. 6.6000%, 4/15/18 | 777,178 | ||||||||||
1,957,025 | ||||||||||||
Cable Television – 1.6% | ||||||||||||
1,205,000 | COX Communications, Inc. 4.6250%, 1/15/10 | 1,206,003 | ||||||||||
1,105,000 | COX Communications, Inc. 6.2500%, 6/1/18 (144A) | 1,176,147 | ||||||||||
370,000 | COX Communications, Inc. 9.3750%, 1/15/19 (144A) | 468,195 | ||||||||||
665,000 | Time Warner Cable, Inc. 6.7500%, 7/1/18 | 730,544 | ||||||||||
$ | 1,310,000 | Time Warner Cable, Inc. 5.0000%, 2/1/20 | 1,270,347 | |||||||||
1,020,000 | Time Warner Cable, Inc. 6.7500%, 6/15/39 | 1,068,251 | ||||||||||
5,919,487 | ||||||||||||
Casino Hotels – 0% | ||||||||||||
80,000 | Ameristar Casinos, Inc. 9.2500%, 6/1/14 (144A) | 83,000 | ||||||||||
Casino Services – 0.7% | ||||||||||||
2,500,000 | International Game Technology 7.5000%, 6/15/19 | 2,709,075 | ||||||||||
Cellular Telecommunications – 1.0% | ||||||||||||
1,270,000 | America Movil S.A.B. de C.V. 5.0000%, 10/16/19 (144A) | 1,241,778 | ||||||||||
960,000 | Cellco Partnership /Verizon Wireless Capital LLC, 5.2500%, 2/1/12 | 1,018,200 | ||||||||||
1,400,000 | Cellco Partnership /Verizon Wireless Capital LLC, 7.3750%, 11/15/13 | 1,608,132 | ||||||||||
3,868,110 | ||||||||||||
Chemicals – Diversified – 1.7% | ||||||||||||
1,630,000 | Dow Chemical Co. 7.6000%, 5/15/14 | 1,854,764 | ||||||||||
3,250,000 | Dow Chemical Co. 8.5500%, 5/15/19 | 3,877,721 | ||||||||||
685,000 | E.I. du Pont de Nemours & Co. 5.0000%, 7/15/13 | 737,914 | ||||||||||
6,470,399 | ||||||||||||
Coatings and Paint Products – 1.0% | ||||||||||||
1,862,000 | RPM International, Inc. 6.1250%, 10/15/19 | 1,873,316 | ||||||||||
1,790,000 | Sherwin-Williams Co. 3.1250%, 12/15/14 | 1,767,877 | ||||||||||
3,641,193 | ||||||||||||
Commercial Banks – 3.4% | ||||||||||||
1,780,000 | American Express Bank FSB 5.5000%, 4/16/13 | 1,897,354 | ||||||||||
1,395,000 | BB&T Corp. 5.7000%, 4/30/14 | 1,510,015 | ||||||||||
1,395,000 | BB&T Corp. 6.8500%, 4/30/19 | 1,564,636 | ||||||||||
1,410,000 | Credit Suisse New York 5.0000%, 5/15/13 | 1,503,673 | ||||||||||
1,600,000 | Credit Suisse New York 5.5000%, 5/1/14 | 1,736,322 | ||||||||||
4,320,000 | Discover Bank 8.7000%, 11/18/19 | 4,628,249 | ||||||||||
12,840,249 | ||||||||||||
Computer Services – 0.7% | ||||||||||||
1,480,000 | Affiliated Computer Services, Inc. 4.7000%, 6/1/10 | 1,492,950 | ||||||||||
950,000 | Affiliated Computer Services, Inc. 5.2000%, 6/1/15 | 979,688 | ||||||||||
2,472,638 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Computers – Memory Devices – 0.8% | ||||||||||||
$ | 1,617,000 | Seagate Technology 6.3750%, 10/1/11 | $ | 1,645,298 | ||||||||
1,165,000 | Seagate Technology 10.0000%, 5/1/14 (144A) | 1,287,325 | ||||||||||
2,932,623 | ||||||||||||
Consulting Services – 0.1% | ||||||||||||
265,000 | FTI Consulting, Inc. 7.7500%, 10/1/16 | 268,313 | ||||||||||
Containers – Metal and Glass – 0.6% | ||||||||||||
390,000 | Ball Corp. 7.1250%, 9/1/16 | 399,750 | ||||||||||
433,000 | Ball Corp. 7.3750%, 9/1/19 | 444,908 | ||||||||||
825,000 | Owens-Brockway Glass Container, Inc. 8.2500%, 5/15/13 | 847,687 | ||||||||||
565,000 | Owens-Brockway Glass Container, Inc. 6.7500%, 12/1/14 | 577,713 | ||||||||||
2,270,058 | ||||||||||||
Containers – Paper and Plastic – 0.2% | ||||||||||||
100,000 | Rock-Tenn Co. 9.2500%, 3/15/16 (144A) | 108,625 | ||||||||||
560,000 | Rock-Tenn Co. 9.2500%, 3/15/16 | 608,300 | ||||||||||
716,925 | ||||||||||||
Cosmetics and Toiletries – 0.2% | ||||||||||||
315,000 | Chattem, Inc. 7.0000%, 3/1/14 | 323,663 | ||||||||||
530,000 | Estee Lauder Companies, Inc. 7.7500%, 11/1/13 | 615,732 | ||||||||||
939,395 | ||||||||||||
Dialysis Centers – 0.2% | ||||||||||||
905,000 | DaVita, Inc. 6.6250%, 3/15/13 | 907,263 | ||||||||||
Diversified Banking Institutions – 7.5% | ||||||||||||
3,290,000 | Bank of America Corp. 7.3750%, 5/15/14 | 3,733,209 | ||||||||||
680,000 | Bank of America Corp. 5.4200%, 3/15/17 | 671,229 | ||||||||||
910,000 | Bank of America Corp. 5.6500%, 5/1/18 | 924,207 | ||||||||||
2,120,000 | Citigroup, Inc. 5.6250%, 8/27/12 | 2,180,566 | ||||||||||
1,860,000 | Citigroup, Inc. 6.0100%, 1/15/15 | 1,899,242 | ||||||||||
3,160,000 | Citigroup, Inc. 8.5000%, 5/22/19 | 3,649,019 | ||||||||||
1,865,000 | GMAC LLC 6.8750%, 9/15/11(144A) | 1,837,025 | ||||||||||
610,000 | Goldman Sachs Group, Inc. 3.6250%, 8/1/12 | 628,486 | ||||||||||
770,000 | Goldman Sachs Group, Inc. 5.4500%, 11/1/12 | 827,888 | ||||||||||
1,255,000 | Goldman Sachs Group, Inc. 6.0000%, 5/1/14 | 1,372,679 | ||||||||||
1,350,000 | Goldman Sachs Group, Inc. 6.1500%, 4/1/18 | 1,445,174 | ||||||||||
1,770,000 | JPMorgan Chase & Co. 6.0000%, 1/15/18 | 1,902,741 | ||||||||||
$ | 1,035,000 | JPMorgan Chase & Co. 6.3000%, 4/23/19 | 1,138,580 | |||||||||
2,735,000 | Morgan Stanley 4.7500%, 4/1/14 | 2,750,718 | ||||||||||
1,930,000 | Morgan Stanley 4.2000%, 11/20/14 | 1,931,347 | ||||||||||
1,550,000 | Morgan Stanley 5.6250%, 9/23/19 | 1,561,331 | ||||||||||
28,453,441 | ||||||||||||
Diversified Financial Services – 1.8% | ||||||||||||
795,000 | General Electric Capital Corp. 4.8000%, 5/1/13 | 830,990 | ||||||||||
1,100,000 | General Electric Capital Corp. 5.9000%, 5/13/14 | 1,189,179 | ||||||||||
4,633,000 | General Electric Capital Corp. 6.0000%, 8/7/19 | 4,809,151 | ||||||||||
6,829,320 | ||||||||||||
Diversified Minerals – 2.0% | ||||||||||||
750,000 | Teck Resources, Ltd. 7.0000%, 9/15/12 | 792,188 | ||||||||||
2,435,000 | Teck Resources, Ltd. 9.7500%, 5/15/14 | 2,809,381 | ||||||||||
645,000 | Teck Resources, Ltd. 5.3750%, 10/1/15 | 632,906 | �� | |||||||||
1,560,000 | Teck Resources, Ltd. 10.7500%, 5/15/19 | 1,864,200 | ||||||||||
1,580,000 | Teck Resources, Ltd. 6.1250%, 10/1/35 | 1,414,100 | ||||||||||
7,512,775 | ||||||||||||
Diversified Operations – 2.7% | ||||||||||||
510,000 | Kansas City Southern Railway 13.0000%, 12/15/13 | 591,600 | ||||||||||
1,035,000 | SPX Corp 7.6250%, 12/15/14 | 1,066,050 | ||||||||||
3,250,000 | Tyco Electronics Group S.A. 6.0000%, 10/1/12 | 3,448,257 | ||||||||||
1,750,000 | Tyco Electronics Group S.A. 5.9500%, 1/15/14 | 1,830,456 | ||||||||||
990,000 | Tyco Electronics Group S.A. 6.5500%, 10/1/17 | 1,023,621 | ||||||||||
1,987,000 | Tyco Electronics Group S.A. 7.1250%, 10/1/37 | 2,048,877 | ||||||||||
10,008,861 | ||||||||||||
Electric – Generation – 0.5% | ||||||||||||
1,835,000 | Allegheny Energy Supply Co. LLC 8.2500%, 4/15/12 (144A) | 2,007,622 | ||||||||||
Electric – Integrated – 2.2% | ||||||||||||
1,585,000 | CMS Energy Corp. 6.3000%, 2/1/12 | 1,613,214 | ||||||||||
1,060,000 | CMS Energy Corp. 1.2344%, 1/15/13‡ | 954,000 | ||||||||||
1,270,000 | Monongahela Power Co. 6.7000%, 6/15/14 | 1,373,720 | ||||||||||
590,000 | Pacific Gas & Electric Co. 4.8000%, 3/1/14 | 626,579 | ||||||||||
910,000 | PPL Energy Supply LLC 5.7000%, 10/15/15 | 946,482 |
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Electric – Integrated – (continued) | ||||||||||||
$ | 1,400,000 | Southern California Edison Co. 7.6250%, 1/15/10 | $ | 1,402,522 | ||||||||
1,250,000 | Virginia Electric and Power Co. 5.1000%, 11/30/12 | 1,349,994 | ||||||||||
8,266,511 | ||||||||||||
Electronic Components – Semiconductors – 0.8% | ||||||||||||
1,170,000 | National Semiconductor Corp. 0.5036%, 6/15/10 | 1,156,976 | ||||||||||
1,090,000 | National Semiconductor Corp. 6.1500%, 6/15/12 | 1,141,717 | ||||||||||
669,000 | National Semiconductor Corp. 6.6000%, 6/15/17‡ | 685,297 | ||||||||||
2,983,990 | ||||||||||||
Electronic Connectors – 0.7% | ||||||||||||
2,715,000 | Amphenol Corp. 4.7500%, 11/15/14 | 2,715,953 | ||||||||||
Electronics – Military – 1.8% | ||||||||||||
1,507,000 | L-3 Communications Corp. 6.1250%, 7/15/13 | 1,522,070 | ||||||||||
920,000 | L-3 Communications Corp. 6.1250%, 1/15/14 | 925,750 | ||||||||||
1,770,000 | L-3 Communications Corp. 6.3750%, 10/15/15 | 1,776,638 | ||||||||||
2,500,000 | L-3 Communications Corp. 5.2000%, 10/15/19 (144A) | 2,472,840 | ||||||||||
6,697,298 | ||||||||||||
Enterprise Software/Services – 0.9% | ||||||||||||
1,403,000 | BMC Software, Inc. 7.2500%, 6/1/18 | 1,527,933 | ||||||||||
905,000 | CA, Inc. 6.1250%, 12/1/14 | 983,932 | ||||||||||
1,060,000 | CA, Inc. 5.3750%, 12/1/19 | 1,065,947 | ||||||||||
3,577,812 | ||||||||||||
Fiduciary Banks – 0.5% | ||||||||||||
1,620,000 | Northern Trust Corp. 4.6250%, 5/1/14 | 1,726,304 | ||||||||||
Finance – Auto Loans – 1.8% | ||||||||||||
900,000 | Ford Motor Credit Co. LLC 9.7500%, 9/15/10 | 928,664 | ||||||||||
1,860,000 | Ford Motor Credit Co. LLC 7.3750%, 2/1/11 | 1,897,917 | ||||||||||
1,045,000 | Ford Motor Credit Co. LLC 7.2500%, 10/25/11 | 1,055,337 | ||||||||||
1,012,000 | Ford Motor Credit Co. LLC 7.5000%, 8/1/12 | 1,020,560 | ||||||||||
1,790,000 | PACCAR Financial, Corp. 1.9500%, 12/17/12 | 1,771,472 | ||||||||||
6,673,950 | ||||||||||||
Finance – Credit Card – 1.1% | ||||||||||||
825,000 | American Express Co. 7.0000%, 3/19/18 | 908,549 | ||||||||||
1,550,000 | American Express Co. 8.1250%, 5/20/19 | 1,836,845 | ||||||||||
530,000 | American Express Co. 6.8000%, 9/1/66‡ | 474,350 | ||||||||||
$ | 840,000 | American Express Credit Co. 7.3000%, 8/20/13 | 944,060 | |||||||||
4,163,804 | ||||||||||||
Finance – Investment Bankers/Brokers – 2.1% | ||||||||||||
2,490,000 | Charles Schwab Corp. 4.9500%, 6/1/14 | 2,626,785 | ||||||||||
1,530,000 | Jefferies Group, Inc. 8.5000%, 7/15/19 | 1,672,487 | ||||||||||
413,000 | Jefferies Group, Inc. 3.8750%, 11/1/29 | 407,838 | ||||||||||
73,000 | Lazard Group LLC 7.1250%, 5/15/15 | 75,785 | ||||||||||
1,470,000 | Lazard Group LLC 6.8500%, 6/15/17 | 1,479,386 | ||||||||||
790,000 | TD Ameritrade Holding Corp. 4.1500%, 12/1/14 | 778,883 | ||||||||||
980,000 | TD Ameritrade Holding Corp. 5.6000%, 12/1/19 | 973,497 | ||||||||||
8,014,661 | ||||||||||||
Finance – Other Services – 0.8% | ||||||||||||
1,037,000 | Cantor Fitzgerald L.P. 7.8750%, 10/15/19 (144A) | 1,014,865 | ||||||||||
1,890,000 | CME Group, Inc. 5.7500%, 2/15/14 | 2,067,227 | ||||||||||
3,082,092 | ||||||||||||
Food – Meat Products – 0.2% | ||||||||||||
860,000 | Smithfield Foods, Inc. 7.0000%, 8/1/11 | 857,850 | ||||||||||
Food – Miscellaneous/Diversified – 0.6% | ||||||||||||
436,000 | Dole Food Co., Inc. 13.8750%, 3/15/14 (144A) | 524,290 | ||||||||||
1,499,000 | General Mills, Inc. 5.2500%, 8/15/13 | 1,617,181 | ||||||||||
2,141,471 | ||||||||||||
Gas – Distribution – 0.1% | ||||||||||||
365,000 | Southern Star Central Gas Pipeline, Inc. 6.0000%, 6/1/16 (144A) | 348,575 | ||||||||||
Hotels and Motels – 1.5% | ||||||||||||
591,000 | Hyatt Hotels Corp. 5.7500%, 8/15/15 (144A) | 594,542 | ||||||||||
443,000 | Hyatt Hotels Corp. 6.8750%, 8/15/19 (144A) | 442,494 | ||||||||||
1,945,000 | Marriott International, Inc. 4.6250%, 6/15/12 | 1,955,624 | ||||||||||
565,000 | Marriott International, Inc. 5.6250%, 2/15/13 | 579,754 | ||||||||||
395,000 | Starwood Hotels & Resorts Worldwide, Inc. 7.8750%, 10/15/14 | 422,156 | ||||||||||
1,800,000 | Starwood Hotels & Resorts Worldwide, Inc. 7.1500%, 12/1/19 | 1,793,250 | ||||||||||
5,787,820 | ||||||||||||
Investment Management and Advisory Services – 1.6% | ||||||||||||
1,655,000 | Ameriprise Financial, Inc. 7.3000%, 6/28/19 | 1,840,459 | ||||||||||
1,059,000 | Ameriprise Financial, Inc. 7.5180%, 6/1/66‡ | 931,920 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 11
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Investment Management and Advisory Services – (continued) | ||||||||||||
$ | 1,640,000 | BlackRock, Inc. 3.5000%, 12/10/14 | $ | 1,619,405 | ||||||||
1,640,000 | BlackRock, Inc. 5.0000%, 12/10/19 | 1,611,597 | ||||||||||
6,003,381 | ||||||||||||
Life and Health Insurance – 1.6% | ||||||||||||
1,110,000 | Aflac, Inc. 6.9000%, 12/17/39 | 1,093,530 | ||||||||||
1,800,000 | Prudential Financial, Inc. 3.6250%, 9/17/12 | 1,826,627 | ||||||||||
653,000 | Prudential Financial, Inc. 4.7500%, 6/13/15 | 649,127 | ||||||||||
2,110,000 | Prudential Financial, Inc. 7.3750%, 6/15/19 | 2,365,663 | ||||||||||
5,934,947 | ||||||||||||
Machinery – General Industrial – 0.4% | ||||||||||||
1,448,000 | Roper Industries, Inc. 6.2500%, 9/1/19 | 1,507,461 | ||||||||||
Medical – Biomedical and Genetic – 0.5% | ||||||||||||
1,030,000 | Bio-Rad Laboratories, Inc. 6.1250%, 12/15/14 | 1,030,000 | ||||||||||
950,000 | Bio-Rad Laboratories, Inc. 8.0000%, 9/15/16 (144A) | 1,002,250 | ||||||||||
2,032,250 | ||||||||||||
Medical – Generic Drugs – 0.7% | ||||||||||||
1,300,000 | Watson Pharmaceuticals, Inc. 5.0000%, 8/15/14 | 1,327,271 | ||||||||||
1,320,000 | Watson Pharmaceuticals, Inc. 6.1250%, 8/15/19 | 1,361,968 | ||||||||||
2,689,239 | ||||||||||||
Medical – Hospitals – 0.7% | ||||||||||||
835,000 | CHS/Community Health Systems, Inc. 8.8750%, 7/15/15 | 864,225 | ||||||||||
855,000 | HCA, Inc. 9.2500%, 11/15/16 | 918,056 | ||||||||||
850,000 | HCA, Inc. 8.5000%, 4/15/19 (144A) | 915,875 | ||||||||||
2,698,156 | ||||||||||||
Medical – Wholesale Drug Distributors – 0.4% | ||||||||||||
790,000 | McKesson Corp. 6.5000%, 2/15/14 | 873,870 | ||||||||||
680,000 | McKesson Corp. 7.5000%, 2/15/19 | 806,400 | ||||||||||
1,680,270 | ||||||||||||
Medical Instruments – 1.0% | ||||||||||||
1,865,000 | Boston Scientific, Corp. 4.5000%, 1/15/15 | 1,868,806 | ||||||||||
920,000 | Boston Scientific, Corp. 6.0000%, 1/15/20 | 940,035 | ||||||||||
890,000 | Boston Scientific, Corp. 7.3750%, 1/15/40 | 956,186 | ||||||||||
3,765,027 | ||||||||||||
Medical Labs and Testing Services – 1.4% | ||||||||||||
$ | 680,000 | Laboratory Corp. of America Holdings 5.6250%, 12/15/15 | 710,968 | |||||||||
2,575,000 | Roche Holdings, Inc. 4.5000%, 3/1/12 (144A) | 2,704,566 | ||||||||||
1,540,000 | Roche Holdings, Inc. 6.0000%, 3/1/19 (144A) | 1,692,231 | ||||||||||
5,107,765 | ||||||||||||
Medical Products – 1.4% | ||||||||||||
1,300,000 | Carefusion Corp. 4.1250%, 8/1/12 (144A) | 1,340,196 | ||||||||||
970,000 | Carefusion Corp. 5.1250%, 8/1/14 (144A) | 1,019,678 | ||||||||||
1,020,000 | Carefusion Corp. 6.3750%, 8/1/19 (144A) | 1,091,931 | ||||||||||
1,665,000 | Hospira, Inc. 6.4000%, 5/15/15 | 1,842,859 | ||||||||||
5,294,664 | ||||||||||||
Metal – Copper – 0.4% | ||||||||||||
1,260,000 | Freeport-McMoRan Copper & Gold, Inc. 8.3750%, 4/1/17 | 1,379,700 | ||||||||||
Metal Processors and Fabricators – 0.1% | ||||||||||||
430,000 | Timken Co. 6.0000%, 9/15/14 | 452,517 | ||||||||||
Multi-Line Insurance – 1.1% | ||||||||||||
510,000 | Genworth Financial, Inc. 8.6250%, 12/15/16 | 529,094 | ||||||||||
1,355,000 | MetLife, Inc. 6.7500%, 6/1/16 | 1,517,385 | ||||||||||
1,665,000 | MetLife, Inc. 7.7170%, 2/15/19 | 1,956,600 | ||||||||||
4,003,079 | ||||||||||||
Non-Hazardous Waste Disposal – 1.3% | ||||||||||||
905,000 | Allied Waste North America, Inc. 6.5000%, 11/15/10 | 941,065 | ||||||||||
1,245,000 | Allied Waste North America, Inc. 7.2500%, 3/15/15 | 1,301,025 | ||||||||||
1,810,000 | Allied Waste North America, Inc. 7.1250%, 5/15/16 | 1,927,650 | ||||||||||
780,000 | Waste Management, Inc. 7.3750%, 8/1/10 | 807,974 | ||||||||||
4,977,714 | ||||||||||||
Office Automation and Equipment – 0.6% | ||||||||||||
245,000 | Xerox Corp. 5.6500%, 5/15/13 | 255,280 | ||||||||||
612,000 | Xerox Corp. 8.2500%, 5/15/14 | 702,040 | ||||||||||
460,000 | Xerox, Corp. 5.6250%, 12/15/19 | 459,358 | ||||||||||
660,000 | Xerox, Corp. 6.7500%, 12/15/39 | 664,971 | ||||||||||
2,081,649 | ||||||||||||
Oil – Field Services – 0.3% | ||||||||||||
760,000 | Weatherford International, Ltd. 9.6250%, 3/1/19 | 947,494 |
See Notes to Schedule of Investments and Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Oil and Gas Drilling – 0.9% | ||||||||||||
$ | 1,150,000 | Nabors Industries, Inc. 9.2500%, 1/15/19 | $ | 1,408,423 | ||||||||
1,720,000 | Rowan Companies, Inc. 7.8750%, 8/1/19 | 1,913,657 | ||||||||||
3,322,080 | ||||||||||||
Oil Companies – Exploration and Production – 1.6% | ||||||||||||
1,550,000 | Anadarko Petroleum Corp. 5.9500%, 9/15/16 | 1,676,630 | ||||||||||
1,685,000 | Forest Oil Corp. 8.0000%, 12/15/11 | 1,756,612 | ||||||||||
735,000 | Forest Oil Corp. 8.5000%, 2/15/14 (144A) | 768,075 | ||||||||||
670,000 | Kerr-McGee Corp. 6.8750%, 9/15/11 | 720,338 | ||||||||||
515,000 | Newfield Exploration Co. 7.6250%, 3/1/11 | 531,738 | ||||||||||
710,000 | Questar Market Resources 6.8000%, 3/1/20 | 740,037 | ||||||||||
6,193,430 | ||||||||||||
Pharmacy Services – 0.9% | ||||||||||||
625,000 | Express Scripts, Inc. 5.2500%, 6/15/12 | 664,126 | ||||||||||
1,860,000 | Express Scripts, Inc. 6.2500%, 6/15/14 | 2,029,501 | ||||||||||
750,000 | Express Scripts, Inc. 7.2500%, 6/15/19 | 852,138 | ||||||||||
3,545,765 | ||||||||||||
Pipelines – 2.4% | ||||||||||||
750,000 | Energy Transfer Partners L.P. 5.9500%, 2/1/15 | 794,702 | ||||||||||
1,180,000 | Enterprise Products Operating LLC 4.6000%, 8/1/12 | 1,246,177 | ||||||||||
558 | Kern River Funding Corp. 4.8930%, 4/30/18‡,§ | 556 | ||||||||||
474,000 | Kinder Morgan Energy Partners L.P. 5.9500%, 2/15/18 | 502,068 | ||||||||||
2,125,000 | Kinder Morgan Energy Partners L.P. 6.9500%, 1/15/38 | 2,264,746 | ||||||||||
2,235,000 | Kinder Morgan Finance Co. ULC 5.7000%, 1/5/16 | 2,145,600 | ||||||||||
820,000 | Midcontinent Express Pipeline LLC 5.4500%, 9/15/14 (144A) | 838,982 | ||||||||||
570,000 | Plains All American Pipeline L.P. 4.2500%, 9/1/12 | 588,231 | ||||||||||
485,000 | Plains All American Pipeline L.P. 8.7500%, 5/1/19 | 571,861 | ||||||||||
8,952,923 | ||||||||||||
Property Trust – 0.5% | ||||||||||||
1,810,000 | WEA Finance LLC / WT Finance Australia Pty, Ltd. 5.7500%, 9/2/15 (144A) | 1,908,536 | ||||||||||
Real Estate Management/Services – 0.7% | ||||||||||||
1,310,000 | AMB Property L.P. 6.1250%, 12/1/16 | 1,293,609 | ||||||||||
1,300,000 | AMB Property L.P. 6.6250%, 12/1/19 | 1,275,078 | ||||||||||
2,568,687 | ||||||||||||
Reinsurance – 1.4% | ||||||||||||
$ | 3,215,000 | Berkshire Hathaway Finance Corp 4.0000%, 4/15/12 | 3,369,224 | |||||||||
1,340,000 | Berkshire Hathaway Finance Corp. 5.0000%, 8/15/13 | 1,440,907 | ||||||||||
455,000 | Berkshire Hathaway Finance Corp. 4.6250%, 10/15/13 | 485,071 | ||||||||||
5,295,202 | ||||||||||||
REIT – Diversified – 0.1% | ||||||||||||
443,000 | Duke Realty L.P. 7.3750%, 2/15/15 | 467,180 | ||||||||||
REIT – Health Care – 0.8% | ||||||||||||
1,582,000 | HCP, Inc. 6.4500%, 6/25/12 | 1,628,743 | ||||||||||
650,000 | HCP, Inc. 5.6500%, 12/15/13 | 651,131 | ||||||||||
670,000 | Ventas Realty LP / Ventas Capital Corp. 6.5000%, 6/1/16 | 646,550 | ||||||||||
2,926,424 | ||||||||||||
REIT – Regional Malls – 0.2% | ||||||||||||
637,000 | Simon Property Group L.P. 6.7500%, 5/15/14 | 678,838 | ||||||||||
REIT – Warehouse/Industrial – 0.2% | ||||||||||||
580,000 | ProLogis 7.3750%, 10/30/19 | 572,115 | ||||||||||
Resorts and Theme Parks – 0.1% | ||||||||||||
520,000 | Vail Resorts, Inc. 6.7500%, 2/15/14 | 516,100 | ||||||||||
Retail – Apparel and Shoe – 0.9% | ||||||||||||
890,000 | Limited Brands, Inc. 8.5000%, 6/15/19 (144A) | 967,875 | ||||||||||
1,135,000 | Limited Brands, Inc. 7.6000%, 7/15/37 | 1,010,150 | ||||||||||
1,270,000 | Nordstrom, Inc. 6.7500%, 6/1/14 | 1,418,335 | ||||||||||
3,396,360 | ||||||||||||
Retail – Computer Equipment – 0.1% | ||||||||||||
330,000 | GameStop Corp. 8.0000%, 10/1/12 | 341,963 | ||||||||||
Retail – Office Supplies – 0.1% | ||||||||||||
325,000 | Staples, Inc. 7.7500%, 4/1/11 | 349,248 | ||||||||||
Retail – Propane Distribution – 0.2% | ||||||||||||
850,000 | Amerigas Partners L.P. 7.2500%, 5/20/15 | 850,000 | ||||||||||
Retail – Regional Department Stores – 1.1% | ||||||||||||
600,000 | JC Penney Corp., Inc. 9.0000%, 8/1/12 | 676,500 | ||||||||||
602,000 | JC Penney Corp., Inc. 6.8750%, 10/15/15 | 635,110 | ||||||||||
620,000 | JC Penney Corp., Inc. 5.7500%, 2/15/18 | 611,475 | ||||||||||
240,000 | JC Penney Corp., Inc. 6.3750%, 10/15/36 | 213,120 | ||||||||||
1,010,000 | Macy’s Retail Holdings, Inc. 5.7500%, 7/15/14 | 1,012,525 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 13
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Retail – Regional Department Stores – (continued) | ||||||||||||
$ | 1,010,000 | Macy’s Retail Holdings, Inc. 5.9000%, 12/1/16 | $ | 984,750 | ||||||||
4,133,480 | ||||||||||||
Retail – Restaurants – 0.9% | ||||||||||||
1,848,000 | Brinker International 5.7500%, 6/1/14 | 1,812,088 | ||||||||||
1,345,000 | Darden Restaurants Inc. 5.6250%, 10/15/12 | 1,435,590 | ||||||||||
3,247,678 | ||||||||||||
Special Purpose Entity – 0.5% | ||||||||||||
980,000 | Harley-Davidson Funding Corp. 5.7500%, 12/15/14 (144A) | 994,963 | ||||||||||
625,000 | Petroplus Finance, Ltd. 6.7500%, 5/1/14 (144A) | 587,500 | ||||||||||
461,000 | Petroplus Finance, Ltd. 7.0000%, 5/1/17 (144A) | 414,900 | ||||||||||
1,997,363 | ||||||||||||
Steel – Producers – 1.6% | ||||||||||||
1,020,000 | ArcelorMittal 5.3750%, 6/1/13 | 1,076,356 | ||||||||||
790,000 | ArcelorMittal 9.0000%, 2/15/15 | 933,066 | ||||||||||
1,065,000 | ArcelorMittal 6.1250%, 6/1/18 | 1,098,905 | ||||||||||
1,530,000 | Reliance Steel & Aluminum, Co. 6.2000%, 11/15/16 | 1,508,198 | ||||||||||
1,466,000 | Steel Dynamics, Inc. 7.7500%, 4/15/16 (144A) | 1,526,472 | ||||||||||
6,142,997 | ||||||||||||
Super-Regional Banks – 0.8% | ||||||||||||
1,040,000 | Capital One Financial Corp. 7.3750%, 5/23/14 | 1,177,522 | ||||||||||
915,000 | National City Corp. 6.8750%, 5/15/19 | 968,528 | ||||||||||
950,000 | Wells Fargo Capital 7.7000%, 9/26/99‡ | 921,500 | ||||||||||
3,067,550 | ||||||||||||
Telephone – Integrated – 1.4% | ||||||||||||
920,000 | BellSouth Corp. 4.7500%, 11/15/12 | 982,381 | ||||||||||
640,000 | Qwest Communications International, Inc. 7.2500%, 2/15/11 | 643,200 | ||||||||||
3,570,000 | Sprint Capital Corp. 7.6250%, 1/30/11 | 3,654,787 | ||||||||||
5,280,368 | ||||||||||||
Television – 1.4% | ||||||||||||
1,620,000 | CBS Corp. 8.2000%, 5/15/14 | 1,841,645 | ||||||||||
2,560,000 | CBS Corp. 8.8750%, 5/15/19 | 3,062,589 | ||||||||||
590,000 | CBS Corp. 5.5000%, 5/15/33 | 494,183 | ||||||||||
5,398,417 | ||||||||||||
Transportation – Railroad – 0.3% | ||||||||||||
$ | 658,311 | CSX Corp. 8.3750%, 10/15/14 | 758,486 | |||||||||
310,000 | Kansas City Southern de Mexico S.A. de C.V. 7.6250%, 12/1/13 | 305,350 | ||||||||||
220,000 | Kansas City Southern de Mexico S.A. de C.V. 7.3750%, 6/1/14 | 214,500 | ||||||||||
1,278,336 | ||||||||||||
Wireless Equipment – 0.1% | ||||||||||||
300,000 | American Tower Corp. 4.6250%, 4/1/15 (144A) | 303,437 | ||||||||||
Total Corporate Bonds (cost $284,437,913) | 303,912,762 | |||||||||||
Preferred Stock – 0.1% | ||||||||||||
Diversified Banking Institutions – 0.1% | ||||||||||||
4,800 | Citigroup, Inc., convertible, 7.5000% (T-DECS) (cost $480,000) | 500,832 | ||||||||||
U.S. Treasury Notes/Bonds – 16.9% | ||||||||||||
$ | 2,120,000 | 0.8750%, 2/28/11 | 2,125,135 | |||||||||
1,530,000 | 0.8750%, 3/31/11 | 1,532,809 | ||||||||||
3,625,000 | 0.8750%, 5/31/11 | 3,629,390 | ||||||||||
9,095,000 | 1.1250%, 6/30/11 | 9,131,945 | ||||||||||
3,690,000 | 1.0000%, 10/31/11 | 3,686,679 | ||||||||||
2,840,000 | 1.1250%, 1/15/12** | 2,837,336 | ||||||||||
5,733,000 | 4.6250%, 2/29/12 | 6,144,612 | ||||||||||
4,195,000 | 1.3750%, 5/15/12 | 4,195,000 | ||||||||||
694,000 | 4.7500%, 5/31/12 | 749,466 | ||||||||||
90,000 | 1.8750%, 6/15/12 | 90,984 | ||||||||||
3,100,000 | 1.5000%, 7/15/12 | 3,104,842 | ||||||||||
1,503,412 | 0.6250%, 4/15/13ÇÇ | 1,528,782 | ||||||||||
1,000,000 | 2.7500%, 10/31/13 | 1,024,141 | ||||||||||
7,110,000 | 1.7500%, 1/31/14 | 6,975,024 | ||||||||||
720,000 | 1.7500%, 3/31/14 | 702,900 | ||||||||||
6,438,000 | 2.2500%, 5/31/14 | 6,394,241 | ||||||||||
1,360,000 | 2.6250%, 7/31/14 | 1,366,800 | ||||||||||
1,555,000 | 2.3750%, 8/31/14 | 1,543,580 | ||||||||||
1,965,000 | 2.3750%, 9/30/14 | 1,948,415 | ||||||||||
805,000 | 2.1250%, 11/30/14 | 785,946 | ||||||||||
380,935 | 1.3750%, 7/15/18ÇÇ | 381,708 | ||||||||||
3,483,699 | 2.1250%, 1/15/19ÇÇ | 3,694,355 | ||||||||||
424,000 | 2.7500%, 2/15/19 | 390,345 | ||||||||||
10,000 | 3.6250%, 8/15/19 | 9,831 | ||||||||||
Total U.S. Treasury Notes/Bonds (cost $63,370,400) | 63,974,266 | |||||||||||
Money Market – 1.3% | ||||||||||||
4,855,350 | Janus Cash Liquidity Fund LLC, 0% (cost $4,855,350) | 4,855,350 | ||||||||||
Total Investments (total cost $353,143,663) – 98.8% | 373,243,210 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 1.2% | 4,516,029 | |||||||||||
Net Assets – 100% | $ | 377,759,239 | ||||||||||
See Notes to Schedule of Investments and Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Bermuda | $ | 1,002,400 | 0.3% | |||||
Canada | 6,848,994 | 1.8% | ||||||
Cayman Islands | 2,932,622 | 0.8% | ||||||
Luxembourg | 11,459,539 | 3.1% | ||||||
Mexico | 1,761,628 | 0.5% | ||||||
Sweden | 2,621,062 | 0.7% | ||||||
Switzerland | 4,187,489 | 1.1% | ||||||
United Kingdom | 1,596,483 | 0.4% | ||||||
United States†† | 340,832,993 | 91.3% | ||||||
Total | $ | 373,243,210 | 100.0% |
†† | Includes Cash Equivalents (90.0% excluding Cash Equivalents) |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 15
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Flexible | ||||||
As of December 31, 2009 | Bond | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 353,144 | ||||
Unaffiliated investments at value | $ | 368,388 | ||||
Affiliated money market investments | 4,855 | |||||
Receivables: | ||||||
Portfolio shares sold | 359 | |||||
Dividends | 1 | |||||
Interest | 4,483 | |||||
Non-interested Trustees’ deferred compensation | 9 | |||||
Other assets | 8 | |||||
Total Assets | 378,103 | |||||
Liabilities: | ||||||
Payables: | ||||||
Due to Custodian | 2 | |||||
Portfolio shares repurchased | 91 | |||||
Advisory fees | 170 | |||||
Transfer agent fees and expenses | 2 | |||||
Distribution fees and shareholder servicing fees – Service Shares | �� | 15 | ||||
Non-interested Trustees’ fees and expenses | 5 | |||||
Non-interested Trustees’ deferred compensation fees | 9 | |||||
Accrued expenses and other payables | 50 | |||||
Total Liabilities | 344 | |||||
Net Assets | $ | 377,759 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 344,095 | ||||
Undistributed net investment income/(loss)* | 1,523 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | 12,042 | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 20,099 | |||||
Total Net Assets | $ | 377,759 | ||||
Net Assets – Institutional Shares | $ | 304,204 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 24,216 | |||||
Net Asset Value Per Share | $ | 12.56 | ||||
Net Assets – Service Shares | $ | 73,555 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,509 | |||||
Net Asset Value Per Share | $ | 13.35 |
* | See Note 5 in the Notes to the Financial Statements. |
See Notes to Financial Statements.
16 | DECEMBER 31, 2009
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Flexible | ||||||
For the fiscal year ended December 31, 2009 | Bond | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 18,688 | ||||
Dividends from affiliates | 27 | |||||
Total Investment Income | 18,715 | |||||
Expenses: | ||||||
Advisory fees | 1,907 | |||||
Transfer agent fees and expenses | 5 | |||||
Registration fees | 30 | |||||
Custodian fees | 24 | |||||
Audit fees | 31 | |||||
Non-interested Trustees’ fees and expenses | 9 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 138 | |||||
Other expenses | 97 | |||||
Non-recurring costs (Note 4) | – | |||||
Cost assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 2,241 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 2,241 | |||||
Net Investment Income/(Loss) | 16,474 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | 12,417 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 14,659 | |||||
Net Gain/(Loss) on Investments | 27,076 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 43,550 |
See Notes to Financial Statements.
Janus Aspen Series | 17
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Flexible | ||||||||||
Bond | ||||||||||
For the fiscal years ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 16,474 | $ | 15,187 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | 12,417 | 6,128 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 14,659 | (2,471) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 43,550 | 18,844 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (13,671) | (13,615) | ||||||||
Service Shares | (2,429) | (1,213) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | (278) | – | ||||||||
Service Shares | (42) | – | ||||||||
Net (Decrease) from Dividends and Distributions | (16,420) | (14,828) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 44,473 | 50,424 | ||||||||
Service Shares | 49,484 | 23,286 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 13,948 | 13,615 | ||||||||
Service Shares | 2,472 | 1,213 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (86,402) | (56,187) | ||||||||
Service Shares | (16,094) | (13,982) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 7,881 | 18,369 | ||||||||
Net Increase/(Decrease) in Net Assets | 35,011 | 22,385 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 342,748 | 320,363 | ||||||||
End of period | $ | 377,759 | $ | 342,748 | ||||||
Undistributed net investment income/(loss)* | $ | 1,523 | $ | 1,088 |
* | See Note 5 in Notes to Financial Statements |
See Notes to Financial Statements.
18 | DECEMBER 31, 2009
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Flexible Bond Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $11.61 | $11.46 | $11.24 | $11.36 | $12.14 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .57 | .53 | .53 | .54 | .60 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | .94 | .14 | .24 | (.08) | (.36) | |||||||||||||||||
Total from Investment Operations | 1.51 | .67 | .77 | .46 | .24 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.55) | (.52) | (.55) | (.56) | (.59) | |||||||||||||||||
Distributions (from capital gains)* | (.01) | – | – | (.02) | (.43) | |||||||||||||||||
Total Distributions | (.56) | (.52) | (.55) | (.58) | (1.02) | |||||||||||||||||
Net Asset Value, End of Period | $12.56 | $11.61 | $11.46 | $11.24 | $11.36 | |||||||||||||||||
Total Return | 13.22% | 5.93% | 7.04% | 4.22% | 2.00% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $304,204 | $309,504 | $297,919 | $264,656 | $278,324 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $302,033 | $306,207 | $279,676 | $264,990 | $321,856 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 0.59% | 0.60% | 0.61% | 0.64% | 0.57% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 0.59% | 0.60% | 0.61% | 0.64% | 0.57% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 4.65% | 4.56% | 4.91% | 4.63% | 4.18% | |||||||||||||||||
Portfolio Turnover Rate | 271% | 169% | 138%(2) | 163%(2) | 171%(2) |
Service Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Flexible Bond Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $12.32 | $12.13 | $11.86 | $11.91 | $12.70 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .55 | .52 | .62 | .51 | .53 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.01 | .16 | .17 | (.05) | (.31) | |||||||||||||||||
Total from Investment Operations | 1.56 | .68 | .79 | .46 | .22 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.52) | (.49) | (.52) | (.49) | (.58) | |||||||||||||||||
Distributions (from capital gains)* | (.01) | – | – | (.02) | (.43) | |||||||||||||||||
Total Distributions | (.53) | (.49) | (.52) | (.51) | (1.01) | |||||||||||||||||
Net Asset Value, End of Period | $13.35 | $12.32 | $12.13 | $11.86 | $11.91 | |||||||||||||||||
Total Return | 12.89% | 5.71% | 6.80% | 3.98% | 1.76% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $73,555 | $33,244 | $22,444 | $27,630 | $32,909 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $55,100 | $28,537 | $29,701 | $30,780 | $33,352 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 0.84% | 0.85% | 0.86% | 0.89% | 0.83% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 0.84% | 0.85% | 0.85% | 0.89% | 0.82% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 4.42% | 4.32% | 4.66% | 4.36% | 3.94% | |||||||||||||||||
Portfolio Turnover Rate | 271% | 169% | 138%(2) | 163%(2) | 171%(2) |
* | See Note 5 in Notes to Financial Statements. | |
(1) | See Note 6 in Notes to Financial Statements. | |
(2) | Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 139% in 2007, 165% in 2006 and 177% in 2005. |
See Notes to Financial Statements.
Janus Aspen Series | 19
Table of Contents
Notes to Schedule of Investments
Barclays Capital U.S. Aggregate Bond Index | Is an unmanaged market value weighted index for U.S. dollar-denominated investment-grade debt issues, including government, corporate, mortgage-backed, and asset-backed securities with maturities of at least one year. | |
Lipper Variable Annuity Intermediate Investment Grade Debt Funds | Funds that invest at least 65% of their assets in investment grade debt issues (rated in top four grades) with dollar-weighted average maturities of five to ten years. | |
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. | |
REIT | Real Estate Investment Trust | |
T-DECS | Tangible Dividend Enhanced Common Stock | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. |
** | A portion of this security has been segregated by the custodian 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. | |
‡ | Rate is subject to change. Rate shown reflects current rate. | |
ÇÇ | Security is a U.S. Treasury Inflation-Protected Security (TIPS). |
§ Schedule of Restricted and Illiquid Securities (as of December 31, 2009)
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Flexible Bond Portfolio | ||||||||||||
Kern River Funding Corp., 4.8930%, 4/30/18 | 4/28/03 | $ | 553 | $ | 556 | 0.0% | ||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2009. The issuer incurs all registration costs.
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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Flexible Bond Portfolio | |||||||||||
Corporate Bonds | $ | – | $ | 303,912,762 | $ | – | |||||
Preferred Stock | – | 500,832 | – | ||||||||
U.S. Treasury Notes/Bonds | – | 63,974,266 | – | ||||||||
Money Market | – | 4,855,350 | – | ||||||||
Total Investments in Securities | $ | – | $ | 373,243,210 | $ | – | |||||
Aggregate collateral segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, option contracts, short sales, swap agreements, and/or securities with extended settlement dates as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Flexible Bond Portfolio | $ | 1,998,124 | |||
20 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf and, in addition, each class bears a portion of general
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
22 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its
24 | DECEMBER 31, 2009
Table of Contents
investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
26 | DECEMBER 31, 2009
Table of Contents
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. There were no derivatives held by the Portfolio during the fiscal year ended December 31, 2009.
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.
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
Bank Loans
The Portfolio may invest in bank loans, which include institutionally-traded floating rate securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Portfolio has the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the loan agreement and only upon receipt by the Lender of payments from the borrower. The Portfolio generally has no right to enforce compliance with the terms of the loan agreement with the borrower. Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with general interest rate changes and/or issuer credit quality. The interest rates paid on a floating rate security in which the Portfolio invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year London Interbank Offered Rate (“LIBOR”). LIBOR is a short-term interest rate that banks charge one another and is generally representative of the most competitive and current cash rates.
The Portfolio may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Portfolio may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Portfolio utilizes an independent third party to value individual bank loans on a daily basis.
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 their 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 Management LLC (“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
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
exposure to the risks associated with one or more counterparties.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Floating Rate Loans
The Portfolio may invest in floating rate loans. Floating rate loans are debt securities that have floating interest rates, which adjust periodically, and are tied to a benchmark lending rate such as the 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 condition is troubled or uncertain and companies that are highly leveraged. The Portfolio may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loans may include fully funded term loans or revolving lines of credit.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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. Fannie Maes and Freddie Macs are not backed by the full faith and credit of the U.S. Government. 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 securities 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
28 | DECEMBER 31, 2009
Table of Contents
return. In addition, mortgage-backed securities may be supported by some form of government or private guarantee and/or insurance. However, there is no assurance that the guarantors or insurers will meet their obligations.
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, may shorten the effective maturities of these securities and may result in a 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 a Portfolio’s sensitivity to interest changes and causing its price to decline.
Mortgage Dollar Rolls
The Portfolio may enter into “mortgage dollar rolls.” In a “mortgage dollar roll” transaction, the Portfolio sells a mortgage-related security (such as a Ginnie Mae security) to a dealer and simultaneously agrees to repurchase a similar security (but not the same security) in the future at a pre-determined price. The Portfolio will not be entitled to receive interest and principal payments while the dealer holds the security. The difference between the sale price and the future purchase price is recorded as an adjustment to investment income.
The Portfolio’s obligations under a dollar roll agreement must be covered by cash, U.S. Government securities or other liquid high-grade debt obligations equal in value to the securities subject to repurchase by the Portfolio, maintained in a segregated account. To the extent that the Portfolio collateralizes its obligations under a dollar roll agreement, the asset coverage requirements of the 1940 Act will not apply to such transactions. Furthermore, under certain circumstances, an underlying mortgage-backed security that is part of a dollar roll transaction may be considered illiquid.
Successful use of mortgage dollar rolls depends on the portfolio managers’ ability to predict interest rates and mortgage payments. Dollar roll transactions involve the risk that the market value of the securities the Portfolio is required to purchase may decline below the agreed upon repurchase price.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
Securities Traded on a To-Be-Announced Basis
The Portfolio may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Portfolio commits to purchasing or selling securities for which specific information is not yet known at the time of the trade, particularly the face amount and maturity date in Ginnie Mae, Fannie Mae and/or Freddie Mac transactions.
Securities purchased on a TBA basis are not settled until they are delivered to the Portfolio, normally 15 to 45 days later. Beginning on the date the Portfolio enters into a TBA transaction, cash, U.S. Government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
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 managers anticipate 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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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.
When-Issued Securities
The Portfolio may purchase or sell securities on a when-issued or forward commitment basis. 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.
30 | DECEMBER 31, 2009
Table of Contents
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 Flexible Bond Portfolio | First $ | 300 Million | 0.55 | |||||
Over $ | 300 Million | 0.45 | ||||||
Janus Capital has agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 0.90% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown on the Statement of Operations.
Janus Aspen Series | 31
Table of Contents
Notes to Financial Statements (continued)
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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Flexible Bond Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 347,806,689 | $ | 342,960,338 | $ | 27,429 | $ | 4,855,350 | ||||||
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Other Book | Net Tax | |||||||||||||||||
Ordinary | Long-Term | Accumulated | Post-October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 12,205,740 | $ | 1,449,527 | $ | – | $ | – | $ | (10,130) | $ | 20,018,377 | ||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Flexible Bond Portfolio | $ | 353,224,833 | $ | 20,578,378 | $ | (560,001) | |||||
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. Certain permanent differences such as tax
32 | DECEMBER 31, 2009
Table of Contents
returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 16,099,464 | $ | 320,934 | $ | – | $ | – | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 14,827,871 | $ | – | $ | – | $ | – | |||||||||
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
For each fiscal year ended December 31
Janus Aspen Flexible | ||||
Portfolio | Bond Portfolio | |||
Institutional Shares | ||||
2009(1) | 0.59% | |||
2008(1) | 0.60% | |||
2007(1) | 0.61% | |||
2006(1) | 0.64% | |||
2005(1) | 0.57% | |||
Service Shares | ||||
2009(1) | 0.84% | |||
2008(1) | 0.85% | |||
2007(1) | 0.86% | |||
2006(1) | 0.89% | |||
2005(1) | 0.83% | |||
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
Janus Aspen Series | 33
Table of Contents
Notes to Financial Statements (continued)
7. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Flexible Bond Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 3,646 | 4,346 | ||||||||
Reinvested dividends and distributions | 1,148 | 1,184 | ||||||||
Shares repurchased | (7,225) | (4,872) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (2,431) | 658 | ||||||||
Shares Outstanding, Beginning of Period | 26,647 | 25,989 | ||||||||
Shares Outstanding, End of Period | 24,216 | 26,647 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 3,873 | 1,904 | ||||||||
Reinvested dividends and distributions | 190 | 100 | ||||||||
Shares repurchased | (1,253) | (1,155) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 2,810 | 849 | ||||||||
Shares Outstanding, Beginning of Period | 2,699 | 1,850 | ||||||||
Shares Outstanding, End of Period | 5,509 | 2,699 |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 | $ | 637,966,822 | $ | 634,371,554 | $ | 318,745,439 | $ | 315,412,999 | ||||||
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at
34 | DECEMBER 31, 2009
Table of Contents
the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
Janus Aspen Series | 35
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Flexible Bond Portfolio:
of Janus Aspen Flexible Bond Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Flexible Bond Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
36 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 37
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
38 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 39
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
40 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
Janus Aspen Series | 41
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
42 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 320,934 | ||||||||
Janus Aspen Series | 43
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
44 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 45
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Gibson Smith 151 Detroit Street Denver, CO 80206 DOB: 1968 | Executive Vice President and Co-Portfolio Manager Janus Aspen Flexible Bond Portfolio | 5/07-Present | Co-Chief Investment Officer and Executive Vice President of Janus Capital; Executive Vice President of Janus Distributors LLC and Janus Services LLC; and Portfolio Manager for other Janus accounts. Formerly, Vice President (2003-2006) of Janus Capital. | |||
Darrell Watters 151 Detroit Street Denver, CO 80206 DOB: 1963 | Executive Vice President and Co-Portfolio Manager Janus Aspen Flexible Bond Portfolio | 5/07-Present | Vice President and Research Analyst of Janus Capital and Portfolio Manager for other Janus accounts. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
46 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 47
Table of Contents
Notes
48 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 49
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81114 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 9 | |
Statement of Operations | 10 | |
Statements of Changes in Net Assets | 11 | |
Financial Highlights | 12 | |
Notes to Schedule of Investments | 13 | |
Notes to Financial Statements | 14 | |
Report of Independent Registered Public Accounting Firm | 27 | |
Additional Information | 28 | |
Explanations of Charts, Tables and Financial Statements | 31 | |
Trustees and Officers | 34 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of the manager’s best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Forty Portfolio (unaudited)
Portfolio Snapshot We seek to invest in business models that exhibit high returns on capital and excess cash flow generation. We focus our analysis on companies with large potential total addressable markets that trade at attractive valuations. We manage focused portfolios that leverage the most compelling large-cap growth ideas of the research team. | Ron Sachs portfolio manager |
Performance Overview
For the 12-month period ended December 31, 2009, Janus Aspen Forty Portfolio’s Institutional Shares and Service Shares returned 46.33% and 46.01%, respectively, versus a return of 37.21% for the Portfolio’s primary benchmark, the Russell 1000® Growth Index. The Portfolio’s secondary benchmark, the S&P 500® Index, returned 26.46% for the period.
Economic Overview
Equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher. For the year, mid cap stocks easily outpaced small and large cap stocks, which performed similarly. Growth-style indices also outperformed value indices, as information technology was easily the best performing sector followed distantly by materials. Telecommunications and utilities were relative laggards. Commodities generally were strongly higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Contributors to Relative Performance
Apple, Inc. has been a winning position for the Portfolio for much of the year. It has been gaining market share in the PC market during a period of soft economic growth. Its iPhone and other portable devices have been market leaders as well. We believe Apple is still early in its market share gains, particularly in the high-end PC market. We also think its iPhone will remain a dominant device in the smart phone wireless market, an area we think will continue to expand. Apple’s success has been tied to its ability to offer the consumer a better value proposition than its competitors given its smooth integration of hardware and software products. We believe this will continue to drive long-term growth for the company.
Global brewer Anheuser-Busch InBev N.V. (ABI) continued to perform well. It has benefited from asset sales, cost cutting measures and strong earnings. We think the company will continue to make operating improvements. We like its dominant global presence in a market that has favorable pricing trends in our view. We believe there is a multiyear opportunity for the beer industry to see more rational pricing, making it an attractive industry to us. ABI is well positioned in our opinion given its dominant market share in the U.S. and Brazil, two of the largest beer markets in the world.
Research In Motion, Ltd.’s (RIM) continued strength in the smart phone market provided a positive backdrop for the company’s shares during the year. We think the company will remain a dominant player in the growing smart phone market. In our view, RIM offers wireless carriers a compelling cost benefit while giving consumers attractive phones and applications.
Detractors from Relative Performance
Biopharmaceutical holding Gilead Sciences, Inc. was our largest detractor during the year. Despite uncertainty surrounding health care reform, we believe Gilead has a strong differentiated drug franchise with its HIV-fighting drug Truvada. We also think the market for this drug is large and growing given indications of increased effectiveness when used earlier in treatment.
Wells Fargo & Co. was weak early in the year amid concerns over the bank’s capital needs. We liked Wells Fargo given our belief that it would be a survivor of the credit crisis. However, we decided to exit the position because of the potential for problems with parts of its loan portfolio and the possible need for additional capital. We felt there were better opportunities within the financials sector.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
First Solar, Inc. designs and manufactures solar modules using a thin film semiconductor technology. We were attracted to the low cost manufacturer, but recent long-term contracts it signed clouds its sales prospects and profitability in our view. We sold this position given the lack of transparency.
Due to certain circumstances and market conditions, I may initiate positions in futures contracts in order to mitigate the risks and potentially enhance the performance of the Portfolio. (Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.)
Outlook
Individual stock selection remains our main focus, but our views on the U.S. and global economy influence our forecasts and expectations for individual companies. We believe the U.S. economy continues to face challenges, despite economic data continuing to point to a recovery. While a collapse of the financial system has been averted, the foundations for a recovery in the U.S. are lacking in our view. Unemployment and underemployment remain big concerns. Banks still seem reluctant to lend and falling commercial real-estate values appear to be a drag on lending growth. We believe the developing world, particularly East Asia, South America and the Middle East, is showing strong growth in corporate and consumer spending. In addition, strong government and private-sector balance sheets seem capable of driving continued growth despite weakness in the U.S. and Western Europe. That said, we are concerned that many stock valuations reflect optimistic assumptions about the economic environment.
We favor companies that we think have a distinct competitive advantage or “moat” and whose performance is more likely to be driven by company-specific fundamentals than the macroeconomic environment. Many of the Portfolio’s holdings have taken advantage of dislocations in the financial markets and real economy to improve their competitive positions. We believe that positions them well to drive market share and profitability gains in most any economic environment.
Thank you for your investment in Janus Aspen Forty Portfolio. I look forward to reporting results in the future.
Janus Aspen Series | 3
Table of Contents
Janus Aspen Forty Portfolio (unaudited)
Janus Aspen Forty Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Apple, Inc. | 8.94% | |||
Anheuser-Busch InBev N.V. | 5.61% | |||
Research in Motion, Ltd. (U.S. Shares) | 4.71% | |||
Intuitive Surgical, Inc. | 4.38% | |||
Google, Inc. – Class A | 4.01% |
5 Bottom Performers – Holdings
Contribution | ||||
Gilead Sciences, Inc. | –1.51% | |||
Wells Fargo & Co. | –0.47% | |||
First Solar, Inc. | –0.27% | |||
Standard Chartered PLC | –0.10% | |||
Bank of America Corp. | –0.09% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell 1000® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Growth Index Weighting | ||||||||||
Information Technology | 23.15% | 32.55% | 31.24% | |||||||||
Consumer Staples | 7.59% | 15.43% | 14.91% | |||||||||
Health Care | 6.06% | 23.13% | 15.69% | |||||||||
Financials | 3.80% | 9.35% | 4.33% | |||||||||
Materials | 3.34% | 5.72% | 3.96% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell 1000® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Growth Index Weighting | ||||||||||
Utilities | 0.00% | 0.00% | 1.41% | |||||||||
Energy | 1.27% | 2.01% | 6.32% | |||||||||
Consumer Discretionary | 1.42% | 2.45% | 10.20% | |||||||||
Industrials | 1.57% | 6.91% | 11.28% | |||||||||
Telecommunication Services | 1.71% | 2.45% | 0.67% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Apple, Inc. Computers | 7.9% | |||
Anheuser-Busch InBev N.V. Brewery | 6.6% | |||
Celgene Corp. Medical – Biomedical and Genetic | 5.7% | |||
Research In Motion, Ltd. (U.S. Shares) Computers | 5.6% | |||
Google, Inc. – Class A Web Portals/Internet Service Providers | 5.2% | |||
31.0% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 6.3% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Forty Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Forty Portfolio – Institutional Shares | 46.33% | 6.68% | 0.62% | 10.53% | 0.68% | ||||||
Janus Aspen Forty Portfolio – Service Shares | 46.01% | 6.41% | 0.38% | 10.20% | 0.93% | ||||||
Russell 1000® Growth Index | 37.21% | 1.63% | –3.99% | 3.25% | |||||||
S&P 500® Index | 26.46% | 0.42% | –0.95% | 4.47% | |||||||
Lipper Quartile – Institutional Shares | 1st | 1st | 1st | 1st | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Large-Cap Growth Funds | 21/228 | 3/191 | 10/85 | 1/52 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s performance may be affected by risks that include those associated with non-diversification and investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
May 31, 1997 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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 “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – May 1, 1997 |
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in this chart.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,209.40 | $ | 3.84 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.73 | $ | 3.52 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,207.90 | $ | 5.23 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.47 | $ | 4.79 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.69% for Institutional Shares and 0.94% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Forty Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 91.4% | ||||||||||||
Agricultural Chemicals – 2.8% | ||||||||||||
273,530 | Monsanto Co. | $ | 22,361,078 | |||||||||
44,263 | Syngenta A.G. | 12,414,653 | ||||||||||
34,775,731 | ||||||||||||
Brewery – 6.6% | ||||||||||||
1,551,883 | Anheuser-Busch InBev N.V. | 80,235,185 | ||||||||||
340,184 | Anheuser-Busch InBev N.V. – VVPR Strip* | 2,437 | ||||||||||
80,237,622 | ||||||||||||
Cellular Telecommunications – 0.7% | ||||||||||||
182,905 | America Movil S.A.B. de C.V. – Series L (ADR) | 8,592,877 | ||||||||||
Chemicals – Diversified – 1.1% | ||||||||||||
977,902 | Israel Chemicals, Ltd. | 12,775,637 | ||||||||||
Commercial Banks – 1.7% | ||||||||||||
817,299 | Standard Chartered PLC | 20,459,614 | ||||||||||
Computers – 13.5% | ||||||||||||
458,844 | Apple, Inc.* | 96,751,846 | ||||||||||
1,019,319 | Research In Motion, Ltd. (U.S. Shares)* | 68,844,805 | ||||||||||
165,596,651 | ||||||||||||
Cosmetics and Toiletries – 1.0% | ||||||||||||
149,065 | Colgate-Palmolive Co. | 12,245,690 | ||||||||||
Diversified Banking Institution – 6.1% | ||||||||||||
1,882,667 | Bank of America Corp. | 28,352,965 | ||||||||||
117,220 | Goldman Sachs Group, Inc. | 19,791,425 | ||||||||||
645,240 | JPMorgan Chase & Co. | 26,887,151 | ||||||||||
75,031,541 | ||||||||||||
Diversified Minerals – 1.6% | ||||||||||||
681,790 | Cia Vale do Rio Doce (ADR) | 19,792,364 | ||||||||||
Electronic Connectors – 0.6% | ||||||||||||
160,235 | Amphenol Corp. – Class A | 7,399,652 | ||||||||||
Enterprise Software/Services – 4.9% | ||||||||||||
2,454,195 | Oracle Corp. | 60,225,945 | ||||||||||
Finance – Investment Bankers/Brokers – 0.2% | ||||||||||||
98,570 | Charles Schwab Corp. | 1,855,087 | ||||||||||
Finance – Other Services – 2.1% | ||||||||||||
77,260 | CME Group, Inc. | 25,955,497 | ||||||||||
Medical – Biomedical and Genetic – 11.6% | ||||||||||||
1,249,988 | Celgene Corp.* | 69,599,332 | ||||||||||
1,451,720 | Gilead Sciences, Inc.* | 62,830,442 | ||||||||||
226,225 | Vertex Pharmaceuticals, Inc.* | 9,693,741 | ||||||||||
142,123,515 | ||||||||||||
Medical – Drugs – 1.6% | ||||||||||||
112,915 | Roche Holding A.G. | 19,226,325 | ||||||||||
Medical Instruments – 2.7% | ||||||||||||
106,700 | Intuitive Surgical, Inc.* | 32,364,244 | ||||||||||
Multi-Line Insurance – 1.5% | ||||||||||||
372,025 | ACE, Ltd. (U.S. Shares) | 18,750,060 | ||||||||||
Multimedia – 3.2% | ||||||||||||
2,839,880 | News Corp. – Class A | 38,877,957 | ||||||||||
Networking Products – 5.1% | ||||||||||||
2,617,725 | Cisco Systems, Inc.* | 62,668,337 | ||||||||||
Oil Companies – Integrated – 2.9% | ||||||||||||
463,195 | Petroleo Brasileiro S.A. (ADR) | 22,085,138 | ||||||||||
320,546 | Petroleo Brasileiro S.A. (U.S. Shares) | 13,587,945 | ||||||||||
35,673,083 | ||||||||||||
Optical Supplies – 2.5% | ||||||||||||
187,136 | Alcon, Inc. (U.S. Shares) | 30,755,802 | ||||||||||
Real Estate Operating/Development – 0.8% | ||||||||||||
2,404,000 | Hang Lung Properties, Ltd. | 9,391,857 | ||||||||||
Retail – Drug Store – 3.7% | ||||||||||||
1,413,658 | CVS Caremark Corp. | 45,533,924 | ||||||||||
Retail – Regional Department Stores – 0.8% | ||||||||||||
170,380 | Kohl’s Corp.* | 9,188,593 | ||||||||||
Soap and Cleaning Preparations – 1.0% | ||||||||||||
225,856 | Reckitt Benckiser Group PLC | 12,231,809 | ||||||||||
Telecommunication Equipment – Fiber Optics – 1.2% | ||||||||||||
765,070 | Corning, Inc. | 14,773,502 | ||||||||||
Transportation – Services – 1.3% | ||||||||||||
270,180 | United Parcel Service, Inc. – Class B | 15,500,227 | ||||||||||
Web Portals/Internet Service Providers – 6.3% | ||||||||||||
101,679 | Google, Inc. – Class A* | 63,038,946 | ||||||||||
847,771 | Yahoo!, Inc.* | 14,225,597 | ||||||||||
77,264,543 | ||||||||||||
Wireless Equipment – 2.2% | ||||||||||||
702,049 | Crown Castle International Corp.* | 27,407,993 | ||||||||||
Total Common Stock (cost $773,938,882) | 1,116,675,679 | |||||||||||
Preferred Stock – 1.5% | ||||||||||||
Diversified Banking Institution – 1.5% | ||||||||||||
1,238,160 | Bank of America, Corp. convertible, 10.0000% (cost $18,572,400) | 18,473,347 | ||||||||||
Money Market – 8.1% | ||||||||||||
99,196,715 | Janus Cash Liquidity Fund LLC, 0% (cost $99,196,715) | 99,196,715 | ||||||||||
Total Investments (total cost $891,707,997) – 101.0% | 1,234,345,741 | |||||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.9)% | (11,855,295) | |||||||||||
Net Assets – 100% | $ | 1,222,490,446 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Belgium | $ | 80,237,622 | 6.5% | |||||
Brazil | 55,465,446 | 4.5% | ||||||
Canada | 68,844,805 | 5.6% | ||||||
Hong Kong | 9,391,857 | 0.8% | ||||||
Israel | 12,775,637 | 1.0% | ||||||
Mexico | 8,592,877 | 0.7% | ||||||
Switzerland | 81,146,839 | 6.6% | ||||||
United Kingdom | 32,691,423 | 2.6% | ||||||
United States†† | 885,199,235 | 71.7% | ||||||
Total | $ | 1,234,345,741 | 100.0% |
†† | Includes Cash Equivalents (63.7% excluding Cash Equivalents). |
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Forty | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 891,708 | ||||
Unaffiliated investments at value | $ | 1,135,149 | ||||
Affiliated money market investments | 99,197 | |||||
Cash | 11 | |||||
Receivables: | ||||||
Investments sold | 2,187 | |||||
Portfolio shares sold | 624 | |||||
Dividends | 465 | |||||
Non-interested Trustees’ deferred compensation | 30 | |||||
Other assets | 185 | |||||
Total Assets | 1,237,848 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | 5,848 | |||||
Portfolio shares repurchased | 8,531 | |||||
Advisory fees | 659 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 136 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Non-interested Trustees’ deferred compensation fees | 30 | |||||
Accrued expenses and other payables | 151 | |||||
Total Liabilities | 15,358 | |||||
Net Assets | $ | 1,222,490 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 1,253,720 | ||||
Undistributed net investment income/(loss)* | (63) | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (373,851) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 342,684 | |||||
Total Net Assets | $ | 1,222,490 | ||||
Net Assets – Institutional Shares | $ | 582,511 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 17,333 | |||||
Net Asset Value Per Share | $ | 33.61 | ||||
Net Assets – Service Shares | $ | 639,979 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 19,291 | |||||
Net Asset Value Per Share | $ | 33.17 |
* | See Note 5 in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Forty | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 10 | ||||
Dividends | 7,482 | |||||
Dividends from affiliates | 173 | |||||
Foreign tax withheld | (387) | |||||
Total Investment Income | 7,278 | |||||
Expenses: | ||||||
Advisory fees | 6,408 | |||||
Audit fees | 30 | |||||
Custodian fees | 41 | |||||
Transfer agent fees and expenses | 7 | |||||
Registration fees | 43 | |||||
Non-interested Trustees’ fees and expenses | 31 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 1,301 | |||||
Other expenses | 288 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 8,149 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 8,149 | |||||
Net Investment Income/(Loss) | (871) | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (26,528) | |||||
Net realized gain/(loss) from futures contracts | 1,788 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations | ||||||
and non-interested Trustees’ deferred compensation | 402,139 | |||||
Net Gain/(Loss) on Investments | 377,399 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 376,528 |
See Notes to Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Forty | ||||||||||
For the fiscal year ended December 31, 2009 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (871) | (896)(1) | |||||||
Net realized gain/(loss) from investment and foreign currency transactions | (26,528) | (32,381) | ||||||||
Net realized gain/(loss) from futures contracts | 1,788 | (9,323) | ||||||||
Net realized gain/(loss) from options sales | – | 98 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 402,139 | (631,475)(1) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 376,528 | (673,977) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | – | (497)(1) | ||||||||
Service Shares | – | (41)(1) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Return of Capital | ||||||||||
Institutional Shares | (186) | (351)(1) | ||||||||
Service Shares | (69) | (29)(1) | ||||||||
Net Decrease from Dividends and Distributions | (255) | (918) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 83,180 | 292,704 | ||||||||
Service Shares | 134,727 | 260,280 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 186 | 849 | ||||||||
Service Shares | 64 | 61 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (82,553) | (139,686) | ||||||||
Service Shares | (116,583) | (202,119) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 19,021 | 212,089 | ||||||||
Net Increase/(Decrease) in Net Assets | 395,294 | (462,806) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 827,196 | 1,290,002 | ||||||||
End of period | $ | 1,222,490 | $ | 827,196 | ||||||
Undistributed net investment income/(loss)* | $ | (63) | $ | (7) |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Prior year amounts have been reclassified due to the recharacterization of dividend income to return of capital with no impact to net assets. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Forty Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $22.97 | $41.18 | $30.16 | $27.68 | $24.58 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .08 | .04 | .15 | .13 | .06 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 10.57 | (18.20) | 10.99 | 2.45 | 3.10 | |||||||||||||||||
Total from Investment Operations | 10.65 | (18.16) | 11.14 | 2.58 | 3.16 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | (.03) | (.12) | (.10) | (.06) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Return of Capital | (.01) | (.02) | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | (.01) | (.05) | (.12) | (.10) | (.06) | |||||||||||||||||
Net Asset Value, End of Period | $33.61 | $22.97 | $41.18 | $30.16 | $27.68 | |||||||||||||||||
Total Return | 46.38% | (44.15)% | 36.99% | 9.35% | 12.85% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $582,511 | $399,087 | $576,503 | $439,009 | $560,842 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $482,572 | $560,324 | $485,379 | $474,784 | $509,092 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 0.68% | 0.67% | 0.69%(3) | 0.70%(3) | 0.67% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 0.68% | 0.67% | 0.69%(3) | 0.70%(3) | 0.67% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.05% | 0.05%(4) | 0.40% | 0.37% | 0.24% | |||||||||||||||||
Portfolio Turnover Rate | 32% | 61% | 24% | 44% | 42% |
Service Shares
For a share outstanding each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Forty Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $22.73 | $40.80 | $29.91 | $27.45 | $24.39 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | – | (.03) | .06 | .03 | – | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 10.44 | (18.04) | 10.89 | 2.47 | 3.06 | |||||||||||||||||
Total from Investment Operations | 10.44 | (18.07) | 10.95 | 2.50 | 3.06 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | (.06) | (.04) | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Return of Capital | –(5) | –(6) | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | – | – | (.06) | (.04) | – | |||||||||||||||||
Net Asset Value, End of Period | $33.17 | $22.73 | $40.80 | $29.91 | $27.45 | |||||||||||||||||
Total Return | 45.95% | (44.28)% | 36.63% | 9.12% | 12.56% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $639,979 | $428,109 | $713,499 | $446,909 | $465,001 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $520,592 | $653,396 | $557,041 | $439,970 | $441,936 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 0.93% | 0.92% | 0.94%(3) | 0.95%(3) | 0.92% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 0.93% | 0.92% | 0.94%(3) | 0.95%(3) | 0.92% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.22)% | (0.18)%(4) | 0.15% | 0.12% | (0.01)% | |||||||||||||||||
Portfolio Turnover Rate | 32% | 61% | 24% | 44% | 42% |
* | See Note 5 in Notes to Financial Statements | |
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(2) | See “Explanations of Charts, Tables and Financial Statements.” | |
(3) | Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets includes any applicable dividends and interest on short positions and may include stock loan fees. The ratio would have been 0.67% for Institutional Shares and 0.92% for Service Shares in 2007 and 0.70% for Institutional Shares and 0.95% for Service Shares in 2006 without the inclusion of dividends and interest on short positions and any stock loan fees. | |
(4) | As a result in the recharacterization of dividend income to return of capital, the Ratio of Net Investment Income/(Loss) to Average Net Assets has been reduced by 0.11% for Institutional Shares and reduced by 0.09% for Service Shares. The adjustment had no inpact on total net assets or total return of the class. | |
(5) | Return of Capital aggregated less than $.01 on a per share basis for the fiscal year ended December 31, 2009. | |
(6) | Return of Capital aggregated less than $.01 on a per share basis for the fiscal year ended December 31, 2008. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Large-Cap Growth Funds | Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. | |
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 | The Standard & Poor’s (“S&P”) 500® Index is 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 | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. | |
VVPR Strip | The Voter Verified Paper Record (VVPR) strip is a coupon which, if presented along with the dividend coupon of the ordinary share, allows the benefit of a reduced withholding tax on the dividends paid by the company. This strip is quoted separately from the ordinary share and is freely negotiable. |
* | 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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Forty Portfolio | |||||||||||
Common Stock | |||||||||||
Agricultural Chemicals | $ | 22,361,078 | $ | 12,414,653 | $ | – | |||||
Brewery | – | 80,237,622 | – | ||||||||
Cellular Telecommunications | – | 8,592,877 | – | ||||||||
Chemicals – Diversified | – | 12,775,637 | – | ||||||||
Commercial Banks | – | 20,459,614 | – | ||||||||
Diversified Minerals | – | 19,792,364 | – | ||||||||
Medical – Drugs | – | 19,226,325 | – | ||||||||
Oil Companies – Integrated | – | 35,673,083 | – | ||||||||
Real Estate Operating/Development | – | 9,391,857 | – | ||||||||
Soap and Cleaning Preparations | – | 12,231,809 | – | ||||||||
All Other | 863,518,760 | – | – | ||||||||
Preferred Stock | – | 18,473,347 | – | ||||||||
Money Market | – | 99,196,715 | – | ||||||||
Total Investments in Securities | $ | 885,879,838 | $ | 348,465,903 | $ | – | |||||
Janus Aspen Series | 13
Table of Contents
Notes to Financial Statements
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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf and, in addition, each class bears a portion of general
14 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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.
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (continued)
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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’s ability to establish and maintain appropriate systems and trading.
16 | DECEMBER 31, 2009
Table of Contents
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option contracts to hedge against changes in interest
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the
18 | DECEMBER 31, 2009
Table of Contents
extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | 1,788,202 | $ | – | $ | – | $ | – | $ | 1,788,202 | ||||||||||
Total | $ | 1,788,202 | $ | – | $ | – | $ | – | $ | 1,788,202 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.“
The effect of derivatives on the Statement of Operations is indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus
20 | DECEMBER 31, 2009
Table of Contents
applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Forty Portfolio | All Asset Levels | 0.64 | ||||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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
22 | DECEMBER 31, 2009
Table of Contents
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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Forty Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 302,518,718 | $ | 203,683,003 | $ | 101,490 | $ | 99,196,715 | ||||||
Janus Institutional Cash Management Fund – Institutional Shares(1) | 84,241 | 40,761,076 | 33,453 | – | ||||||||||
Janus Institutional Money Market Fund – Institutional Shares(1) | 64,951 | 35,618,921 | 38,300 | – | ||||||||||
$ | 302,667,910 | $ | 280,063,000 | $ | 173,243 | $ | 99,196,715 | |||||||
(1) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
(3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Other Book | Net Tax | |||||||||||||||||
Ordinary | Long-Term | Accumulated | Post-October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Forty Portfolio(1) | $ | – | $ | – | $ | (359,684,752) | $ | (8,901,016) | $ | (16,001) | $ | 337,372,267 | ||||||||
(1) | Capital loss carryover is subject to annual limitations. |
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | December 31, | Accumulated | |||||||||||
Portfolio | 2010 | 2011 | 2017 | Capital Losses | ||||||||||
Janus Aspen Forty Portfolio(1) | $ | (149,006,480) | $ | (146,398,991) | $ | (64,279,281) | $ | (359,684,752) | ||||||
(1) | Capital loss carryover is subject to annual limitations. |
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Expired | ||||||||||||||||||||||
Janus Aspen Forty Portfolio | $ | 168,247,730 | |||||||||||||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Forty Portfolio | $ | 896,973,474 | $ | 344,440,899 | $ | (7,068,632) | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Forty Portfolio | $ | – | $ | – | $ | 255,273 | $ | (814,573) | |||||||||
24 | DECEMBER 31, 2009
Table of Contents
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Forty Portfolio | $ | 757,912 | $ | – | $ | 159,629 | $ | – | |||||||||
6. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Forty Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 3,021 | 7,498 | ||||||||
Reinvested dividends and distributions | 7 | 23 | ||||||||
Shares repurchased | (3,067) | (4,148) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (39) | 3,373 | ||||||||
Shares Outstanding, Beginning of Period | 17,372 | 13,999 | ||||||||
Shares Outstanding, End of Period | 17,333 | 17,372 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 4,833 | 7,478 | ||||||||
Reinvested dividends and distributions | 2 | 1 | ||||||||
Shares repurchased | (4,379) | (6,133) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 456 | 1,346 | ||||||||
Shares Outstanding, Beginning of Period | 18,835 | 17,489 | ||||||||
Shares Outstanding, End of Period | 19,291 | 18,835 |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 | $ | 309,655,828 | $ | 296,449,152 | $ | – | $ | – | ||||||
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586,
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
26 | DECEMBER 31, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Forty Portfolio:
of Janus Aspen Forty Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Forty Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
Janus Aspen Series | 27
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
28 | DECEMBER 31, 2009
Table of Contents
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited) (continued)
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
30 | DECEMBER 31, 2009
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
Janus Aspen Series | 31
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
32 | DECEMBER 31, 2009
Table of Contents
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
Janus Aspen Series | 33
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
34 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 35
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Ron Sachs 151 Detroit Street Denver, CO 80206 DOB: 1967 | Executive Vice President and Portfolio Manager Janus Aspen Forty Portfolio | 1/08-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
36 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 37
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81115 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 11 | |
Statement of Operations | 12 | |
Statements of Changes in Net Assets | 13 | |
Financial Highlights | 14 | |
Notes to Schedule of Investments | 15 | |
Notes to Financial Statements | 17 | |
Report of Independent Registered Public Accounting Firm | 31 | |
Additional Information | 32 | |
Explanations of Charts, Tables and Financial Statements | 35 | |
Designation Requirements | 38 | |
Trustees and Officers | 39 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of the manager’s best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to the manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectuses.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Global Life Sciences Portfolio (unaudited)
Portfolio Snapshot We take a global approach to identify high quality or improving businesses in the life sciences sector trading at a discount to our estimate of intrinsic value. We believe the rapidly growing global healthcare sector offers fertile opportunities for differentiated research. We believe what sets us apart is the quality of our team, the depth of our research and our commitment to delivering superior long-term results for our clients. | Andy Acker portfolio manager |
Performance Overview
Global equity markets began the period in the midst of a significant sell-off as the full weight of the financial crisis took hold. Markets hit their lows in March and then began to rebound among signs of stabilization in the global financial system. However, health care stocks lagged the rally as uncertainty surrounding health care reform in the U.S. continued to weigh on the sector.
Despite this backdrop, Janus Aspen Global Life Sciences Portfolio’s Institutional Shares and Service Shares returned 25.79% and 25.65%, respectively, for the year ended December 31, 2009. The MSCI World Health Care Index, the Portfolio’s secondary benchmark, returned 18.89% while the Portfolio’s primary benchmark, the S&P 500® Index, returned 26.46%.
Portfolio Composition
The Portfolio includes companies that we categorize into three conceptual groups: core growth, emerging growth and opportunistic investments. In general, about half of the Portfolio is invested in core growth holdings (companies with dominant franchises that tend to generate strong, consistent free cash flow.) Emerging growth companies (those with new products that we believe can drive earnings acceleration) generally represent 20-30% of the Portfolio. The remaining weighting consists of opportunistic investments, exemplified by companies suffering from what we feel are short-term market misperceptions that should resolve over time.
Stocks That Weighed on Returns
By far the most disappointing stock during the period was Sequenom, Inc. Sequenom had previously been a top contributor for the Portfolio and our research indicated significant potential for the company’s novel, non-invasive genetic screening method for Down’s syndrome. Unfortunately, we later discovered that much of the data we had relied upon for our analysis had been fabricated, causing a precipitous and unexpected decline in the stock. Our value at risk approach led us to trim the position as it continued to rise (reducing the impact of the fall), but it was still our largest detractor.
Genzyme Corp. was hit by the viral contamination of one of its major manufacturing plants. The resulting shut-down disrupted supplies for several key drugs, negatively impacting near-term earnings. While these problems were unfortunate, we believe the issues should be addressable and the long-term impact should be more muted. We continue to like the company’s long-term growth potential and used the weakness to add to our position.
Gilead Sciences, Inc., the market leader for therapies to treat HIV, was another detractor during the period despite strong financial performance. We believe the shares suffered from a shift into cyclical stocks as well as questions about the company’s diversification strategy, stemming from a poorly received biotechnology acquisition. Nevertheless, we continue to believe Gilead has one of the best franchises in the pharmaceutical industry and added to the position on weakness.
Stocks That Aided Returns
Our largest contributor was biotechnology firm Human Genome Sciences, Inc., which surged (up over 10 fold) during the period after reporting positive phase III data for lead drug Benlysta. Benlysta could be the first new treatment approved for lupus in over 50 years and fits our target of investing in companies addressing high unmet medical needs. We believe the drug (shared 50/50 with GlaxoSmithKline) has blockbuster potential.
Another top contributor during the period was OdontoPrev S.A., the largest dental insurer in Brazil. We liked the company for its market leading position, solid free cash flow generation, and high growth and profitability. We believe these characteristics could be further enhanced by the company’s decision to merge operations with the dental business of Banco Bradesco, the No. 2 dental operator in Brazil. Combined, the company should have
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
over four million dental customers, over three times the size of the next largest competitor.
Alcon, Inc. is a drug and medical device maker with a focus on eye care. Its stock price rallied for most of the year, getting an added boost in early December amid speculation Novartis, which owns 25% of the company, could acquire additional shares. (It subsequently made an offer after year-end.) We took some profits late in the year, but continue to believe Alcon’s dominant franchise in ophthalmology and strong presence in emerging markets should continue to create long term value.
Risk Management
The Portfolio continues with its “value at risk” approach as part of a comprehensive risk management framework. This approach focuses our attention on downside risks, especially those arising from what we consider to be binary events (such as clinical trial announcements or regulatory decisions) that can lead to significant share price volatility. In practice, this means the position size of any one holding is limited so that, in a worst-case scenario, the estimated adverse impact from a particular event should not exceed 1% of the Portfolio’s performance. The Portfolio may also utilize options and futures contracts in an attempt to mitigate risks and enhance the performance of the Portfolio. (Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.)
Looking Ahead
Health-care reform in the U.S. appeared to be near the finish line at the end of December as the legislation moved through the Senate and into the conference process to reconcile the House and Senate versions. Regardless of the outcome on health-care reform, we believe political fears and five years of underperformance during the global economic boom have created many attractive buying opportunities within the health-care sector.
We believe the long-term drivers of health-care spending remain intact, including aging populations, rising life expectancies, and higher standards of living globally. Companies addressing high unmet medical needs or helping to mitigate the rise of health-care costs should remain best positioned in our view.
Thank you for your continued investment in Janus Aspen Global Life Sciences Portfolio.
Janus Aspen Series | 3
Table of Contents
Janus Aspen Global Life Sciences Portfolio (unaudited)
Janus Aspen Global Life Sciences Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Human Genome Sciences, Inc. | 3.12% | |||
OdontoPrev S.A. | 2.53% | |||
Alcon, Inc. (U.S. Shares) | 1.26% | |||
Intuitive Surgical, Inc. | 1.19% | |||
United Therapeutics Corp. | 1.14% |
5 Bottom Performers – Holdings
Contribution | ||||
Sequenom, Inc. | –1.38% | |||
Genzyme Corp. | –0.90% | |||
Gilead Sciences, Inc. | –0.62% | |||
Genmab A/S | –0.51% | |||
Dr. Reddy’s Laboratories, Ltd. | –0.49% |
5 Top Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Health Care | 28.20% | 93.84% | 13.97% | |||||||||
Consumer Staples | 1.45% | 4.74% | 12.11% | |||||||||
Materials | 0.48% | 1.25% | 3.34% | |||||||||
Consumer Discretionary | 0.01% | –0.02% | 8.98% | |||||||||
Energy | 0.00% | 0.00% | 12.64% |
5 Bottom Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Financials | –0.53% | 0.19% | 13.16% | |||||||||
Utilities | 0.00% | 0.00% | 3.99% | |||||||||
Telecommunication Services | 0.00% | 0.00% | 3.46% | |||||||||
Information Technology | 0.00% | 0.00% | 18.13% | |||||||||
Industrials | 0.00% | 0.00% | 10.22% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Roche Holding A.G. Medical – Drugs | 4.2% | |||
Merck & Co., Inc. Medical – Drugs | 3.5% | |||
Celgene Corp. Medical – Biomedical and Genetic | 3.2% | |||
Gilead Sciences, Inc. Medical – Biomedical and Genetic | 3.2% | |||
Genzyme Corp. Medical – Biomedical and Genetic | 3.1% | |||
17.2% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 3.5% for long positions and (0.7)% for short positions of total net assets.
*Includes Securities Sold Short of (1.3)%
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Global Life Sciences Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Since | Total Annual Fund | Net Annual Fund | |||||||
Year | Year | Inception* | Operating Expenses | Operating Expenses | |||||||
Janus Aspen Global Life Sciences Portfolio – Institutional Shares | 25.79% | 5.55% | 0.43% | 1.46% | 1.24%(a) | ||||||
Janus Aspen Global Life Sciences Portfolio – Service Shares | 25.65% | 5.33% | 0.20% | 1.70% | 1.49%(b) | ||||||
S&P 500® Index | 26.46% | 0.42% | –0.86% | ||||||||
Morgan Stanley Capital International World Health Care Index | 18.89% | 3.16% | 2.90%** | ||||||||
Lipper Quartile – Institutional Shares | 2nd | 1st | 3rd | ||||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Health/Biotechnology Funds | 14/35 | 7/29 | 5/6 | ||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
(a) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
(b) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance 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 Portfolio, and therefore the Portfolio’s performance, may decline in response to such risks.
The Portfolio invests in Real Estate Investment Trusts (REITs), which may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic region. REITs may be subject to risks including, but not limited to: legal, political, liquidity, and interest rate risks, a decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrowers. To the extent the Portfolio invests in foreign REITs, the Portfolio may be subject to fluctuations in currency rates or political or economic conditions in a particular country.
The use of short sales may cause the Portfolio to have higher expenses than those of other equity portfolios. Short sales are speculative transactions and involve special risks, including a greater reliance on the investment team’s ability to accurately anticipate the future value of a security. The Portfolio’s losses are potentially unlimited in a short sale transaction. The Portfolio’s use of short sales in effect leverages the Portfolio. The Portfolio’s use of leverage may result in risks and can magnify the effect of any losses. There is no assurance that a leveraging strategy will be successful.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
The Portfolio invests in certain industry groups, which may react similarly to market developments (resulting in greater price volatility), and may have significant exposure to foreign markets (which include risks such as currency fluctuation and political uncertainty).
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
January 31, 2000 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
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 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 “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – January 18, 2000 | |
** | The Morgan Stanley Capital International World Health Care Index since inception return is calculated from January 31, 2000. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Global Life Sciences Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,181.30 | $ | 6.87 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.90 | $ | 6.36 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,182.80 | $ | 5.72 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.96 | $ | 5.30 | ||||||||
† | Expenses are equal to the annualized expense ratio of 1.25% for Institutional Shares and 1.04% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include effect of contractual waivers by Janus Capital. |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Global Life Sciences Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Common Stock – 98.8% | ||||||||||||
Agricultural Chemicals – 1.6% | ||||||||||||
1,863 | Monsanto Co. | $ | 152,300 | |||||||||
1,151 | Potash Corporation of Saskatchewan, Inc. (U.S. Shares) | 124,884 | ||||||||||
277,184 | ||||||||||||
Chemicals – Diversified – 1.3% | ||||||||||||
3,009 | Bayer A.G.** | 240,670 | ||||||||||
Heart Monitors – 0.6% | ||||||||||||
2,815 | HeartWare International, Inc.* | 99,848 | ||||||||||
Instruments – Scientific – 1.5% | ||||||||||||
5,665 | Thermo Fisher Scientific, Inc.* | 270,164 | ||||||||||
Life and Health Insurance – 1.5% | ||||||||||||
7,169 | OdontoPrev S.A.** | 262,139 | ||||||||||
Medical – Biomedical and Genetic – 27.9% | ||||||||||||
10,534 | Acorda Therapeutics, Inc.* | 265,667 | ||||||||||
10,651 | Alexion Pharmaceuticals, Inc.* | 519,982 | ||||||||||
5,282 | AMAG Pharmaceuticals, Inc.* | 200,874 | ||||||||||
5,021 | Amgen, Inc.* | 284,038 | ||||||||||
19,514 | Arena Pharmaceuticals, Inc.* | 69,275 | ||||||||||
10,280 | Celgene Corp.* | 572,390 | ||||||||||
9,270 | Dendreon Corp.* | 243,616 | ||||||||||
37,480 | Fibrogen, Inc. – Private Placement°° ,§ | 187,400 | ||||||||||
7,235 | Genmab A/S*,** | 114,531 | ||||||||||
11,187 | Genzyme Corp.* | 548,275 | ||||||||||
13,144 | Gilead Sciences, Inc.*,** | 568,872 | ||||||||||
7,633 | Human Genome Sciences, Inc.*,** | 233,570 | ||||||||||
3,559 | Martek Biosciences Corp.* | 67,407 | ||||||||||
8,515 | Myriad Genetics, Inc.* | 222,242 | ||||||||||
6,833 | OSI Pharmaceuticals, Inc.* | 212,028 | ||||||||||
6,401 | United Therapeutics Corp.* | 337,013 | ||||||||||
7,429 | Vertex Pharmaceuticals, Inc.* | 318,333 | ||||||||||
4,965,513 | ||||||||||||
Medical – Drugs – 31.4% | ||||||||||||
9,561 | Abbott Laboratories | 516,198 | ||||||||||
18,404 | Achillion Pharmaceuticals, Inc.* | 57,236 | ||||||||||
1,258 | Array BioPharma, Inc.* | 3,535 | ||||||||||
4,075 | AstraZeneca PLC (ADR)** | 191,281 | ||||||||||
6,679 | Auxilium Pharmaceuticals, Inc.* | 200,236 | ||||||||||
14,636 | Bristol-Myers Squibb Co. | 369,559 | ||||||||||
13,481 | Forest Laboratories, Inc.* | 432,875 | ||||||||||
11,528 | GlaxoSmithKline PLC (ADR)** | 487,058 | ||||||||||
6,206 | King Pharmaceuticals, Inc.* | 76,148 | ||||||||||
17,091 | Merck & Co., Inc. | 624,505 | ||||||||||
7,398 | Novartis A.G.** | 403,430 | ||||||||||
4,486 | Novo Nordisk A/S** | 287,317 | ||||||||||
26,699 | Pfizer, Inc. | 485,655 | ||||||||||
4,333 | Roche Holding A.G.** | 737,790 | ||||||||||
3,745 | Sanofi-Aventis S.A.** | 293,773 | ||||||||||
3,709 | Shire PLC (ADR)** | 217,718 | ||||||||||
11,496 | XenoPort, Inc.* | 213,366 | ||||||||||
5,597,680 | ||||||||||||
Medical – Generic Drugs – 3.3% | ||||||||||||
267,733 | Mediquest Therapeutics – Private Placement°° ,§ | 80,320 | ||||||||||
7,628 | Mylan, Inc.* | 140,584 | ||||||||||
4,429 | Pharmstandard (GDR) (144A)*,** | 88,902 | ||||||||||
4,978 | Teva Pharmaceutical S.P. (ADR) | 279,664 | ||||||||||
589,470 | ||||||||||||
Medical – HMO – 2.4% | ||||||||||||
1,984 | Humana, Inc.* | 87,078 | ||||||||||
11,052 | UnitedHealth Group, Inc. | 336,865 | ||||||||||
423,943 | ||||||||||||
Medical – Wholesale Drug Distributors – 0.6% | ||||||||||||
142,776 | Alapis Holding Industrial and Commercial S.A.** | 103,226 | ||||||||||
Medical Information Systems – 0.5% | ||||||||||||
1,920 | Athenahealth, Inc.* | 86,861 | ||||||||||
Medical Instruments – 3.4% | ||||||||||||
25,073 | Lifesync Holdings, Inc. – Private Placement°° ,§ | 54,659 | ||||||||||
3,803 | Medtronic, Inc. | 167,256 | ||||||||||
10,691 | St. Jude Medical, Inc.* | 393,215 | ||||||||||
615,130 | ||||||||||||
Medical Labs and Testing Services – 0.8% | ||||||||||||
4,165 | Genoptix, Inc.* | 147,982 | ||||||||||
Medical Products – 12.0% | ||||||||||||
6,853 | Baxter International, Inc. | 402,134 | ||||||||||
2,438 | Becton, Dickinson and Co. | 192,261 | ||||||||||
8,438 | Covidien PLC (U.S. Shares)** | 404,096 | ||||||||||
1,710 | Henry Schein, Inc.* | 89,946 | ||||||||||
3,576 | Hospira, Inc.* | 182,376 | ||||||||||
6,013 | Johnson & Johnson | 387,297 | ||||||||||
3,484 | Stryker Corp. | 175,489 | ||||||||||
16,921 | TomoTherapy, Inc.* | 65,992 | ||||||||||
4,905 | Varian Medical Systems, Inc.* | 229,799 | ||||||||||
2,129,390 | ||||||||||||
Optical Supplies – 1.5% | ||||||||||||
1,599 | Alcon, Inc. (U.S. Shares)** | 262,796 | ||||||||||
Pharmacy Services – 1.1% | ||||||||||||
3,030 | Medco Health Solutions, Inc.* | 193,647 | ||||||||||
Physical Practice Management – 1.1% | ||||||||||||
3,241 | Mednax, Inc.* | 194,817 | ||||||||||
Retail – Drug Store – 2.3% | ||||||||||||
13,007 | CVS Caremark Corp.** | 418,955 | ||||||||||
Soap and Cleaning Preparations – 0.9% | ||||||||||||
3,054 | Reckitt Benckiser Group PLC** | 165,397 | ||||||||||
Therapeutics – 3.1% | ||||||||||||
19,625 | Allos Therapeutics, Inc.* | 128,936 | ||||||||||
7,251 | Onyx Pharmaceuticals, Inc.* | 212,744 | ||||||||||
84,230 | Portola Pharmaceuticals, Inc. – Private Placement°° ,§ | 139,822 | ||||||||||
4,958 | Theravance, Inc.* | 64,801 | ||||||||||
546,303 | ||||||||||||
Total Common Stock (cost $14,812,781) | 17,591,115 | |||||||||||
Corporate Bond – 0.6% | ||||||||||||
REIT – Office Property – 0.6% | ||||||||||||
$ | 116,000 | Alexandria Real Estate Equities, Inc. convertible, 3.7000%, 1/15/27 (144A) (cost $84,661) | 109,620 | |||||||||
Preferred Stock – 0.3% | ||||||||||||
Medical – Generic Drugs – 0.3% | ||||||||||||
140,292 | Mediquest Therapeutics – Private Placement Series A-1, 0%°° ,§ (cost $84,521) | 42,088 | ||||||||||
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Global Life Sciences Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Warrants – 0% | ||||||||||||
Medical – Generic Drugs – 0% | ||||||||||||
107,093 | Mediquest Therapeutics – expires 6/15/11°° ,§ | $ | 0 | |||||||||
21,463 | Mediquest Therapeutics – expires 6/15/12°° ,§ | 0 | ||||||||||
Total Warrants (cost $2,511) | 0 | |||||||||||
Total Investments (total cost $14,984,474) – 99.7% | 17,742,823 | |||||||||||
Securities Sold Short – (1.3)% | ||||||||||||
Medical – Generic Drugs – (1.3)% | ||||||||||||
5,310 | Dr. Reddy’s Laboratories, Ltd. | (128,555) | ||||||||||
2,324 | UCB S.A. | (97,391) | ||||||||||
Total Securities Sold Short (proceeds $160,408) | (225,946) | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 1.6% | 289,651 | |||||||||||
Net Assets – 100% | $ | 17,806,528 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Brazil | $ | 262,139 | 1.5% | |||||
Canada | 124,883 | 0.7% | ||||||
Denmark | 401,848 | 2.3% | ||||||
France | 293,773 | 1.6% | ||||||
Germany | 240,670 | 1.4% | ||||||
Greece | 103,226 | 0.6% | ||||||
Ireland | 404,096 | 2.3% | ||||||
Israel | 279,664 | 1.6% | ||||||
Jersey | 217,718 | 1.2% | ||||||
Russia | 88,901 | 0.5% | ||||||
Switzerland | 1,404,017 | 7.9% | ||||||
United Kingdom | 843,736 | 4.7% | ||||||
United States | 13,078,152 | 73.7% | ||||||
Total | $ | 17,742,823 | 100.0% |
Summary of Investments by Country – (Short Positions)
% of Securities | ||||||||
Country | Value | Sold Short | ||||||
Belgium | $ | (97,391) | 43.1% | |||||
India | (128,555) | 56.9% | ||||||
Total | $ | (225,946) | 100.0% |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
Brazilian Real 1/14/10 | 130,000 | $ | 74,427 | $ | 179 | |||||||
British Pound 1/14/10 | 125,000 | 201,813 | 1,587 | |||||||||
British Pound 1/21/10 | 141,500 | 228,441 | 9,209 | |||||||||
British Pound 2/4/10 | 10,000 | 16,143 | 141 | |||||||||
Danish Krone 1/21/10 | 250,000 | 48,200 | 2,064 | |||||||||
Euro 1/14/10 | 37,000 | 53,079 | 2,053 | |||||||||
Euro 1/21/10 | 116,400 | 166,983 | 7,364 | |||||||||
Russian Rouble 1/21/10 | 1,140,000 | 37,507 | 1,830 | |||||||||
Swiss Franc 1/14/10 | 246,000 | 238,047 | 4,796 | |||||||||
Swiss Franc 1/21/10 | 265,000 | 256,450 | 6,788 | |||||||||
Total | $ | 1,321,090 | $ | 36,011 |
Schedule of Written Options – Calls | Value | |||
Human Genome Sciences, Inc. expires January 2010 26 contracts exercise price $25.00 (premiums received $7,606) | $ | (15,340) | ||
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Global | ||||||
Life | ||||||
As of December 31, 2009 | Sciences | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 14,984 | ||||
Unaffiliated investments at value | $ | 17,743 | ||||
Deposits with broker for short sales | 160 | |||||
Receivables: | ||||||
Investments sold | 531 | |||||
Portfolio shares sold | 57 | |||||
Dividends | 40 | |||||
Interest | 2 | |||||
Non-interested Trustees’ deferred compensation | – | |||||
Due from adviser | 43 | |||||
Other assets | 2 | |||||
Forward currency contracts | 36 | |||||
Total Assets | 18,614 | |||||
Liabilities: | ||||||
Payables: | ||||||
Due to custodian | 433 | |||||
Short sales, at value(1) | 226 | |||||
Options written, at value(2) | 15 | |||||
Investments purchased | 79 | |||||
Portfolio shares repurchased | 1 | |||||
Advisory fees | 10 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 3 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | – | |||||
Accrued expenses and other payables | 38 | |||||
Total Liabilities | 807 | |||||
Net Assets | $ | 17,807 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | 18,013 | |||||
Undistributed net investment income/(loss)* | (2) | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (2,926) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 2,722 | |||||
Total Net Assets | $ | 17,807 | ||||
Net Assets – Institutional Shares | $ | 2,437 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 238 | |||||
Net Asset Value Per Share | $ | 10.23 | ||||
Net Assets – Service Shares | $ | 15,370 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 1,533 | |||||
Net Asset Value Per Share | $ | 10.03 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Includes proceeds of $160,408. | |
(2) | Includes premiums of $7,606 on written options. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Global | ||||||
Life | ||||||
For the fiscal year ended December 31, 2009 | Sciences | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 8 | ||||
Dividends | 216 | |||||
Dividends from affiliates | 1 | |||||
Foreign tax withheld | (11) | |||||
Total Investment Income | 214 | |||||
Expenses: | ||||||
Advisory fees | 101 | |||||
Transfer agent fees and expenses | 10 | |||||
Registration fees | 3 | |||||
Custodian fees | 56 | |||||
Audit fees | 30 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Short sales dividend expenses | 4 | |||||
Stock loan fees | – | |||||
Printing fees | 17 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 34 | |||||
System fees | 32 | |||||
Other expenses | 20 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 309 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 309 | |||||
Less: Excess Expense Reimbursement | (108) | |||||
Net Expenses after Expense Reimbursement | 201 | |||||
Net Investment Income/(Loss) | 13 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (597) | |||||
Net realized gain/(loss) from short sales | 5 | |||||
Net realized gain/(loss) from options contracts | (2) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 4,173 | |||||
Net Gain/(Loss) on Investments | 3,579 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 3,592 |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Global | ||||||||||
Life | ||||||||||
Sciences | ||||||||||
For each fiscal year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 13 | $ | (65) | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (597) | (344) | ||||||||
Net realized gain/(loss) from short sales | 5 | (54) | ||||||||
Net realized gain/(loss) from options contracts | (2) | – | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 4,173 | (7,124) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 3,592 | (7,587) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | (34) | – | ||||||||
Service Shares | (224) | – | ||||||||
Net (Decrease) from Dividends and Distributions | (258) | – | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 410 | 922 | ||||||||
Service Shares | 2,411 | 2,054 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 34 | – | ||||||||
Service Shares | 224 | – | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (685) | (1,188) | ||||||||
Service Shares | (4,246) | (6,949) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (1,852) | (5,161) | ||||||||
Net Increase/(Decrease) in Net Assets | 1,482 | (12,748) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 16,325 | 29,073 | ||||||||
End of period | $ | 17,807 | $ | 16,325 | ||||||
Undistributed net investment income/(loss)* | $ | (2) | $ | – |
* | See Note 5 in Notes to Financial Statements |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each fiscal
year ended December 31
year ended December 31
Janus Aspen Global Life Sciences Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $8.27 | $11.63 | $9.53 | $8.94 | $7.94 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .03 | .04 | .05 | .05 | .03 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 2.07 | (3.40) | 2.05 | .54 | .97 | |||||||||||||||||
Total from Investment Operations | 2.10 | (3.36) | 2.10 | .59 | 1.00 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | – | – | – | |||||||||||||||||
Distributions (from capital gains)* | (.14) | – | – | – | – | |||||||||||||||||
Total Distributions | (.14) | – | – | – | – | |||||||||||||||||
Net Asset Value, End of Period | $10.23 | $8.27 | $11.63 | $9.53 | $8.94 | |||||||||||||||||
Total Return | 25.79% | (28.89)% | 22.04% | 6.60% | 12.59% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $2,437 | $2,247 | $3,505 | $3,428 | $3,879 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $2,090 | $2,908 | $3,391 | $3,913 | $3,733 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 1.27%(2) | 1.24% | 1.09% | 1.10% | 0.95% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 1.27%(2) | 1.24% | 1.09% | 1.10% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.08% | (0.10)% | (0.38)% | (0.48)% | (0.53)% | |||||||||||||||||
Portfolio Turnover Rate | 81% | 87% | 81% | 80% | 89% |
Service Shares
For a share outstanding during each fiscal
year ended December 31
year ended December 31
Janus Aspen Global Life Sciences Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $8.12 | $11.44 | $9.40 | $8.84 | $7.87 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | (.01) | (.01) | (.01) | (.01) | – | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 2.06 | (3.31) | 2.05 | .57 | .97 | |||||||||||||||||
Total from Investment Operations | 2.05 | (3.32) | 2.04 | .56 | .97 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | – | – | – | |||||||||||||||||
Distributions (from capital gains)* | (.14) | – | – | – | – | |||||||||||||||||
Total Distributions | (.14) | – | – | – | – | |||||||||||||||||
Net Asset Value, End of Period | $10.03 | $8.12 | $11.44 | $9.40 | $8.84 | |||||||||||||||||
Total Return | 25.65% | (29.02)% | 21.70% | 6.33% | 12.33% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $15,370 | $14,078 | $25,568 | $26,288 | $30,522 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $13,660 | $20,193 | $26,165 | $30,308 | $30,905 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 1.28%(2)(3) | 1.49% | 1.34% | 1.35% | 1.20% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 1.27%(2)(3) | 1.49% | 1.34% | 1.35% | 1.20% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.08% | (0.31)% | (0.63)% | (0.73)% | (0.77)% | |||||||||||||||||
Portfolio Turnover Rate | 81% | 87% | 81% | 80% | 89% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | See Note 6 in Notes to Financial Statements. | |
(2) | Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets includes any applicable dividends and interest on short positions and may include stock loan fees. The ratio would have been 1.24% and 1.24%, respectively, for Institutional Shares and 1.25% and 1.25%, respectively, for Service Shares without the inclusion of any applicable dividends and interest on short positions and any stock loan fees. | |
(3) | Pursuant to a contractual agreement, Janus waived certain fees and expenses during the period. The Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets would be 1.52% and 1.52%, respectively, without the waiver of these fees and expenses. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Health/Biotechnology Funds | Funds that invest at least 65% of their equity portfolios in shares of companies engaged in health-care, medicine, and biotechnology. | |
Morgan Stanley Capital International World Health Care Index | Is a capitalization weighted index that monitors the performance of health care 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 | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
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. | |
ADR | American Depositary Receipt | |
GDR | Global Depositary Receipt | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
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 by the custodian 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. |
°° ∞ Schedule of Fair Valued Securities (as of December 31, 2009)
Value as a % | |||||||
Value | of Net Assets | ||||||
Janus Aspen Global Life Sciences Portfolio | |||||||
Fibrogen, Inc. – Private Placement | $ | 187,400 | 1.1% | ||||
Lifesync Holdings, Inc. — Private Placement | 54,659 | 0.3% | |||||
Mediquest Therapeutics — expires 6/15/11 | – | 0.0% | |||||
Mediquest Therapeutics — expires 6/15/12 | – | 0.0% | |||||
Mediquest Therapeutics — Private Placement | 80,320 | 0.4% | |||||
Mediquest Therapeutics — Private Placement, Series A-1, 0% | 42,088 | 0.3% | |||||
Portola Pharmaceuticals, Inc. — Private Placement | 139,822 | 0.8% | |||||
$ | 504,289 | 2.9% | |||||
Securities are valued at “fair value” pursuant to procedures adopted by the Portfolio’s trustees. The Schedule of Fair Valued Securities does not include international equity securities fair valued pursuant to a systematic fair valuation model.
§ Schedule of Restricted and Illiquid Securities (as of December 31, 2009)
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Global Life Sciences Portfolio | ||||||||||||
Fibrogen, Inc. – Private Placement | 12/28/04 – 11/8/05 | $ | 170,534 | $ | 187,400 | 1.1% | ||||||
Lifesync Holdings, Inc. – Private Placement | 5/31/06 – 2/19/08 | 189,350 | 54,659 | 0.3% | ||||||||
Mediquest Therapeutics – expires 6/15/11 | 5/11/06 – 6/15/06 | – | – | 0.0% | ||||||||
Mediquest Therapeutics – expires 6/15/12 | 10/12/07 – 5/8/08 | 2,511 | – | 0.0% | ||||||||
Mediquest Therapeutics – Private Placement | 5/11/06 – 6/15/06 | 160,640 | 80,320 | 0.4% | ||||||||
Mediquest Therapeutics – Private Placement, Series A-1, 0% | 3/31/09 | 84,521 | 42,088 | 0.3% | ||||||||
Portola Pharmaceuticals, Inc. – Private Placement | 7/3/08 | 119,185 | 139,822 | 0.8% | ||||||||
$ | 726,741 | $ | 504,289 | 2.9% | ||||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2009. The issuer incurs all registration costs.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments (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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||||||||
Investments in Securities: | |||||||||||||||||
Janus Aspen Global Life Sciences Portfolio | |||||||||||||||||
Common Stock | |||||||||||||||||
Chemicals – Diversified | $ | – | $ | 240,670 | $ | – | |||||||||||
Life and Health Insurance | – | 262,139 | – | ||||||||||||||
Medical – Biomedical and Genetic | 4,663,582 | 114,531 | 187,400 | ||||||||||||||
Medical – Drugs | 2,979,312 | 2,618,368 | – | ||||||||||||||
Medical – Generic Drugs | 140,584 | 368,566 | 80,320 | ||||||||||||||
Medical – Wholesale Drug Distributors | – | 103,226 | – | ||||||||||||||
Medical Instruments | 560,471 | – | 54,659 | ||||||||||||||
Soap and Cleaning Preparations | – | 165,397 | – | ||||||||||||||
Therapeutics | 406,481 | – | 139,822 | ||||||||||||||
All Other | 4,505,587 | – | – | ||||||||||||||
Corporate Bond | – | 109,620 | – | ||||||||||||||
Preferred Stock | – | – | 42,088 | ||||||||||||||
Warrants | – | – | – | ||||||||||||||
Total Investments in Securities | $ | 13,256,017 | $ | 3,982,517 | $ | 504,289 | |||||||||||
Investments in Securities Sold Short: | |||||||||||||||||
Medical – Generic Drugs | $ | – | $ | (225,946) | $ | – | |||||||||||
Other Financial Instruments(a): | $ | – | $ | 20,671 | $ | – | |||||||||||
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Level 3 Valuation Reconciliation of Assets (as of the fiscal period ended December 31, 2009)
Change in | |||||||||||||||||||||||
Accrued | Unrealized | Net | Transfers In | ||||||||||||||||||||
Balance as of | Discounts/ | Realized | Appreciation/ | Purchases/ | and/or Out of | Balance as of | |||||||||||||||||
December 31, 2008 | Premiums | Gain/(Loss) | (Depreciation)(a) | (Sales) | Level 3 | December 31, 2009 | |||||||||||||||||
Investments in Securities: | |||||||||||||||||||||||
Janus Aspen Global Life Sciences Portfolio | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||
Medical — Biomedical and Genetic | $ | 219,258 | $ | – | $ | – | $ | (31,858) | $ | – | $ | – | $ | 187,400 | |||||||||
Medical — Generic Drugs | 87,290 | – | – | (6,970) | – | – | 80,320 | ||||||||||||||||
Medical Instruments | 54,659 | – | – | – | – | – | 54,659 | ||||||||||||||||
Therapeutics | 119,185 | – | – | 20,637 | – | – | 139,822 | ||||||||||||||||
Preferred Stock | 34,516 | – | – | (5,908) | – | 13,480 | 42,088 | ||||||||||||||||
(a) | Included in “Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation” on the Statement of Operations. |
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Global Life Sciences Portfolio | $ | 4,748,844 | |||
16 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 Life Sciences 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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
18 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
20 | DECEMBER 31, 2009
Table of Contents
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
The Portfolio recognized realized gains/(losses) from written options contracts during the fiscal year ended December 31, 2009 as indicated in the table below:
Portfolio | Gains/(Losses) | ||||
Janus Aspen Global Life Sciences Portfolio | $ | (1,489) | |||
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.
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
Written option activity for the fiscal year ended December 31, 2009 is indicated in the table below:
Number of | Premiums | |||||||
Call Options | Contracts | Received | ||||||
Janus Aspen Global Life Sciences Portfolio | ||||||||
Options outstanding at December 31, 2008 | – | $ | – | |||||
Options written | 35 | 10,238 | ||||||
Options closed | (9) | (2,632) | ||||||
Options expired | – | – | ||||||
Options exercised | – | – | ||||||
Options outstanding at December 31, 2009 | 26 | $ | 7,606 | |||||
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
22 | DECEMBER 31, 2009
Table of Contents
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as | Statement of Assets and | Statement of Assets and | ||||||||||
hedging instruments | Liabilities Location | Fair Value | Liabilities Location | Fair Value | ||||||||
Equity Contracts | Unaffiliated investments at value | $ | – | Options written, at value | $ | 15,340 | ||||||
Foreign Exchange Contracts | Forward currency contracts | 36,011 | Forward currency contracts | – | ||||||||
Total | $ | 36,011 | $ | 15,340 | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (1,489 | ) | $ | – | $ | (1,489 | ) | ||||||||
Foreign Exchange Contracts | – | – | – | (144,208 | ) | (144,208 | ) | |||||||||||||
Total | $ | – | $ | – | $ | (1,489 | ) | $ | (144,208 | ) | $ | (145,697 | ) | |||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (7,734 | ) | $ | – | $ | (7,734 | ) | ||||||||
Foreign Exchange Contracts | – | – | – | 95,088 | 95,088 | |||||||||||||||
Total | $ | – | $ | – | $ | (7,734 | ) | $ | 95,088 | $ | 87,354 | |||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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,
24 | DECEMBER 31, 2009
Table of Contents
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
Portfolio pays stock loan fees on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Life Sciences Portfolio | All Asset Levels | 0.64 | ||||||
Janus Capital has agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 1.24% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and
26 | DECEMBER 31, 2009
Table of Contents
Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Global Life Sciences Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 8,541,690 | $ | 8,545,690 | $ | 829 | $ | – | ||||||
Janus Institutional Money Market Fund – Institutional Shares(1) | 533 | 190,291 | 258 | – | ||||||||||
$ | 8,542,223 | $ | 8,735,981 | $ | 1,087 | $ | – | |||||||
(1) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Global Life Sciences Portfolio | $ | – | $ | – | $ | (1,708,020) | $ | (1,634) | $ | (5,259) | $ | 1,508,605 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
Portfolio | December 31, 2017 | Accumulated Capital Losses | |||||||||||||||
Janus Aspen Global Life Sciences Portfolio | $ | (1,708,020) | $ | (1,708,020) | |||||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Global Life Sciences Portfolio | $ | 16,168,680 | $ | 2,711,411 | $ | (1,137,268) | |||||
Information on the tax components of securities sold short as of December 31, 2009 is as follows:
Federal Tax | |||||||||||
Proceeds from | Unrealized | Unrealized | |||||||||
Portfolio | Securities Sold Short | (Appreciation) | Depreciation | ||||||||
Janus Aspen Global Life Sciences Portfolio | (160,408) | (65,538) | – | ||||||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Life Sciences Portfolio | $ | – | $ | 257,348 | $ | – | $ | (1,545) | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Life Sciences Portfolio | $ | – | $ | – | $ | – | $ | (75,822) | |||||||||
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
28 | DECEMBER 31, 2009
Table of Contents
For each fiscal year ended December 31
Janus Aspen | ||||
Portfolio | Global Life Sciences Portfolio | |||
Institutional Shares | ||||
2009(1) | 1.75% | |||
2008(1) | 1.46% | |||
2007(1) | 1.09% | |||
2006(1) | 1.10% | |||
2005(1) | 0.95% | |||
Service Shares | ||||
2009(1) | 2.00% | |||
2008(1) | 1.70% | |||
2007(1) | 1.34% | |||
2006(1) | 1.35% | |||
2005(1) | 1.20% | |||
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
7. | Capital Share Transactions |
Janus Aspen Global | ||||||||||
For each fiscal year ended December 31 | Life Sciences Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 46 | 87 | ||||||||
Reinvested dividends and distributions | 4 | – | ||||||||
Shares repurchased | (84) | (116) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (34) | (29) | ||||||||
Shares Outstanding, Beginning of Period | 272 | 301 | ||||||||
Shares Outstanding, End of Period | 238 | 272 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 259 | 195 | ||||||||
Reinvested dividends and distributions | 27 | – | ||||||||
Shares repurchased | (487) | (695) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (201) | (500) | ||||||||
Shares Outstanding, Beginning of Period | 1,734 | 2,234 | ||||||||
Shares Outstanding, End of Period | 1,533 | 1,734 |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 Life Sciences Portfolio | $ | 12,420,560 | $ | 13,907,156 | $ | – | $ | – | ||||||
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
On December 11, 2009, the Board of Trustees of Janus Aspen Series approved a plan to liquidate and terminate the Portfolio. Effective April 28, 2010, the Portfolio will no longer be offered for sale and will be liquidated on or about April 30, 2010.
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, the date of issuance of the Portfolio’s financial statements, and determined that there were no other material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
30 | DECEMBER 31, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Global Life Sciences Portfolio:
of Janus Aspen Global Life Sciences Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Global Life Sciences Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
Janus Aspen Series | 31
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
32 | DECEMBER 31, 2009
Table of Contents
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
Janus Aspen Series | 33
Table of Contents
Additional Information (unaudited) (continued)
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
34 | DECEMBER 31, 2009
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
Janus Aspen Series | 35
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
36 | DECEMBER 31, 2009
Table of Contents
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
Janus Aspen Series | 37
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Global Life Sciences Portfolio | $ | 257,348 | ||||||||
38 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 39
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
40 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Andrew Acker 151 Detroit Street Denver, CO 80206 DOB: 1972 | Executive Vice President and Portfolio Manager Janus Aspen Global Life Sciences Portfolio | 5/07-Present | Vice President and Research Analyst of Janus Capital, and Portfolio Manager for other Janus accounts. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). | |||
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81118 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 11 | |
Statement of Operations | 12 | |
Statements of Changes in Net Assets | 13 | |
Financial Highlights | 14 | |
Notes to Schedule of Investments | 16 | |
Notes to Financial Statements | 17 | |
Report of Independent Registered Public Accounting Firm | 32 | |
Additional Information | 33 | |
Explanations of Charts, Tables and Financial Statements | 36 | |
Trustees and Officers | 39 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of the manager’s best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to the manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares and Service II Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares and Service II Shares, brokerage commissions, interest, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectuses.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
Portfolio Snapshot We seek to identify strong technology related businesses with sustainable competitive advantages and improving returns on capital. We believe what sets us apart is the depth of our research, our investment conviction, and our commitment to delivering superior long-term results for our clients. | Barney Wilson portfolio manager |
Performance Overview
During the 12 months ended December 31, 2009, Janus Aspen Global Technology Portfolio’s Institutional Shares, Service Shares and Service II Shares returned 57.09%, 56.90% and 57.09%, respectively. By comparison, the Portfolio’s secondary and primary benchmarks, the Morgan Stanley Capital International (MSCI) World Information Technology Index and the S&P 500® Index returned 52.36% and 26.46%, respectively.
Market Environment
Global equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Many indices hit the low point for the period in March as evidence of an above average contraction in the U.S. economy and economic weakness globally continued to unfold. Markets rallied through year-end with broad indices reaching their pre-October 2008 levels. Emerging markets strongly outperformed developed markets with the largest gains in Asia led by India. Russia and Brazil also led their respective regions higher. In developed markets, Europe and North America performed similarly and easily outgained Asia, which was weighed down by muted gains in Japan. In terms of sectors, materials and information technology were the strongest performers, while utilities and telecommunication services were relative laggards. Commodities generally were strongly higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December. The Dollar Index finished the period with losses, as the U.S. currency lagged all major currencies except the Japanese yen.
Investment Strategy
Janus Aspen Global Technology Portfolio’s objective is to seek long-term growth of capital. We work closely with the Janus analysts covering technology and technology-related companies to identify high quality and innovative technology companies that are growing earnings and cash flow in excess of market expectations. While investing in the information technology sector can be more volatile than a broader market index, we believe the sector can provide an excellent opportunity for attractive investment returns if one can tolerate the volatility.
Three things are at the core of the Portfolio’s investment and portfolio construction philosophy: fundamental research, valuation analysis and diversification. First, in the intensive research that is a hallmark of Janus, we seek out the customers, competitors and suppliers of a company to develop our view of the future fundamental performance of that company. We try to anticipate material changes in industries and to understand which companies are going to win on a multi-year basis in the product marketplace and why. Second, in conducting our valuation analysis, we focus foremost on the value of the future cash flows of the company. Third, when constructing the Portfolio, we deliberately seek to manage risk by diversifying across multiple dimensions, such as subsectors, geographies, market capitalizations and valuation ranges.
Due to certain circumstances and market conditions, we may initiate positions in futures contracts in order to mitigate the risks and potentially enhance the performance of the Portfolio. (Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.)
Contributors to Relative Performance
Apple, Inc. was a top contributor, as the company continued to show strong performance in its PC and iPhone businesses. We think the company will continue to gain market share in the growing smart phone market and will continue to gain share in laptop computers, especially in international markets.
Marvell Technology Group, Ltd. also posted strong returns during the year, as the company did a better job in controlling costs. Marvell is a semiconductor company that specializes in storage and communication solutions for primarily communication devices. Long term, we remain
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
attracted to Marvell’s business model and potential to gain market share. We also believe Marvell’s management team will be able to create shareholder value over time.
ARM Holdings PLC was another top contributor. The U.K.-based semiconductor intellectual property licensing company represents a company that has benefited from the growth in smart phone usage. It receives royalty revenues from licensing its technology to semiconductor manufacturers. The company’s dominant market share in low-powered, mobile devices at period end gives it a competitive advantage in our view. It is difficult for clients to change to different providers once a relationship has been established because of the technology challenges involved. The possibility of wider adoption of cheaper chips in other areas, such as automotive, industrials, and consumer durables also makes ARM an attractive holding to us.
Detractors from Relative Performance
Nintendo Co., Ltd. declined during the period, hurt by slumping hardware sales. We think the company is in a multiyear growth cycle given its leading game platform the Wii, which has expanded the gaming market. In addition, we think the company can benefit from new products that could drive higher margin software sales.
Myriad Genetics, Inc. is a small-to-mid sized company that provides molecular diagnostics for identifying a variety of diseases, including breast cancer. The company was hurt by a weak consumer, as its cancer screenings are somewhat discretionary. We think this was a near-term issue for the company related to the soft economy. We added to our position during the period because we believe Myriad is a leading company in gene-based diagnostics that could help in the early detection and treatment of various diseases.
Genzyme Corp., a biopharmaceutical company, continued to suffer from production issues that surfaced at one of its plants earlier in the year. While we think the valuation at period end remained attractive to us and we maintained our position, we remain watchful of management’s ability to execute.
Looking Ahead
We focus on anticipating change, trying to determine which companies are going to win on a multiyear basis in the product marketplace, and on finding companies where we feel the price of the stock is below the value of the cash flows of the company. Our goal is to leverage the strong, grassroots research foundation of Janus in order to uncover what we believe are the best investment opportunities for our shareholders.
Thank you for your investment in Janus Aspen Global Technology Portfolio.
Janus Aspen Series | 3
Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
Janus Aspen Global Technology Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Apple, Inc. | 5.34% | |||
Marvell Technology Group, Ltd. | 4.07% | |||
ARM Holdings PLC | 3.21% | |||
SuccessFactors, Inc. | 2.81% | |||
Tyco Electronics, Ltd. (U.S. Shares) | 2.60% |
5 Bottom Performers – Holdings
Contribution | ||||
Nintendo Co., Ltd. | –0.89% | |||
Amazon.com, Inc. | –0.56% | |||
Myriad Genetics, Inc. | –0.43% | |||
VMware, Inc. | –0.40% | |||
Genzyme Corp. | –0.35% |
5 Top Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (% of Equities) | S&P 500® Index Weighting | ||||||||||
Information Technology | 53.73% | 79.75% | 18.13% | |||||||||
Consumer Discretionary | 4.69% | 6.43% | 8.98% | |||||||||
Health Care | 3.20% | 8.52% | 13.97% | |||||||||
Telecommunication Services | 1.23% | 0.87% | 3.46% | |||||||||
Industrials | 0.48% | 3.44% | 10.22% |
5 Bottom Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (% of Equities) | S&P 500® Index Weighting | ||||||||||
Financials | 0.00% | 0.00% | 13.16% | |||||||||
Energy | 0.00% | 0.00% | 12.64% | |||||||||
Consumer Staples | 0.00% | 0.00% | 12.11% | |||||||||
Materials | 0.19% | 0.71% | 3.34% | |||||||||
Utilities | 0.28% | 0.28% | 3.99% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Marvell Technology Group, Ltd. Semiconductor Components/Integrated Circuits | 4.2% | |||
Apple, Inc. Computers | 4.0% | |||
Accenture, Ltd. – Class A (U.S. Shares) Computer Services | 3.6% | |||
Oracle Corp. Enterprise Software/Services | 3.6% | |||
ARM Holdings PLC Electronic Components – Semiconductors | 3.3% | |||
18.7% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
*Includes Securities Sold Short of (1.0%)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Since | Total Annual Fund | Net Annual Fund | |||||||
Year | Year | Inception* | Operating Expenses | Operating Expenses | |||||||
Janus Aspen Global Technology Portfolio – Institutional Shares | 57.09% | 5.45% | –7.21% | 0.85% | 0.85%(a) | ||||||
Janus Aspen Global Technology Portfolio – Service Shares | 56.90% | 5.17% | –7.46% | 1.11% | 1.11%(b) | ||||||
Janus Aspen Global Technology Portfolio – Service II Shares | 57.09% | 5.22% | –7.46% | 1.11% | 1.11%(c) | ||||||
S&P 500® Index | 26.46% | 0.42% | –0.86% | ||||||||
Morgan Stanley Capital International World Information Technology Index | 52.36% | 2.43% | –7.44%** | ||||||||
Lipper Quartile – Institutional Shares | 3rd | 1st | 3rd | ||||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Global Science & Technology Funds | 31/56 | 13/51 | 8/13 | ||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
For Service II Shares, a 1% redemption fee may be imposed on shares held for 60 days or less. Performance shown does not reflect this redemption fee and, if reflected, performance would have been lower.
a) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
(b) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
(c) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
See important disclosures on the following page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Annual expense ratios include dividends or interest on short sales, which are paid to the lender of borrowed securities. Such expenses will vary depending on whether the securities the Portfolio sells short pay dividends or interest and the amount of such dividends or interest.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance 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 Portfolio, and therefore the Portfolio’s performance, may decline in response to such risks.
The use of short sales may cause the Portfolio to have higher expenses than those of other equity portfolios. Short sales are speculative transactions and involve special risks, including a greater reliance on the investment team’s ability to accurately anticipate the future value of a security. The Portfolio’s losses are potentially unlimited in a short sale transaction. The Portfolio’s use of short sales in effect leverages the Portfolio. The Portfolio’s use of leverage may result in risks and can magnify the effect of any losses. There is no assurance that a leveraging strategy will be successful.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
The Portfolio may at times have significant exposure to certain industry groups, which may react similarly to market developments (resulting in greater price volatility). The Portfolio also may have significant exposure to foreign markets (which include risks such as currency fluctuation and political uncertainty).
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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 II Shares for periods prior to December 31, 2001 are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expenses of Service II 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
January 31, 2000 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
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.
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.
See Notes to Schedule of Investments 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 “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – January 18, 2000 | |
** | The Morgan Stanley Capital International World Information Technology Index since inception returns are calculated from January 31, 2000. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,240.90 | $ | 5.20 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,239.80 | $ | 6.66 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.26 | $ | 6.01 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service II Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,240.00 | $ | 6.55 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.36 | $ | 5.90 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.92% for Institutional Shares, 1.18% for Service Shares, and 1.16% for Service II Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include the effect of contractual waivers by Janus Capital. |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Global Technology Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 98.4% | ||||||||||||
Applications Software – 2.3% | ||||||||||||
93,133 | Microsoft Corp. | $ | 2,839,625 | |||||||||
Cable Television – 0.8% | ||||||||||||
930 | Jupiter Telecommunications Co., Ltd.** | 921,913 | ||||||||||
Casino Services – 1.2% | ||||||||||||
76,575 | International Game Technology | 1,437,313 | ||||||||||
Commercial Services – 1.5% | ||||||||||||
205,355 | Live Nation, Inc.* | 1,747,571 | ||||||||||
Computer Aided Design – 0.4% | ||||||||||||
10,496 | ANSYS, Inc.* | 456,156 | ||||||||||
Computer Services – 3.6% | ||||||||||||
106,104 | Accenture, Ltd. – Class A (U.S. Shares) | 4,403,316 | ||||||||||
Computers – 7.1% | ||||||||||||
23,033 | Apple, Inc.*,** | 4,856,738 | ||||||||||
21,456 | International Business Machines Corp. | 2,808,590 | ||||||||||
13,961 | Research In Motion, Ltd. (U.S. Shares)* | 942,926 | ||||||||||
8,608,254 | ||||||||||||
Computers – Peripheral Equipment – 0.4% | ||||||||||||
25,318 | Logitech International S.A.* | 435,942 | ||||||||||
Decision Support Software – 0.9% | ||||||||||||
129,885 | DemandTec, Inc.* | 1,139,091 | ||||||||||
E-Commerce/Services – 3.1% | ||||||||||||
8,848 | Ctrip.com International, Ltd.* | 635,817 | ||||||||||
132,902 | eBay, Inc.*,** | 3,128,513 | ||||||||||
3,764,330 | ||||||||||||
Educational Software – 1.3% | ||||||||||||
35,009 | Blackboard, Inc.* | 1,589,059 | ||||||||||
Electronic Components – Miscellaneous – 1.6% | ||||||||||||
80,754 | Tyco Electronics, Ltd. (U.S. Shares) | 1,982,511 | ||||||||||
Electronic Components – Semiconductors – 4.2% | ||||||||||||
1,394,072 | ARM Holdings PLC** | 3,984,842 | ||||||||||
106,709 | Micron Technology, Inc.* | 1,126,847 | ||||||||||
5,111,689 | ||||||||||||
Electronic Connectors – 2.9% | ||||||||||||
77,029 | Amphenol Corp. – Class A | 3,557,199 | ||||||||||
Electronic Measuring Instruments – 2.5% | ||||||||||||
122,217 | Trimble Navigation, Ltd.* | 3,079,868 | ||||||||||
Enterprise Software/Services – 9.5% | ||||||||||||
17,345 | Advent Software, Inc.* | 706,462 | ||||||||||
89,445 | Autonomy Corp. PLC*,** | 2,180,030 | ||||||||||
75,846 | Aveva Group PLC** | 1,232,296 | ||||||||||
177,720 | Oracle Corp. | 4,361,248 | ||||||||||
72,145 | Taleo Corp.* | 1,696,850 | ||||||||||
52,956 | Temenos Group A.G.* | 1,367,411 | ||||||||||
11,544,297 | ||||||||||||
Human Resources – 4.9% | ||||||||||||
56,931 | Hewitt Associates, Inc. – Class A* | 2,405,904 | ||||||||||
214,700 | SuccessFactors, Inc.* | 3,559,726 | ||||||||||
5,965,630 | ||||||||||||
Internet Applications Software – 3.3% | ||||||||||||
66,082 | DealerTrack Holdings, Inc.* | 1,241,681 | ||||||||||
153,080 | Vocus, Inc.* | 2,755,440 | ||||||||||
3,997,121 | ||||||||||||
Internet Content – Information/News – 0.4% | ||||||||||||
80,490 | TechTarget, Inc.* | 453,159 | ||||||||||
Internet Security – 2.4% | ||||||||||||
163,259 | Symantec Corp.* | 2,920,704 | ||||||||||
Medical – Biomedical and Genetic – 6.0% | ||||||||||||
11,070 | Alexion Pharmaceuticals, Inc.* | 540,437 | ||||||||||
53,320 | Celgene Corp.* | 2,968,858 | ||||||||||
13,280 | Genzyme Corp.* | 650,853 | ||||||||||
10,803 | Gilead Sciences, Inc.* | 467,554 | ||||||||||
63,748 | Myriad Genetics, Inc.* | 1,663,823 | ||||||||||
21,585 | Vertex Pharmaceuticals, Inc.* | 924,917 | ||||||||||
7,216,442 | ||||||||||||
Multimedia – 3.2% | ||||||||||||
203,292 | News Corp. – Class A | 2,783,068 | ||||||||||
106,570 | WPP PLC** | 1,040,252 | ||||||||||
3,823,320 | ||||||||||||
Networking Products – 3.0% | ||||||||||||
153,790 | Cisco Systems, Inc.* | 3,681,733 | ||||||||||
Power Converters and Power Supply Equipment – 0.4% | ||||||||||||
210,000 | China High Speed Transmission Equipment Group Co., Ltd. | 509,358 | ||||||||||
Publishing – Newspapers – 0.6% | ||||||||||||
55,143 | New York Times Co. – Class A* | 681,567 | ||||||||||
Retail – Automobile – 0.5% | ||||||||||||
17,513 | Copart, Inc.* | 641,501 | ||||||||||
Semiconductor Components/Integrated Circuits – 7.0% | ||||||||||||
737,825 | Atmel Corp.* | 3,401,373 | ||||||||||
246,812 | Marvell Technology Group, Ltd. | 5,121,349 | ||||||||||
8,522,722 | ||||||||||||
Semiconductor Equipment – 0.7% | ||||||||||||
23,360 | KLA-Tencor Corp. | 844,698 | ||||||||||
Telecommunication Equipment – 4.1% | ||||||||||||
32,970 | Arris Group, Inc.* | 376,847 | ||||||||||
764,500 | BYD Electronic Company, Ltd.* | 620,369 | ||||||||||
33,491 | CommScope, Inc.* | 888,516 | ||||||||||
535,187 | Tellabs Inc.* | 3,039,863 | ||||||||||
4,925,595 | ||||||||||||
Telecommunication Equipment – Fiber Optics – 1.4% | ||||||||||||
70,098 | Corning, Inc. | 1,353,593 | ||||||||||
37,320 | Finisar, Corp.* | 332,894 | ||||||||||
1,686,487 | ||||||||||||
Telecommunication Services – 1.3% | ||||||||||||
53,660 | Amdocs, Ltd. (U.S. Shares)** | 1,530,920 | ||||||||||
Television – 1.1% | ||||||||||||
97,527 | CBS Corp. – Class B | 1,370,254 | ||||||||||
Toys – 2.6% | ||||||||||||
13,065 | Nintendo Co., Ltd.** | 3,099,101 | ||||||||||
Transactional Software – 2.1% | ||||||||||||
70,290 | Solera Holdings, Inc. | 2,531,143 | ||||||||||
Web Portals/Internet Service Providers – 5.4% | ||||||||||||
72,770 | AOL, Inc.* | 1,694,086 | ||||||||||
4,497 | Google, Inc. – Class A* | 2,788,050 | ||||||||||
124,935 | Yahoo!, Inc.* | 2,096,409 | ||||||||||
6,578,545 | ||||||||||||
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Global Technology Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Wireless Equipment – 4.7% | ||||||||||||
54,099 | Crown Castle International Corp. | $ | 2,112,025 | |||||||||
67,051 | QUALCOMM, Inc. | 3,101,779 | ||||||||||
51,978 | Telefonaktiebolaget L.M. Ericsson (ADR) | 477,678 | ||||||||||
5,691,482 | ||||||||||||
Total Common Stock (cost $93,442,000) | 119,289,616 | |||||||||||
Money Market – 1.5% | ||||||||||||
1,860,002 | Janus Cash Liquidity Fund LLC, 0% (cost $1,860,002) | 1,860,002 | ||||||||||
Total Investments (total cost $95,302,002) – 98.9% | 121,149,618 | |||||||||||
Securities Sold Short – (1.0)% | ||||||||||||
Computers – Peripheral Equipment – (0.6)% | ||||||||||||
(22,778 | ) | Synaptics, Inc.* | (698,146) | |||||||||
Electronic Components – Semiconductors – (0.4)% | ||||||||||||
(23,825 | ) | Intel Corp. | (486,030) | |||||||||
Total Securities Sold Short (proceeds $1,162,580) | (1,184,176) | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 1.1% | 1,312,483 | |||||||||||
Net Assets – 100% | $ | 121,277,925 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Bermuda | $ | 5,121,349 | 4.2% | |||||
Canada | 942,926 | 0.8% | ||||||
Cayman Islands | 1,145,175 | 1.0% | ||||||
Guernsey | 1,530,920 | 1.3% | ||||||
Hong Kong | 620,369 | 0.5% | ||||||
Ireland | 4,403,316 | 3.6% | ||||||
Japan | 4,021,014 | 3.3% | ||||||
Jersey | 1,040,252 | 0.9% | ||||||
Sweden | 477,678 | 0.4% | ||||||
Switzerland | 3,785,864 | 3.1% | ||||||
United Kingdom | 7,397,168 | 6.1% | ||||||
United States†† | 90,663,587 | 74.8% | ||||||
Total | $ | 121,149,618 | 100.0% |
†† | Includes Short-Term Securities (73.3% excluding Short-Term Securities) |
Summary of Investments by Country – (Short Positions)
% of Securities | ||||||||
Country | Value | Sold Short | ||||||
United States | $ | (1,184,176) | 100.0% | |||||
Total | $ | (1,184,176) | 100.0% |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
British Pound 1/14/10 | 1,130,000 | $ | 1,824,385 | $ | 38,709 | |||||||
British Pound 1/21/10 | 1,423,000 | 2,297,328 | 92,614 | |||||||||
Japanese Yen 1/14/10 | 131,500,000 | 1,412,837 | 49,900 | |||||||||
Japanese Yen 1/21/10 | 111,000,000 | 1,192,639 | 50,627 | |||||||||
Total | $ | 6,727,189 | $ | 231,850 |
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Global | ||||||
As of December 31, 2009 | Technology | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 95,302 | ||||
Unaffiliated investments at value | $ | 119,290 | ||||
Affiliated money market investments | 1,860 | |||||
Cash | 40 | |||||
Deposits with broker for short sales | 1,163 | |||||
Receivables: | ||||||
Portfolio shares sold | 69 | |||||
Dividends | 16 | |||||
Non-interested Trustees’ deferred compensation | 3 | |||||
Other Assets | 2 | |||||
Forward currency contracts | 232 | |||||
Total Assets | 122,675 | |||||
Liabilities: | ||||||
Payables: | ||||||
Short sales, at value(1) | 1,184 | |||||
Investments purchased | 14 | |||||
Portfolio shares repurchased | 24 | |||||
Advisory fees | 64 | |||||
Transfer agent fees and expenses | 3 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 20 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | 4 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | 3 | |||||
Accrued expenses and other payables | 80 | |||||
Total Liabilities | 1,397 | |||||
Net Assets | $ | 121,278 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 269,863 | ||||
Undistributed net investment income/(loss)* | (3) | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (174,639) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 26,057 | |||||
Total Net Assets | $ | 121,278 | ||||
Net Assets – Institutional Shares | $ | 2,835 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 640 | |||||
Net Asset Value Per Share | $ | 4.43 | ||||
Net Assets – Service Shares | $ | 99,472 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 21,846 | |||||
Net Asset Value Per Share | $ | 4.55 | ||||
Net Assets – Service II Shares | $ | 18,971 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 4,082 | |||||
Net Asset Value Per Share | $ | 4.65 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Includes proceeds of $1,162,580 |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Global | ||||||
For the fiscal year ended December 31, 2009 | Technology | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 2 | ||||
Dividends | 656 | |||||
Dividends from affiliates | 6 | |||||
Foreign tax withheld | (25) | |||||
Total Investment Income | 639 | |||||
Expenses: | ||||||
Advisory fees | 617 | |||||
Transfer agent fees and expenses | 8 | |||||
Registration fees | 3 | |||||
Custodian fees | 28 | |||||
Audit fees | 31 | |||||
Non-interested Trustees’ fees and expenses | 4 | |||||
Short sales dividend expense | 8 | |||||
Short sales interest expense | 3 | |||||
Stock loan fees | 32 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 195 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | 40 | |||||
Printing expenses | 111 | |||||
Other expenses | 89 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 1,169 | |||||
Expense and Fee Offset | (1) | |||||
Net Expenses | 1,168 | |||||
Net Investment Income/(Loss) | (529) | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (1,848) | |||||
Net realized gain/(loss) from short sales | (1,161) | |||||
Net realized gain/(loss) from options contracts | (414) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 47,348 | |||||
Net Gain/(Loss) on Investments | 43,925 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 43,396 |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Global | ||||||||||
Technology | ||||||||||
For the fiscal years ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | (529) | (281)(1) | |||||||
Net realized gain/(loss) from investment and foreign currency transactions | (1,848) | (12,928)(1) | ||||||||
Net realized gain/(loss) from short sales | (1,161) | 696 | ||||||||
Net realized gain/(loss) from options contracts | (414) | 341 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 47,348 | (55,385) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 43,396 | (67,557) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | – | (7) | ||||||||
Service Shares | – | (90) | ||||||||
Service II Shares | – | (17) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Service II Shares | – | – | ||||||||
Net (Decrease) from Dividends and Distributions | – | (114) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 1,646 | 746 | ||||||||
Service Shares | 18,060 | 13,420 | ||||||||
Service II Shares | 7,087 | 2,953 | ||||||||
Redemption fees | ||||||||||
Service II Shares | 10 | 4 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | – | 7 | ||||||||
Service Shares | – | 89 | ||||||||
Service II Shares | – | 17 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (1,199) | (1,832) | ||||||||
Service Shares | (15,808) | (33,335) | ||||||||
Service II Shares | (7,427) | (6,533) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 2,369 | (24,464) | ||||||||
Net Increase/(Decrease) in Net Assets | 45,765 | (92,135) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 75,513 | 167,648 | ||||||||
End of period | $ | 121,278 | $ | 75,513 | ||||||
Undistributed net investment income/(loss)* | $ | (3) | $ | (6) |
* | See Note 5 in Notes to Financial Statements | |
(1) | Prior year amounts have been reclassified due to the recharacterization of dividend income to return of capital with no impact to net assets. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each fiscal year
ended December 31
ended December 31
Janus Aspen Global Technology Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $2.82 | $5.02 | $4.13 | $3.82 | $3.42 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | (.04) | .09 | – | .03 | .05 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.65 | (2.28) | .91 | .28 | .35 | |||||||||||||||||
Total from Investment Operations | 1.61 | (2.19) | .91 | .31 | .40 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | (.01) | (.02) | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | – | (.01) | (.02) | – | – | |||||||||||||||||
Net Asset Value, End of Period | $4.43 | $2.82 | $5.02 | $4.13 | $3.82 | |||||||||||||||||
Total Return | 57.09% | (43.70)% | 22.07% | 8.12% | 11.70% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $2,835 | $1,395 | $4,093 | $2,673 | $2,989 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $2,218 | $3,000 | $3,293 | $2,823 | $3,100 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 0.95%(2) | 0.85%(2) | 0.82%(2) | 0.83% | 0.73% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 0.95%(2) | 0.85%(2) | 0.82%(2) | 0.83% | 0.73% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.31)% | 0.04%(3) | 0.70% | 0.13% | 0.01% | |||||||||||||||||
Portfolio Turnover Rate | 101% | 92% | 67% | 89% | 42% |
Service Shares
For a share outstanding during each fiscal year
ended December 31
ended December 31
Janus Aspen Global Technology Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $2.90 | $5.18 | $4.27 | $3.96 | $3.55 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | – | – | .02 | – | – | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.65 | (2.28) | .91 | .31 | .41 | |||||||||||||||||
Total from Investment Operations | 1.65 | (2.28) | .93 | .31 | .41 | |||||||||||||||||
Less Distributions: | �� | |||||||||||||||||||||
Dividends (from net investment income)* | – | – | (.02) | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | – | – | (.02) | – | – | |||||||||||||||||
Net Asset Value, End of Period | $4.55 | $2.90 | $5.18 | $4.27 | $3.96 | |||||||||||||||||
Total Return | 56.90% | (43.97)% | 21.70% | 7.83% | 11.55% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $99,472 | $62,274 | $137,367 | $132,281 | $138,172 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $78,097 | $101,523 | $133,221 | $134,175 | $134,959 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1) | 1.22%(2) | 1.11%(2) | 1.07%(2) | 1.08% | 0.98% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(1) | 1.22%(2) | 1.11%(2) | 1.07%(2) | 1.08% | 0.98% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.56)% | (0.23)%(3) | 0.39% | (0.12)% | (0.24)% | |||||||||||||||||
Portfolio Turnover Rate | 101% | 92% | 67% | 89% | 42% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | See Note 6 in Notes to Financial Statements. | |
(2) | Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets includes any applicable dividends and interest on short positions and may include stock loan fees. The ratio would have been 0.91% and 0.91%, respectively, in 2009, 0.85% and 0.85%, respectively, in 2008 and 0.82% and 0.82%, respectively, in 2007 for Institutional Shares, 1.18% and 1.17%, respectively, in 2009, 1.11% and 1.11%, respectively, in 2008 and 1.07% and 1.07%, respectively, in 2007 for Service Shares without the inclusion of any applicable dividends and interest on short positions and any stock loan fees. | |
(3) | As a result in the recharacterization of dividend income to return of capital, the Ratio of Net Investment Income/(Loss) to Average Net Assets has been reduced by 0.02% for Institutional Shares and 0.02% for Service Shares respectively. The adjustment had no impact on total net assets or total return of the class. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Service II Shares
For a share outstanding during each fiscal year
ended December 31
ended December 31
Janus Aspen Global Technology Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $2.96 | $5.28 | $4.35 | $4.03 | $3.62 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | – | – | .02 | – | – | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.69 | (2.32) | .93 | .32 | .41 | |||||||||||||||||
Total from Investment Operations | 1.69 | (2.32) | .95 | .32 | .41 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | (.02) | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Redemption Fees | –(1) | –(1) | –(1) | –(1) | –(1) | |||||||||||||||||
Total Distributions and Other | – | – | (.02) | – | – | |||||||||||||||||
Net Asset Value, End of Period | $4.65 | $2.96 | $5.28 | $4.35 | $4.03 | |||||||||||||||||
Total Return | 57.09% | (43.89)% | 21.75% | 7.94% | 11.33% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $18,971 | $11,844 | $26,188 | $24,868 | $25,882 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $16,142 | $19,274 | $25,482 | $25,605 | $24,247 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 1.20%(3) | 1.11%(3) | 1.07%(3) | 1.08% | 0.99% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.20%(3) | 1.11%(3) | 1.07%(3) | 1.08% | 0.98% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | (0.54)% | (0.24)%(4) | 0.39% | (0.13)% | (0.25)% | |||||||||||||||||
Portfolio Turnover Rate | 101% | 92% | 67% | 89% | 42% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Redemption fees aggregated less than $.01 on a per share basis for the fiscal year ended. | |
(2) | See Note 6 in Notes to Financial Statements | |
(3) | Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets includes any applicable dividends and interest on short positions and may include stock loan fees. The ratio would have been 1.17% and 1.17%, respectively, in 2009, 1.11% and 1.11%, respectively, in 2008 and 1.07% and 1.07%, respectively, in 2007 for Service II Shares without the inclusion of any applicable dividends and interest on short positions and any stock loan fees. | |
(4) | As a result in the recharacterization of dividend income to return of capital, the Ratio of Net Investment Income/(Loss) to Average Net Assets has been reduced by 0.03% for Service II Shares. The adjustment had no impact on total net assets or total return of the class. |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Global Science and Technology Funds | Funds that invest at least 65% of their equity portfolio in science and technology stocks. | |
Morgan Stanley Capital International World Information Technology Index | Is 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 | The Standard & Poor’s (“S&P”) 500® Index is 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 | |
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 by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Global Technology Portfolio | |||||||||||
Common Stock | |||||||||||
Cable Television | $ | – | $ | 921,913 | $ | – | |||||
Computers – Peripheral Equipment | – | 435,942 | – | ||||||||
E-Commerce/Services | 3,128,513 | 635,817 | – | ||||||||
Electronic Components – Semiconductors | 1,126,847 | 3,984,842 | – | ||||||||
Enterprise Software/Services | 6,764,560 | 4,779,737 | – | ||||||||
Muiltimedia | 2,783,068 | 1,040,252 | – | ||||||||
Power Converters and Power Supply Equipment | – | 509,358 | – | ||||||||
Telecommunication Equipment | 4,305,226 | 620,369 | – | ||||||||
Toys | – | 3,099,101 | – | ||||||||
Wireless Equipment | 5,213,804 | 477,678 | – | ||||||||
All Others | 79,462,589 | – | – | ||||||||
Money Market | – | 1,860,002 | – | ||||||||
Total Investments in Securities | $ | 102,784,607 | $ | 18,365,011 | $ | – | |||||
Investments in Securities Sold Short: | $ | (1,184,176) | $ | – | $ | – | |||||
Other Financial Instruments(a): | $ | – | $ | 231,850 | $ | – | |||||
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Global Technology Portfolio | $ | 18,657,814 | |||
16 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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. The Trust includes fourteen 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 three classes of shares: Institutional Shares, Service Shares and Service II Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans. Service Shares and Service II Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants. For Service II Shares, a redemption fee of 1% may be imposed on interests in separate accounts or plans held 60 days or less.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
may be allocated pro rata to the Portfolio. Each class of shares bears expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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.
18 | DECEMBER 31, 2009
Table of Contents
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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’s ability to establish and maintain appropriate systems and trading.
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option contracts to hedge against changes in interest
20 | DECEMBER 31, 2009
Table of Contents
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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
The Portfolio recognized realized gains/(losses) from written options contracts during the fiscal year ended December 31, 2009 as indicated in the table below:
Portfolio | Gains/(Losses) | ||||
Janus Aspen Global Technology Portfolio | $ | (104,127) | |||
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.
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
Written option activity for the fiscal year ended December 31, 2009 is indicated in the tables below:
Number of | Premiums | |||||||
Call Options | Contracts | Received | ||||||
Janus Aspen Global Technology Portfolio | ||||||||
Options outstanding at December 31, 2008 | 255 | $ | 37,066 | |||||
Options written | 5,244 | 502,236 | ||||||
Options closed | (5,107) | (467,294) | ||||||
Options expired | (362) | (62,853) | ||||||
Options exercised | (30) | (9,155) | ||||||
Options outstanding at December 31, 2009 | – | $ | – | |||||
Number of | Premiums | |||||||
Put Options | Contracts | Received | ||||||
Janus Aspen Global Technology Portfolio | ||||||||
Options outstanding at December 31, 2008 | – | $ | – | |||||
Options written | 355 | 70,922 | ||||||
Options closed | (355) | (70,922) | ||||||
Options expired | – | – | ||||||
Options exercised | – | – | ||||||
Options outstanding at December 31, 2009 | – | $ | – | |||||
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure
22 | DECEMBER 31, 2009
Table of Contents
as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as hedging instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 231,850 | Forward currency contracts | $ | – | ||||||
Total | $ | 231,850 | $ | – | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (414,205 | ) | $ | – | $ | (414,205 | ) | ||||||||
Foreign Exchange Contracts | – | – | – | (214,174 | ) | (214,174 | ) | |||||||||||||
Total | $ | – | $ | – | $ | (414,205 | ) | $ | (214,174 | ) | $ | (628,379 | ) | |||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Foreign Exchange Contracts | – | – | – | 37,645 | 37,645 | |||||||||||||||
Total | $ | – | $ | – | $ | – | $ | 37,645 | $ | 37,645 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or
24 | DECEMBER 31, 2009
Table of Contents
more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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. As of December 31, 2009, Janus Aspen Global Technology Portfolio had deposits with brokers of $1,162,580. The deposits represent restricted cash held as collateral in relation to short sales.
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 agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares and Service II Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 1.24% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares and Service II Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares and Service II Shares at an annual rate of up to 0.25% of Service Shares’ and Service II Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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
26 | DECEMBER 31, 2009
Table of Contents
compensation expenses for the fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown on the Statement of Operations.
A 1.00% redemption fee may be imposed on Service II Shares of the Portfolio held for 60 days or less. This fee is paid to the Portfolio rather than Janus Capital, and is designed to deter excessive short-term trading and to offset the brokerage commissions, market impact, and other costs associated with changes in the Portfolio’s asset level and cash flow due to short-term money movements in and out of the Portfolio. The redemption fee is accounted for as an addition to Paid-in Capital. Total redemption fees for the fiscal year ended December 31, 2009 were $10,362 for the Portfolio.
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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Global Technology Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 51,527,101 | $ | 49,676,099 | $ | 5,876 | $ | 1,860,002 | ||||||
Janus Institutional Money Market Fund – Institutional Shares(1) | 1,391 | 551,024 | 409 | – | ||||||||||
$ | 51,528,492 | $ | 50,227,123 | $ | 6,285 | $ | 1,860,002 | |||||||
(1) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Global Technology Portfolio | $ | – | $ | – | $ | (173,839,621) | $ | – | $ | (3,328) | $ | 25,258,329 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
For the year ended December 31, 2009
December 31, | December 31, | December 31, | December 31, | Accumulated | |||||||||||||
Portfolio | 2010 | 2011 | 2012 | 2017 | Capital Losses | ||||||||||||
Janus Aspen Global Technology Portfolio | $ | (148,365,762) | $ | (8,794,052) | $ | (1,233,946) | $ | (15,445,861) | $ | (173,839,621) | |||||||
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Global Technology Portfolio | $ | 230,513,839 | ||||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Global Technology Portfolio | $ | 95,869,693 | $ | 27,360,118 | $ | (2,080,193) | |||||
Information on the tax components of securities sold short as of December 31, 2009 is as follows:
Federal Tax | |||||||||||
Proceeds from | Unrealized | Unrealized | |||||||||
Portfolio | Securities Sold Short | (Appreciation) | Depreciation | ||||||||
Janus Aspen Global Technology Portfolio | $ | (1,162,580) | $ | (25,734) | $ | 4,138 | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Technology Portfolio | $ | – | $ | – | $ | – | $ | (524,999) | |||||||||
28 | DECEMBER 31, 2009
Table of Contents
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Technology Portfolio | $ | 113,614 | $ | – | $ | – | $ | (415,496) | |||||||||
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
For each fiscal year ended December 31
Janus Aspen Global | ||||
Portfolio | Technology Portfolio | |||
Institutional Shares | ||||
2009(1) | 0.95% | |||
2008(1) | 0.85% | |||
2007(1) | 0.82% | |||
2006(1) | 0.83% | |||
2005(1) | 0.73% | |||
Service Shares | ||||
2009(1) | 1.22% | |||
2008(1) | 1.11% | |||
2007(1) | 1.07% | |||
2006(1) | 1.08% | |||
2005(1) | 0.98% | |||
Service II Shares | ||||
2009(1) | 1.20% | |||
2008(1) | 1.11% | |||
2007(1) | 1.07% | |||
2006(1) | 1.08% | |||
2005(1) | 0.99% | |||
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
7. | Capital Share Transactions |
For each fiscal year ended | ||||||||||
December 31 (all numbers in | Janus Aspen Global Technology Portfolio | |||||||||
thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 488 | 176 | ||||||||
Reinvested dividends and distributions | – | 2 | ||||||||
Shares repurchased | (343) | (498) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 145 | (320) | ||||||||
Shares Outstanding, Beginning of Period | 495 | 815 | ||||||||
Shares Outstanding, End of Period | 640 | 495 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 4,803 | 3,035 | ||||||||
Reinvested dividends and distributions | – | 19 | ||||||||
Shares repurchased | (4,417) | (8,128) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 386 | (5,074) | ||||||||
Shares Outstanding, Beginning of Period | 21,460 | 26,534 | ||||||||
Shares Outstanding, End of Period | 21,846 | 21,460 | ||||||||
Transactions in Portfolio Shares – Service II Shares | ||||||||||
Shares sold | 1,984 | 670 | ||||||||
Reinvested dividends and distributions | – | 4 | ||||||||
Shares repurchased | (1,904) | (1,634) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 80 | (960) | ||||||||
Shares Outstanding, Beginning of Period | 4,002 | 4,962 | ||||||||
Shares Outstanding, End of Period | 4,082 | 4,002 |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 | $ | 95,209,143 | $ | 95,847,865 | $ | – | $ | – | ||||||
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital
30 | DECEMBER 31, 2009
Table of Contents
Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
Janus Aspen Series | 31
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Global Technology Portfolio:
of Janus Aspen Global Technology Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Global Technology Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
32 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 33
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
34 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 35
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
36 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. “Redemption Fees” (if applicable) refers to the fee paid to the Portfolio for shares held for 90 days or less by a shareholder. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses),
Janus Aspen Series | 37
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
38 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 39
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
40 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Burton H. Wilson 151 Detroit Street Denver, CO 80206 DOB: 1963 | Executive Vice President and Portfolio Manager Janus Aspen Global Technology Portfolio | 2/06-Present | Vice President and Assistant Director of Research of Janus Capital, and Portfolio Manager for other Janus accounts. Formerly, Research Analyst (2004-2009) for Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81119 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics
and holdings
and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 9 | |
Statement of Operations | 10 | |
Statements of Changes in Net Assets | 11 | |
Financial Highlights | 12 | |
Notes to Schedule of Investments | 13 | |
Notes to Financial Statements | 15 | |
Report of Independent Registered Public Accounting Firm | 28 | |
Additional Information | 29 | |
Explanations of Charts, Tables and Financial Statements | 32 | |
Designation Requirements | 35 | |
Trustees and Officers | 36 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of the manager’s best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to the manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Growth and Income Portfolio (unaudited)
Portfolio Snapshot We seek to generate capital appreciation and income through investing in a diversified portfolio of equities and income-generating assets. We primarily focus our analysis on larger, well-established companies with predictable and sustainable earnings growth. | Marc Pinto portfolio manager |
Performance Overview
For the 12-month period ended December 31, 2009, Janus Aspen Growth and Income Portfolio’s Institutional and Service Shares returned 39.28% and 38.83%, respectively. The Portfolio’s primary benchmark, the S&P 500® Index, and its secondary benchmark, the Russell 1000® Growth Index, returned 26.46% and 37.21%, respectively.
Economic Overview
Equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher. For the year, mid cap stocks easily outpaced small and large cap stocks, which performed similarly. Growth-style indices also outperformed value indices, as information technology was easily the best performing sector followed distantly by materials. Telecommunications and utilities were relative laggards. Commodities generally were higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Contributors to Relative Performance
The primary sectors that contributed to Portfolio performance during the period were consumer staples and financials. Within consumer staples, global brewer Anheuser-Busch InBev N.V.’s integration of Anheuser-Busch, which InBev acquired in 2008, has gone well and its Brazilian business has been performing strongly to offset weak volumes in Europe. The company also continued to pay down debt it incurred for the Anheuser-Busch acquisition. We believe management, which has been focused on reducing costs, will continue to execute well.
Within technology, computer and mobile device maker Apple, Inc. performed strongly. The computer and mobile device maker’s latest quarterly results showed the company continues to perform well among its various product lines. While we like that Apple continues to introduce its iPhone to new markets, we have been reducing our position on the stock’s strength.
Investment bank Goldman Sachs Group, Inc. also rebounded strongly during the period. We believe Goldman Sachs is well positioned to continue to capture market share in the U.S. and will benefit from improving capital markets. We also like that Goldman Sachs was among the first financial firms to repay the U.S. Government’s Troubled Asset Relief Program funding.
Detractors from Relative Performance
Our holdings in materials and our overweight in health care were the primary detractors. Among individual detractors, casino operator MGM Mirage declined, as investors were worried about the company’s ability to address financing issues regarding its City Center project in Las Vegas. The uncertainty caused us to exit the position at a loss, but after the company secured financing and issued new equity to remove the risk of bankruptcy, we re-established a position. The stock later rebounded and we decided to sell the name and capture gains. However, for the period the holding was a net detractor.
ConocoPhillips, the integrated energy company, traded down early in the year after the company took a major write-down on assets and suspended share repurchases although it did maintain its dividend. We chose to exit our position, as part of our original thesis was based on the company continuing its share buy-back program.
Nintendo Co., Ltd., the Japanese video game company, also weighed on performance, as a lack of new game titles for its Wii console hurt revenues for the company. Since the business was more cyclical and hit-driven than
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
we originally believed, we decided to exit the name in favor of other opportunities that offered better risk-reward opportunities.
Under certain circumstances and market conditions, we may initiate positions in put and call options in order to mitigate the risks and potentially enhance the performance of the portfolio. (Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.)
Outlook
While the economy is recovering, we believe growth will remain muted due to ongoing high unemployment, which will weigh on consumer spending and housing. However, we do not view inflation as a risk in 2010, which should allow the U.S. Federal Reserve (Fed) to keep interest rates low. We view the weaker economy as the larger impact on the markets for 2010, although this will be offset somewhat by low interest rates. In keeping with our outlook, the Portfolio is conservatively positioned with an emphasis on companies with sustainable cash flows, good dividend yields and strong earnings visibility, as opposed to names dependent on large increases in growth.
Thank you for your investment in Janus Aspen Growth and Income Portfolio.
Janus Aspen Growth and Income Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Anheuser-Busch InBev N.V. | 4.30% | |||
Apple, Inc. | 4.29% | |||
Goldman Sachs Group, Inc. | 2.25% | |||
Morgan Stanley | 1.96% | |||
Corning, Inc. | 1.84% |
5 Bottom Performers – Holdings
Contribution | ||||
MGM Mirage | –0.62% | |||
ConocoPhillips | –0.59% | |||
Nintendo Co., Ltd. | –0.41% | |||
Gilead Sciences, Inc. | –0.21% | |||
Bank of America Corp. | –0.19% |
5 Top Performers – Sectors*
Portfolio Weighting | S&P 500® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Information Technology | 12.43% | 22.52% | 18.13% | |||||||||
Consumer Staples | 6.98% | 15.42% | 12.11% | |||||||||
Financials | 6.39% | 12.32% | 13.16% | |||||||||
Consumer Discretionary | 5.30% | 9.07% | 8.98% | |||||||||
Health Care | 3.86% | 16.87% | 13.97% |
5 Bottom Performers – Sectors*
Portfolio Weighting | S&P 500® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Utilities | 0.00% | 0.00% | 3.99% | |||||||||
Telecommunication Services | 0.22% | 0.38% | 3.46% | |||||||||
Materials | 1.61% | 4.32% | 3.34% | |||||||||
Industrials | 2.11% | 5.68% | 10.22% | |||||||||
Energy | 3.23% | 13.42% | 12.64% |
* | 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 Series | 3
Table of Contents
Janus Aspen Growth and Income Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Morgan Stanley Diversified Banking Institutions | 3.0% | |||
Anheuser-Busch InBev N.V Brewery | 2.8% | |||
Roche Holding A.G. Medical – Drugs | 2.7% | |||
Goldman Sachs Group, Inc. Diversified Banking Institutions | 2.7% | |||
Hess Corp. Oil Companies – Integrated | 2.6% | |||
13.8% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 4.7% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Growth and Income Portfolio – Institutional Shares | 39.28% | 1.58% | –1.33% | 5.28% | 0.92% | ||||||
Janus Aspen Growth and Income Portfolio – Service Shares | 38.83% | 1.33% | –1.57% | 5.03% | 1.17% | ||||||
S&P 500® Index | 26.46% | 0.42% | –0.95% | 1.71% | |||||||
Russell 1000® Growth Index | 37.21% | 1.63% | –3.99% | 0.43% | |||||||
Lipper Quartile – Institutional Shares | 1st | 1st | 3rd | 1st | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Large-Cap Core Funds | 9/225 | 39/181 | 62/92 | 5/75 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Growth and Income Portfolio (unaudited)
The Portfolio’s performance may be affected by risks that include those associated with undervalued or overlooked companies and investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
May 31, 1998 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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 “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – May 1, 1998 |
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,202.40 | $ | 5.16 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,200.40 | $ | 6.54 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.26 | $ | 6.01 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.93% for Institutional Shares and 1.18% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
6 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Growth and Income Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Common Stock – 90.3% | ||||||||||||
Aerospace and Defense – 2.2% | ||||||||||||
10,110 | Boeing Co. | $ | 547,255 | |||||||||
23,230 | Empresa Brasileira de Aeronautica S.A. (ADR) | 513,615 | ||||||||||
1,060,870 | ||||||||||||
Agricultural Chemicals – 3.2% | ||||||||||||
5,460 | Monsanto Co. | 446,355 | ||||||||||
19,050 | Syngenta A.G. (ADR)** | 1,071,944 | ||||||||||
1,518,299 | ||||||||||||
Applications Software – 0.5% | ||||||||||||
7,240 | Microsoft Corp. | 220,748 | ||||||||||
Athletic Footwear – 1.8% | ||||||||||||
13,060 | NIKE, Inc. – Class B | 862,874 | ||||||||||
Automotive – Cars and Light Trucks – 0.3% | ||||||||||||
2,933 | Daimler A.G.** | 156,329 | ||||||||||
Brewery – 2.8% | ||||||||||||
25,779 | Anheuser-Busch InBev N.V.** | 1,332,822 | ||||||||||
44,576 | Anheuser-Busch InBev N.V. – VVPR Strip*,** | 319 | ||||||||||
1,333,141 | ||||||||||||
Cable Television – 1.2% | ||||||||||||
16,495 | DIRECTV Group, Inc.* | 550,108 | ||||||||||
Casino Hotels – 0.4% | ||||||||||||
18,882 | Crown, Ltd. | 135,314 | ||||||||||
1,169 | Wynn Resorts, Ltd. | 68,071 | ||||||||||
203,385 | ||||||||||||
Cellular Telecommunications – 0.7% | ||||||||||||
13,345 | Vodafone Group PLC** | 308,136 | ||||||||||
Commercial Banks – 2.7% | ||||||||||||
10,400 | ICICI Bank, Ltd. (ADR) | 392,184 | ||||||||||
14,830 | Itau Unibanco Holding S.A. (ADR) | 338,717 | ||||||||||
20,762 | Standard Chartered PLC** | 519,740 | ||||||||||
1,250,641 | ||||||||||||
Commercial Services – Finance – 1.1% | ||||||||||||
28,065 | Western Union Co. | 529,025 | ||||||||||
Computers – 5.3% | ||||||||||||
4,665 | Apple, Inc.* | 983,662 | ||||||||||
5,575 | International Business Machines Corp. | 729,768 | ||||||||||
11,495 | Research In Motion, Ltd. (U.S. Shares)* | 776,372 | ||||||||||
2,489,802 | ||||||||||||
Diversified Banking Institutions – 8.9% | ||||||||||||
39,081 | Bank of America Corp. | 588,560 | ||||||||||
18,790 | Credit Suisse Group A.G. (ADR)** | 923,716 | ||||||||||
7,500 | Goldman Sachs Group, Inc. | 1,266,300 | ||||||||||
47,440 | Morgan Stanley | 1,404,223 | ||||||||||
4,182,799 | ||||||||||||
Diversified Operations – 1.8% | ||||||||||||
68,000 | China Merchants Holdings International Co. Ltd. | 219,049 | ||||||||||
6,800 | Danaher Corp. | 511,361 | ||||||||||
230,000 | Melco International Development, Ltd.* | 105,201 | ||||||||||
835,611 | ||||||||||||
E-Commerce/Services – 1.1% | ||||||||||||
19,825 | eBay, Inc.* | 466,681 | ||||||||||
5,730 | Liberty Media Corp. – Interactive – Class A* | 62,113 | ||||||||||
528,794 | ||||||||||||
Electronic Components – Semiconductors – 0.8% | ||||||||||||
3,910 | Broadcom Corp. – Class A* | 122,970 | ||||||||||
8,795 | Microchip Technology, Inc. | 255,582 | ||||||||||
378,552 | ||||||||||||
Electronic Connectors – 0.9% | ||||||||||||
8,865 | Amphenol Corp. – Class A | 409,386 | ||||||||||
Enterprise Software/Services – 2.8% | ||||||||||||
12,155 | CA, Inc. | 273,001 | ||||||||||
43,570 | Oracle Corp. | 1,069,208 | ||||||||||
1,342,209 | ||||||||||||
Fiduciary Banks – 0.3% | ||||||||||||
2,347 | Northern Trust Corp. | 122,983 | ||||||||||
Finance – Investment Bankers/Brokers – 0.5% | ||||||||||||
11,905 | Charles Schwab Corp. | 224,052 | ||||||||||
Finance – Other Services – 0.6% | ||||||||||||
12,031 | NYSE Euronext | 304,384 | ||||||||||
Food – Miscellaneous/Diversified – 2.4% | ||||||||||||
22,835 | Nestle S.A.** | 1,110,408 | ||||||||||
Food – Retail – 0.5% | ||||||||||||
35,508 | Tesco PLC** | 243,878 | ||||||||||
Industrial Gases – 0.7% | ||||||||||||
4,335 | Praxair, Inc. | 348,144 | ||||||||||
Medical – Biomedical and Genetic – 2.5% | ||||||||||||
9,995 | Celgene Corp.* | 556,521 | ||||||||||
11,910 | Gilead Sciences, Inc.* | 515,465 | ||||||||||
4,225 | OSI Pharmaceuticals, Inc.* | 131,102 | ||||||||||
1,203,088 | ||||||||||||
Medical – Drugs – 5.5% | ||||||||||||
11,295 | Abbott Laboratories | 609,817 | ||||||||||
27,845 | Bristol-Myers Squibb Co. | 703,086 | ||||||||||
7,545 | Roche Holding A.G.** | 1,284,707 | ||||||||||
2,597,610 | ||||||||||||
Medical – HMO – 0.9% | ||||||||||||
13,535 | UnitedHealth Group, Inc. | 412,547 | ||||||||||
Medical Products – 4.1% | ||||||||||||
12,915 | Baxter International, Inc. | 757,852 | ||||||||||
9,750 | Covidien PLC (U.S. Shares)** | 466,928 | ||||||||||
11,205 | Johnson & Johnson | 721,714 | ||||||||||
1,946,494 | ||||||||||||
Metal Processors and Fabricators – 0.9% | ||||||||||||
3,905 | Precision Castparts Corp. | 430,917 | ||||||||||
Multi-Line Insurance – 0.6% | ||||||||||||
5,930 | ACE, Ltd. (U.S. Shares)** | 298,872 | ||||||||||
Networking Products – 0.8% | ||||||||||||
15,265 | Cisco Systems, Inc.* | 365,444 | ||||||||||
Oil and Gas Drilling – 0.7% | ||||||||||||
4,165 | Transocean, Ltd. (U.S. Shares)** | 344,862 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Growth and Income Portfolio
Schedule of Investments
As of December 31, 2009
Shares or Principal Amount | Value | |||||||||||
Oil Companies – Exploration and Production – 5.9% | ||||||||||||
29,033 | EnCana Corp. (U.S. Shares) | $ | 940,379 | |||||||||
8,570 | EOG Resources, Inc. | 833,861 | ||||||||||
12,465 | Occidental Petroleum Corp. | 1,014,028 | ||||||||||
2,788,268 | ||||||||||||
Oil Companies – Integrated – 6.2% | ||||||||||||
29,033 | Cenovus Energy, Inc. | 731,632 | ||||||||||
19,994 | Hess Corp. | 1,209,636 | ||||||||||
23,320 | Petroleo Brasileiro S.A. (U.S. Shares) | 988,535 | ||||||||||
2,929,803 | ||||||||||||
Optical Supplies – 1.8% | ||||||||||||
5,135 | Alcon, Inc. (U.S. Shares)** | 843,937 | ||||||||||
Power Converters and Power Supply Equipment – 0.4% | ||||||||||||
12,410 | Suntech Power Holdings Co., Ltd. (ADR)* | 206,378 | ||||||||||
Real Estate Operating/Development – 0.8% | ||||||||||||
94,765 | Hang Lung Properties, Ltd. | 370,224 | ||||||||||
Retail – Building Products – 1.4% | ||||||||||||
23,236 | Home Depot, Inc. | 672,217 | ||||||||||
Retail – Drug Store – 1.4% | ||||||||||||
20,501 | CVS Caremark Corp. | 660,337 | ||||||||||
Retail – Jewelry – 1.0% | ||||||||||||
10,480 | Tiffany & Co. | 450,640 | ||||||||||
Retail – Regional Department Stores – 0.7% | ||||||||||||
5,930 | Kohl’s Corp.* | 319,805 | ||||||||||
Semiconductor Components/Integrated Circuits – 0.5% | ||||||||||||
11,880 | Marvell Technology Group, Ltd. | 246,510 | ||||||||||
Soap and Cleaning Preparations – 1.6% | ||||||||||||
14,347 | Reckitt Benckiser Group PLC** | 776,998 | ||||||||||
Telecommunication Equipment – Fiber Optics – 2.1% | ||||||||||||
50,351 | Corning, Inc. | 972,278 | ||||||||||
Television – 1.5% | ||||||||||||
49,230 | CBS Corp. – Class B | 691,682 | ||||||||||
Tobacco – 2.8% | ||||||||||||
23,690 | Altria Group, Inc. | 465,035 | ||||||||||
17,640 | Philip Morris International, Inc. | 850,071 | ||||||||||
1,315,106 | ||||||||||||
Transportation – Railroad – 0.6% | ||||||||||||
4,150 | Union Pacific Corp. | 265,185 | ||||||||||
Wireless Equipment – 2.1% | ||||||||||||
21,110 | QUALCOMM, Inc. | 976,549 | ||||||||||
Total Common Stock (cost $35,036,731) | 42,600,309 | |||||||||||
Corporate Bonds – 1.6% | ||||||||||||
Automotive – Cars and Light Trucks – 0.5% | ||||||||||||
$ | 177,000 | Ford Motor Co., 4.2500%, 11/15/16 | 221,914 | |||||||||
Building – Residential and Commercial – 0.1% | ||||||||||||
78,000 | Meritage Homes Corp. 6.2500%, 3/15/15 | 71,760 | ||||||||||
Power Converters and Power Supply Equipment – 1.0% | ||||||||||||
291,000 | JA Solar Holdings Co., Ltd. 4.5000%, 5/15/13 | 226,980 | ||||||||||
287,000 | Suntech Power Holdings Co., Ltd. 3.0000%, 3/15/13 (144A) | 227,447 | ||||||||||
454,427 | ||||||||||||
Total Corporate Bonds (cost $803,976) | 748,101 | |||||||||||
Preferred Stock – 0.6% | ||||||||||||
Metal – Copper – 0.6% | ||||||||||||
2,410 | Freeport-McMoRan Copper & Gold, Inc. convertible, 6.7500% (cost $241,000) | 277,632 | ||||||||||
U.S. Treasury Notes/Bonds – 2.1% | ||||||||||||
$ | 224,000 | 2.7500%, 7/31/10 | 227,194 | |||||||||
311,000 | 1.5000%, 10/31/10 | 313,755 | ||||||||||
224,000 | 4.8750%, 7/31/11 | 237,886 | ||||||||||
224,000 | 3.3750%, 7/31/13 | 235,130 | ||||||||||
Total U.S. Treasury Notes/Bonds (cost $994,419) | 1,013,965 | |||||||||||
Money Market – 5.0% | ||||||||||||
2,371,759 | Janus Cash Liquidity Fund LLC, 0% (cost $2,371,759) | 2,371,759 | ||||||||||
Total Investments (total cost $39,447,885) – 99.6% | 47,011,766 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.4% | 173,112 | |||||||||||
Net Assets – 100% | $ | 47,184,878 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 135,315 | 0.3% | |||||
Belgium | 1,333,141 | 2.9% | ||||||
Bermuda | 246,510 | 0.5% | ||||||
Brazil | 1,840,867 | 3.9% | ||||||
Canada | 2,448,383 | 5.2% | ||||||
Cayman Islands | 660,806 | 1.4% | ||||||
Germany | 156,329 | 0.3% | ||||||
Hong Kong | 694,475 | 1.5% | ||||||
India | 392,184 | 0.8% | ||||||
Ireland | 466,928 | 1.0% | ||||||
Switzerland | 5,878,445 | 12.5% | ||||||
United Kingdom | 1,848,751 | 3.9% | ||||||
United States†† | 30,909,632 | 65.8% | ||||||
Total | $ | 47,011,766 | 100.0% |
†† | Includes Cash Equivalents (60.7% excluding Cash Equivalents) |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
British Pound 1/14/10 | 245,000 | $ | 395,553 | $ | 8,914 | |||||||
British Pound 1/21/10 | 279,000 | 450,425 | 18,158 | |||||||||
Euro 1/14/10 | 119,000 | 170,714 | 6,603 | |||||||||
Euro 1/21/10 | 120,000 | 172,147 | 7,591 | |||||||||
Euro 2/4/10 | 85,000 | 121,934 | 3,461 | |||||||||
Swiss Franc 1/14/10 | 595,000 | 575,764 | 9,628 | |||||||||
Swiss Franc 1/21/10 | 523,000 | 506,126 | 13,337 | |||||||||
Total | $ | 2,392,663 | $ | 67,692 |
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Growth | ||||||
and | ||||||
As of December 31, 2009 | Income | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 39,448 | ||||
Unaffiliated investments at value | $ | 44,640 | ||||
Affiliated money market investments | 2,372 | |||||
Receivables: | ||||||
Investments sold | 141 | |||||
Portfolio shares sold | 4 | |||||
Dividends | 91 | |||||
Interest | 18 | |||||
Non-interested Trustees’ deferred compensation | 1 | |||||
Other assets | 3 | |||||
Forward currency contracts | 68 | |||||
Total Assets | 47,338 | |||||
Liabilities: | ||||||
Payables: | ||||||
Due to Custodian | 4 | |||||
Investments purchased | 52 | |||||
Portfolio shares repurchased | 16 | |||||
Advisory fees | 25 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 5 | |||||
Transfer agent fees and expenses | 1 | |||||
Custodian fees | 10 | |||||
Audit fees | 17 | |||||
Printing fees | 11 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | 1 | |||||
Accrued expenses and other payables | 10 | |||||
Total Liabilities | 153 | |||||
Net Assets | $ | 47,185 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 96,271 | ||||
Undistributed net investment income/(loss)* | 59 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (56,779) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 7,634 | |||||
Total Net Assets | $ | 47,185 | ||||
Net Assets – Institutional Shares | $ | 23,588 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 1,475 | |||||
Net Asset Value Per Share | $ | 15.99 | ||||
Net Assets – Service Shares | $ | 23,597 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 1,469 | |||||
Net Asset Value Per Share | $ | 16.06 |
* | See Note 5 in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Growth | ||||||
and | ||||||
For the fiscal year ended December 31, 2009 | Income | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | 90 | |||||
Dividends | 735 | |||||
Dividends from affiliates | 5 | |||||
Foreign tax withheld | (34) | |||||
Total Investment Income | 796 | |||||
Expenses: | ||||||
Advisory fees | 260 | |||||
Transfer agent fees and expenses | 5 | |||||
Audit fees | 30 | |||||
Custodian fees | 29 | |||||
Registration fees | 27 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 51 | |||||
System fees | 31 | |||||
Other expenses | 37 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 472 | |||||
Expense and Fee Offset | (1) | |||||
Net Expenses | 471 | |||||
Net Investment Income/(Loss) | 325 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (3,294) | |||||
Net realized gain/(loss) from options contracts | (746) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 17,392 | |||||
Net Gain/(Loss) on Investments | 13,352 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 13,677 |
See Notes to Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Growth | ||||||||||
and | ||||||||||
Income | ||||||||||
For the fiscal years ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 325 | $ | 607 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (3,294) | (7,481) | ||||||||
Net realized gain/(loss) from swap contracts | – | (75) | ||||||||
Net realized gain/(loss) from options contracts | (746) | (184) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 17,392 | (22,603) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 13,677 | (29,736) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (174) | (298) | ||||||||
Service Shares | (134) | (232) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Decrease from Dividends and Distributions | (308) | (530) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 2,480 | 1,106 | ||||||||
Service Shares | 6,746 | 6,147 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 174 | 298 | ||||||||
Service Shares | 134 | 232 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (5,688) | (9,005) | ||||||||
Service Shares | (8,415) | (10,348) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (4,569) | (11,570) | ||||||||
Net Increase/(Decrease) in Net Assets | 8,800 | (41,836) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 38,385 | 80,221 | ||||||||
End of period | $ | 47,185 | $ | 38,385 | ||||||
Undistributed net investment income/(loss)* | $ | 59 | $ | 42 |
* | See Note 5 in Notes to Financial Statements |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding through each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Growth and Income Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $11.58 | $19.89 | $18.67 | $17.57 | $15.70 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .12 | .18 | .37 | .29 | .10 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 4.40 | (8.32) | 1.26 | 1.13 | 1.88 | |||||||||||||||||
Total from Investment Operations | 4.52 | (8.14) | 1.63 | 1.42 | 1.98 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.11) | (.17) | (.41) | (.32) | (.11) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.11) | (.17) | (.41) | (.32) | (.11) | |||||||||||||||||
Net Asset Value, End of Period | $15.99 | $11.58 | $19.89 | $18.67 | $17.57 | |||||||||||||||||
Total Return | 39.16% | (41.12%) | 8.70% | 8.12% | 12.62% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $23,588 | $19,645 | $42,718 | $46,586 | $38,146 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $21,491 | $30,929 | $46,374 | $43,210 | $31,257 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 1.00% | 0.91% | 0.82% | 0.86% | 0.74% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.00% | 0.91% | 0.82% | 0.86% | 0.74% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.90% | 1.14% | 2.02% | 1.97% | 0.62% | |||||||||||||||||
Portfolio Turnover Rate | 40% | 58% | 74% | 58% | 37% |
Service Shares
For a share outstanding through each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Growth and Income Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005(3) | ||||||||||||||||||
Net Asset Value, Beginning of Period | $11.65 | $20.01 | $18.79 | $17.66 | $15.77 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .09 | .15 | .32 | .31 | .07 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 4.41 | (8.38) | 1.27 | 1.06 | 1.88 | |||||||||||||||||
Total from Investment Operations | 4.50 | (8.23) | 1.59 | 1.37 | 1.95 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.09) | (.13) | (.37) | (.24) | (.06) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.09) | (.13) | (.37) | (.24) | (.06) | |||||||||||||||||
Net Asset Value, End of Period | $16.06 | $11.65 | $20.01 | $18.79 | $17.66 | |||||||||||||||||
Total Return | 38.71% | (41.26)% | 8.44% | 7.83% | 12.40% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $23,597 | $18,740 | $37,503 | $37,176 | $55,551 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $20,448 | $28,949 | $36,644 | $44,953 | $53,705 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(1)(2) | 1.25% | 1.16% | 1.07% | 1.09% | 0.99% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.25% | 1.16% | 1.07% | 1.09% | 0.99% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.64% | 0.88% | 1.76% | 1.70% | 0.37% | |||||||||||||||||
Portfolio Turnover Rate | 40% | 58% | 74% | 58% | 37% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01% for 2009, 2008, 2007, 2006, and 2005. | |
(2) | See “Explanations of Charts, Tables and Financial Statements.” | |
(3) | Certain prior year amounts have been reclassified to conform with current year presentation. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Large-Cap Core Funds | Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. | |
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 | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
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. | |
ADR | American Depositary Receipt | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. | |
VVPR Strip | The Voter Verified Paper Record (VVPR) strip is a coupon which, if presented along with the dividend coupon of the ordinary share, allows the benefit of a reduced withholding tax on the dividends paid by the company. This strip is quoted separately from the ordinary share and is freely negotiable. |
* | Non-income producing security. | |
** | A portion of this security has been segregated by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Growth and Income Portfolio | |||||||||||
Common Stock | |||||||||||
Aerospace and Defense | $ | 547,255 | $ | 513,615 | $ | – | |||||
Agricultural Chemicals | 446,355 | 1,071,944 | – | ||||||||
Brewery | – | 1,333,141 | – | ||||||||
Casino Hotels | 68,071 | 135,314 | – | ||||||||
Cellular Telecommunications | – | 308,136 | – | ||||||||
Commercial Banks | – | 1,250,641 | – | ||||||||
Diversified Banking Institutions | 3,259,083 | 923,716 | – | ||||||||
Diversified Operations | 511,361 | 324,250 | – | ||||||||
Food – Miscellaneous/Diversified | – | 1,110,408 | – | ||||||||
Food – Retail | – | 243,878 | – | ||||||||
Medical – Drugs | 1,312,903 | 1,284,707 | – | ||||||||
Oil Companies – Integrated | 1,941,268 | 988,535 | – | ||||||||
Power Converters and Power Supply Equipment | – | 206,378 | – | ||||||||
Real Estate Operating/Development | – | 370,224 | – | ||||||||
Soap and Cleaning Preparations | – | 776,998 | – | ||||||||
All Other | 23,672,128 | – | – | ||||||||
Corporate Bonds | – | 748,101 | – | ||||||||
Preferred Stock | – | 277,632 | – |
Janus Aspen Series | 13
Table of Contents
Notes to Schedule of Investments (continued)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
U.S. Treasury Notes/Bonds | – | 1,013,965 | – | ||||||||
Money Market | – | 2,371,759 | – | ||||||||
Total Investments in Securities | $ | 31,758,424 | $ | 15,253,342 | $ | – | |||||
Other Financial Instruments(a): | $ | – | $ | 67,692 | $ | – | |||||
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Growth and Income Portfolio | $ | 9,683,594 | |||
14 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 Growth and Income 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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Certain prior year amounts in the Financial Highlights have been reclassified to conform with current year presentation.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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.
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (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 expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
16 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its
18 | DECEMBER 31, 2009
Table of Contents
investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
20 | DECEMBER 31, 2009
Table of Contents
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as | Statement of Assets and | Statement of Assets and | ||||||||||
hedging instruments | Liabilities Location | Fair Value | Liabilities Location | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 67,692 | Forward currency contracts | $ | – | ||||||
Total | $ | 67,692 | $ | – | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward | ||||||||||||||||||||
Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (746,067 | ) | $ | – | $ | (746,067 | ) | ||||||||
Foreign Exchange Contracts | – | – | – | (249,223 | ) | (249,223 | ) | |||||||||||||
Total | $ | – | $ | – | $ | (746,067 | ) | $ | (249,223 | ) | $ | (995,290 | ) | |||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Forward | ||||||||||||||||||||
Currency | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | 686,566 | $ | – | $ | 686,566 | ||||||||||
Foreign Exchange Contracts | – | – | – | 164,117 | 164,117 | |||||||||||||||
Total | $ | – | $ | – | $ | 686,566 | $ | 164,117 | $ | 850,683 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral
22 | DECEMBER 31, 2009
Table of Contents
may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Growth and Income Portfolio | All Asset Levels | 0.62 | ||||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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
24 | DECEMBER 31, 2009
Table of Contents
management pooled investment vehicles and the Investing Fund.
During the fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Growth and Income Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 14,836,787 | $ | 12,468,028 | $ | 3,187 | $ | 2,371,759 | ||||||
Janus Institutional Cash Management Fund – Institutional Shares(1) | 1,900 | 1,246,917 | 952 | – | ||||||||||
Janus Institutional Money Market Fund – Institutional Shares(1) | 2,503 | 1,439,693 | 1,153 | – | ||||||||||
$ | 14,841,190 | $ | 15,154,638 | $ | 5,292 | $ | 2,371,759 | |||||||
(1) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Other Book | ||||||||||||||||||
Ordinary | Long-Term | Accumulated | Post-October | to Tax | Net Tax Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Growth and Income Portfolio | $ | 60,316 | $ | – | $ | (56,696,838) | $ | – | $ | 560 | $ | 7,549,423 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | December 31, | December 31, | Accumulated | |||||||||||||
Portfolio | 2010 | 2011 | 2016 | 2017 | Capital Losses | ||||||||||||
Janus Aspen Growth and Income Portfolio(1) | $ | (28,876,109) | $ | (15,741,304) | $ | (4,926,310) | $ | (7,153,115) | $ | (56,696,838) | |||||||
(1) | Capital loss carryover is subject to annual limitations. |
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Growth and Income Portfolio | $ | 516,392 | ||||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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.
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Growth and Income Portfolio | $ | 39,462,343 | $ | 9,172,231 | $ | (1,622,808) | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
�� | |||||||||||||||||
Janus Aspen Growth and Income Portfolio | $ | 307,736 | $ | – | $ | – | $ | – | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Growth and Income Portfolio | $ | 530,413 | $ | – | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
Janus Aspen Growth and Income Portfolio | ||||||||||
For each fiscal year ended December 31 (all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 194 | 70 | ||||||||
Reinvested dividends and distributions | 12 | 20 | ||||||||
Shares repurchased | (427) | (541) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (221) | (451) | ||||||||
Shares Outstanding, Beginning of Period | 1,696 | 2,147 | ||||||||
Shares Outstanding, End of Period | 1,475 | 1,696 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 502 | 354 | ||||||||
Reinvested dividends and distributions | 10 | 15 | ||||||||
Shares repurchased | (652) | (635) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (140) | (266) | ||||||||
Shares Outstanding, Beginning of Period | 1,609 | 1,875 | ||||||||
Shares Outstanding, End of Period | 1,469 | 1,609 |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 Growth and Income Portfolio | $ | 16,152,543 | $ | 18,967,180 | $ | – | $ | – | ||||||
26 | DECEMBER 31, 2009
Table of Contents
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
On December 11, 2009, the Board of Trustees of Janus Aspen Series approved a plan to liquidate and terminate the Portfolio. Effective April 28, 2010, the Portfolio will no longer be offered for sale and will be liquidated on or about April 30, 2010.
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, the date of issuance of the Portfolio’s financial statements, and determined that there were no other material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
Janus Aspen Series | 27
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Growth and Income Portfolio:
of Janus Aspen Growth and Income Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Growth and Income Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
28 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
30 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 31
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
32 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
Janus Aspen Series | 33
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
34 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Growth and Income Portfolio | 100% | |||||||||
Janus Aspen Series | 35
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
36 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products. | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 37
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Marc Pinto 151 Detroit Street Denver, CO 80206 DOB: 1961 | Executive Vice President and Portfolio Manager Janus Aspen Growth and Income Portfolio | 11/07-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
38 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 39
Table of Contents
Notes
40 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81117 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 12 | |
Statement of Operations | 13 | |
Statements of Changes in Net Assets | 14 | |
Financial Highlights | 15 | |
Notes to Schedule of Investments | 16 | |
Notes to Financial Statements | 17 | |
Report of Independent Registered Public Accounting Firm | 28 | |
Additional Information | 29 | |
Explanations of Charts, Tables and Financial Statements | 32 | |
Designation Requirements | 35 | |
Trustees and Officers | 36 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
Management Commentary
The Management Commentary in this report includes valuable insight from each of 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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of their best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees (applicable to Service Shares only) and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, the administrative service fees applicable to Service Shares, brokerage commissions, dividends, interest, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectus.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen INTECH Risk-Managed Core Portfolio (unaudited)
Portfolio Snapshot This portfolio uses a mathematically-based investment process that seeks to capitalize on the natural volatility of stock prices. The primary aim of this strategy is to outperform the benchmark index without increasing risk. | Managed by INTECH Investment Management LLC |
Performance Overview
For the 12-month period ended December 31, 2009, Janus Aspen INTECH Risk-Managed Core Portfolio returned 22.55% for its Service Shares. This compares to the 26.46% return posted by the S&P 500® Index, the Portfolio’s benchmark.
Investment Strategy in This Environment
While INTECH does not employ fundamental analysis in the management of the Portfolio, fundamentals can have a significant impact on the general direction of the market in which we participate. The Portfolio’s goal is to produce long-term returns in excess of its benchmark with an equal or lesser amount of risk.
INTECH’s mathematical investment process seeks to build a more efficient portfolio than its benchmark, the S&P 500® Index. With a focus on risk management, investment decisions are governed by a mathematical investment process. The process does not attempt to predict the direction of the market, nor does it have a particular view of any stock in the Portfolio.
Performance Review
As stock prices moved naturally throughout the period, we continued to implement our mathematical process in a disciplined manner in an effort to maintain a more efficient portfolio than the benchmark, without increasing relative risk. While other factors may influence performance over the short term, we believe that the consistent application of our process will help the Portfolio perform well over the long term.
In INTECH’s history, which spans more than 22 years, we have experienced periods of both underperformance and outperformance relative to the benchmark. From our perspective, the key is to keep periods of underperformance both short in duration and mild in scope. INTECH aims to achieve excess returns over the long term and we believe the Portfolio remains well positioned for long-term capital growth.
Investment Strategy and Outlook
INTECH’s mathematical, risk-managed investment process seeks to outperform the S&P 500® Index over the long term, while attempting to manage risk relative to the benchmark. We will continue implementing the process in a disciplined and deliberate manner in an effort to achieve our long-term performance goals. The Portfolio may underperform during shorter time periods, but has the goal of outperformance over the long term. Risk management remains essential to the investment process. We will continue to make marginal improvements to the mathematical process, seeking an efficient portfolio that offers better long-term results than the benchmark, regardless of the market’s direction.
Thank you for your investment in Janus Aspen INTECH Risk-Managed Core Portfolio.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Exxon Mobil Corp. Oil Companies – Integrated | 5.3% | |||
AT&T, Inc. Telephone – Integrated | 3.3% | |||
International Business Machines Corp. Computers | 2.1% | |||
Johnson & Johnson Medical Products | 1.6% | |||
Apple, Inc. Computers | 1.6% | |||
13.9% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
* Includes Liabilities, net of Cash, receivables and Other Assets of (0.7)%.
Emerging markets comprised 0.1% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 3
Table of Contents
Janus Aspen INTECH Risk-Managed Core Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Since | Total Annual Fund | Net Annual Fund | |||||||
Year | Year | Inception* | Operating Expenses | Operating Expenses | |||||||
Janus Aspen INTECH Risk-Managed Core Portfolio – Service Shares | 22.55% | 0.37% | 5.93% | 1.71% | 1.45% | ||||||
S&P 500® Index | 26.46% | 0.42% | 5.04% | ||||||||
Lipper Quartile – Service Shares | 4th | 2nd | 1st | ||||||||
Lipper Ranking – Service Shares based on total returns for Variable Annuity Large-Cap Core Funds | 186/225 | 90/181 | 37/161 | ||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, the administrative services fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
The Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The proprietary mathematical process used by INTECH Investment Management LLC (“INTECH”) may not achieve the desired results. The rebalancing techniques used by the Portfolio may result in a higher portfolio turnover rate, higher expenses compared to a “buy and hold” or index portfolio strategy.
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio invests in Real Estate Investment Trusts (REITs), which may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic region. REITs may be subject to risks including, but not limited to: legal, political, liquidity, and interest rate risks, a decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrowers. To the extent the Portfolio invests in foreign REITs, the Portfolio may be subject to fluctuations in currency rates or political or economic conditions in a particular country.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
January 31, 2003 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
See Notes to Schedule of Investments for index definitions.
The weighting of securities within the Portfolio may differ significantly from the weightings within the index. The index is unmanaged and is not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – January 2, 2003 |
Portfolio Expenses
The example below shows you the ongoing costs (in dollars) of investing in your Portfolio and allows you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in this chart.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,209.70 | $ | 8.08 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.90 | $ | 7.37 | ||||||||
† | Expenses are equal to the annualized expense ratio of 1.45% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include effect of contractual waivers by Janus Capital. |
Janus Aspen Series | 5
Table of Contents
Janus Aspen INTECH Risk-Managed Core Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 100.7% | ||||||||||||
Advertising Agencies – 0.4% | ||||||||||||
1,700 | Interpublic Group of Companies, Inc.* | $ | 12,546 | |||||||||
1,600 | Omnicom Group, Inc. | 62,640 | ||||||||||
75,186 | ||||||||||||
Aerospace and Defense – 0.6% | ||||||||||||
100 | Boeing Co. | 5,413 | ||||||||||
500 | Lockheed Martin Corp. | 37,675 | ||||||||||
200 | Northrop Grumman Corp. | 11,170 | ||||||||||
1,000 | Rockwell Collins, Inc. | 55,360 | ||||||||||
109,618 | ||||||||||||
Aerospace and Defense – Equipment – 0.9% | ||||||||||||
2,200 | B.F. Goodrich Co. | 141,350 | ||||||||||
300 | United Technologies Corp. | 20,823 | ||||||||||
162,173 | ||||||||||||
Agricultural Chemicals – 0.1% | ||||||||||||
100 | CF Industries Holdings, Inc. | 9,078 | ||||||||||
200 | Monsanto Co. | 16,350 | ||||||||||
25,428 | ||||||||||||
Agricultural Operations – 0.3% | ||||||||||||
1,500 | Archer-Daniels-Midland Co. | 46,965 | ||||||||||
Apparel Manufacturers – 0.5% | ||||||||||||
1,900 | Coach, Inc. | 69,407 | ||||||||||
300 | Polo Ralph Lauren Corp. | 24,294 | ||||||||||
93,701 | ||||||||||||
Appliances – 0% | ||||||||||||
100 | Whirlpool Corp. | 8,066 | ||||||||||
Applications Software – 1.9% | ||||||||||||
800 | Citrix Systems, Inc.* | 33,288 | ||||||||||
1,000 | Intuit, Inc.* | 30,710 | ||||||||||
7,000 | Microsoft Corp. | 213,430 | ||||||||||
1,200 | Red Hat, Inc.* | 37,080 | ||||||||||
500 | Salesforce.com, Inc.* | 36,885 | ||||||||||
351,393 | ||||||||||||
Athletic Footwear – 0.1% | ||||||||||||
200 | NIKE, Inc. – Class B | 13,214 | ||||||||||
Audio and Video Products – 0% | ||||||||||||
100 | Harman International Industries, Inc.* | 3,528 | ||||||||||
Automotive – Cars and Light Trucks – 0.3% | ||||||||||||
5,900 | Ford Motor Co.* | 59,000 | ||||||||||
Automotive – Medium and Heavy Duty Trucks – 0.1% | ||||||||||||
400 | PACCAR, Inc. | 14,508 | ||||||||||
Automotive – Truck Parts and Equipment – Original – 0.1% | ||||||||||||
500 | Johnson Controls, Inc. | 13,620 | ||||||||||
Beverages – Non-Alcoholic – 3.0% | ||||||||||||
3,300 | Coca-Cola Co. | 188,100 | ||||||||||
5,900 | Coca-Cola Enterprises, Inc. | 125,080 | ||||||||||
1,500 | Dr. Pepper Snapple Group, Inc. | 42,450 | ||||||||||
2,600 | Pepsi Bottling Group, Inc. | 97,500 | ||||||||||
1,400 | PepsiCo, Inc. | 85,120 | ||||||||||
538,250 | ||||||||||||
Broadcast Services and Programming – 0.3% | ||||||||||||
1,300 | Scripps Networks Interactive, Inc. – Class A | 53,950 | ||||||||||
Building – Residential and Commercial – 0% | ||||||||||||
100 | D.R. Horton, Inc. | 1,087 | ||||||||||
200 | Lennar Corp. – Class A | 2,554 | ||||||||||
3,641 | ||||||||||||
Building Products – Wood – 0% | ||||||||||||
100 | Masco Corp. | 1,381 | ||||||||||
Cable Television – 1.2% | ||||||||||||
�� | 5,400 | Comcast Corp. – Class A | 91,044 | |||||||||
1,100 | DIRECTV Group, Inc.* | 36,685 | ||||||||||
2,300 | Time Warner Cable, Inc. – Class A* | 95,197 | ||||||||||
222,926 | ||||||||||||
Casino Hotels – 0% | ||||||||||||
100 | Wynn Resorts, Ltd. | 5,823 | ||||||||||
Casino Services – 0.2% | ||||||||||||
2,400 | International Game Technology | 45,048 | ||||||||||
Chemicals – Diversified – 0.4% | ||||||||||||
600 | Dow Chemical Co. | 16,578 | ||||||||||
1,500 | E.I. du Pont de Nemours & Co. | 50,505 | ||||||||||
100 | PPG Industries, Inc. | 5,854 | ||||||||||
72,937 | ||||||||||||
Chemicals – Specialty – 0.3% | ||||||||||||
800 | Eastman Chemical Co. | 48,192 | ||||||||||
100 | Ecolab, Inc. | 4,458 | ||||||||||
52,650 | ||||||||||||
Coal – 0.1% | ||||||||||||
100 | Massey Energy Co. | 4,201 | ||||||||||
200 | Peabody Energy Corp. | 9,042 | ||||||||||
13,243 | ||||||||||||
Commercial Banks – 0.3% | ||||||||||||
300 | BB&T Corp. | 7,611 | ||||||||||
799 | First Horizon National Corp.* | 10,707 | ||||||||||
2,100 | Marshall & Ilsley Corp. | 11,445 | ||||||||||
1,500 | Regions Financial Corp. | 7,935 | ||||||||||
700 | Zions Bancorporation | 8,981 | ||||||||||
46,679 | ||||||||||||
Commercial Services – 0.3% | ||||||||||||
2,200 | Iron Mountain, Inc.* | 50,072 | ||||||||||
Commercial Services – Finance – 1.9% | ||||||||||||
1,500 | Automatic Data Processing, Inc. | 64,230 | ||||||||||
200 | Equifax, Inc. | 6,178 | ||||||||||
300 | MasterCard, Inc. – Class A | 76,794 | ||||||||||
1,500 | Moody’s Corp. | 40,200 | ||||||||||
100 | Paychex, Inc. | 3,064 | ||||||||||
3,600 | Total System Services, Inc. | 62,172 | ||||||||||
800 | Visa, Inc. – Class A | 69,968 | ||||||||||
1,000 | Western Union Co. | 18,850 | ||||||||||
341,456 | ||||||||||||
Computer Services – 1.2% | ||||||||||||
500 | Affiliated Computer Services, Inc. – Class A* | 29,845 | ||||||||||
2,600 | Cognizant Technology Solutions Corp.* | 117,780 | ||||||||||
1,100 | Computer Sciences Corp.* | 63,283 | ||||||||||
210,908 | ||||||||||||
Computers – 5.0% | ||||||||||||
1,400 | Apple, Inc.* | 295,204 | ||||||||||
1,500 | Dell, Inc.* | 21,540 |
See Notes to Schedule of Investments and Financial Statements.
6 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Computers – (continued) | ||||||||||||
3,800 | Hewlett-Packard Co. | $ | 195,738 | |||||||||
2,900 | International Business Machines Corp. | 379,610 | ||||||||||
2,000 | Sun Microsystems, Inc.* | 18,740 | ||||||||||
910,832 | ||||||||||||
Computers – Integrated Systems – 0.5% | ||||||||||||
2,700 | Terdata Corp.* | 84,861 | ||||||||||
Computers – Memory Devices – 1.1% | ||||||||||||
2,300 | EMC Corp.* | 40,181 | ||||||||||
2,900 | NetApp, Inc.* | 99,731 | ||||||||||
200 | SanDisk Corp.* | 5,798 | ||||||||||
1,300 | Western Digital Corp.* | 57,395 | ||||||||||
203,105 | ||||||||||||
Consulting Services – 0.1% | ||||||||||||
500 | SAIC, Inc.* | 9,470 | ||||||||||
Consumer Products – Miscellaneous – 0% | ||||||||||||
100 | Kimberly-Clark Corp. | 6,371 | ||||||||||
Containers – Metal and Glass – 0.7% | ||||||||||||
1,600 | Ball Corp. | 82,720 | ||||||||||
1,200 | Owens-Illinois, Inc.* | 39,444 | ||||||||||
122,164 | ||||||||||||
Containers – Paper and Plastic – 0.3% | ||||||||||||
2,500 | Sealed Air Corp. | 54,650 | ||||||||||
Cosmetics and Toiletries – 1.9% | ||||||||||||
700 | Avon Products, Inc. | 22,050 | ||||||||||
700 | Colgate-Palmolive Co. | 57,505 | ||||||||||
100 | Estee Lauder Cos., Inc. – Class A | 4,836 | ||||||||||
4,327 | Procter & Gamble Co. | 262,346 | ||||||||||
346,737 | ||||||||||||
Cruise Lines – 0.1% | ||||||||||||
600 | Carnival Corp. (U.S. Shares)* | 19,014 | ||||||||||
Data Processing and Management – 0.9% | ||||||||||||
3,000 | Fidelity National Information Services, Inc. | 70,320 | ||||||||||
2,000 | Fiserv, Inc.* | 96,960 | ||||||||||
167,280 | ||||||||||||
Dental Supplies and Equipment – 0.1% | ||||||||||||
700 | Patterson Companies, Inc.* | 19,586 | ||||||||||
Distribution/Wholesale – 0.2% | ||||||||||||
300 | W.W. Grainger, Inc. | 29,049 | ||||||||||
Diversified Banking Institutions – 3.0% | ||||||||||||
7,480 | Bank of America Corp. | 112,649 | ||||||||||
7,500 | Citigroup, Inc.* | 24,825 | ||||||||||
1,000 | Goldman Sachs Group, Inc. | 168,840 | ||||||||||
4,630 | JPMorgan Chase & Co. | 192,932 | ||||||||||
1,400 | Morgan Stanley | 41,440 | ||||||||||
540,686 | ||||||||||||
Diversified Operations – 2.5% | ||||||||||||
500 | 3M Co. | 41,335 | ||||||||||
100 | Dover Corp. | 4,161 | ||||||||||
500 | Eaton Corp. | 31,810 | ||||||||||
15,300 | General Electric Co. | 231,489 | ||||||||||
2,400 | Honeywell International, Inc. | 94,080 | ||||||||||
400 | Illinois Tool Works, Inc. | 19,196 | ||||||||||
500 | Parker Hannifin Corp. | 26,940 | ||||||||||
100 | Textron, Inc. | 1,881 | ||||||||||
450,892 | ||||||||||||
E-Commerce/Products – 0.4% | ||||||||||||
600 | Amazon.com, Inc.* | 80,712 | ||||||||||
E-Commerce/Services – 1.1% | ||||||||||||
3,800 | eBay, Inc.* | 89,452 | ||||||||||
2,500 | Expedia, Inc.* | 64,275 | ||||||||||
200 | Priceline.com, Inc.* | 43,700 | ||||||||||
197,427 | ||||||||||||
Electric – Generation – 0.4% | ||||||||||||
5,800 | AES Corp.* | 77,198 | ||||||||||
Electric – Integrated – 2.9% | ||||||||||||
100 | American Electric Power Company, Inc. | 3,479 | ||||||||||
3,600 | CMS Energy Corp. | 56,376 | ||||||||||
500 | Consolidated Edison, Inc. | 22,715 | ||||||||||
1,100 | Constellation Energy Group, Inc. | 38,687 | ||||||||||
200 | Duke Energy Corp. | 3,442 | ||||||||||
100 | Entergy Corp. | 8,184 | ||||||||||
3,500 | FPL Group, Inc. | 184,870 | ||||||||||
900 | Northeast Utilities | 23,211 | ||||||||||
1,000 | PG&E Corp. | 44,650 | ||||||||||
500 | PPL Corp. | 16,155 | ||||||||||
100 | Progress Energy, Inc. | 4,101 | ||||||||||
1,300 | Public Service Enterprise Group, Inc. | 43,225 | ||||||||||
100 | SCANA Corp. | 3,768 | ||||||||||
200 | Wisconsin Energy Corp. | 9,966 | ||||||||||
3,000 | Xcel Energy, Inc. | 63,660 | ||||||||||
526,489 | ||||||||||||
Electric Products – Miscellaneous – 0.1% | ||||||||||||
100 | Emerson Electric Co. | 4,260 | ||||||||||
600 | Molex, Inc. | 12,930 | ||||||||||
17,190 | ||||||||||||
Electronic Components – Semiconductors – 2.7% | ||||||||||||
1,800 | Advanced Micro Devices, Inc.* | 17,424 | ||||||||||
100 | Altera Corp. | 2,263 | ||||||||||
2,700 | Broadcom Corp. – Class A* | 84,915 | ||||||||||
5,300 | Intel Corp. | 108,120 | ||||||||||
600 | LSI Corp.* | 3,606 | ||||||||||
2,200 | Microchip Technology, Inc. | 63,932 | ||||||||||
2,200 | Micron Technology, Inc.* | 23,232 | ||||||||||
600 | National Semiconductor Corp. | 9,216 | ||||||||||
2,500 | Nvidia Corp.* | 46,700 | ||||||||||
3,200 | Texas Instruments, Inc. | 83,392 | ||||||||||
1,600 | Xilinx, Inc. | 40,096 | ||||||||||
482,896 | ||||||||||||
Electronic Connectors – 0.2% | ||||||||||||
700 | Amphenol Corp. – Class A | 32,326 | ||||||||||
Electronic Forms – 0.2% | ||||||||||||
800 | Adobe Systems, Inc.* | 29,424 | ||||||||||
Electronic Measuring Instruments – 0.2% | ||||||||||||
1,000 | Agilent Technologies, Inc.* | 31,070 | ||||||||||
Engineering – Research and Development Services – 0.2% | ||||||||||||
700 | Fluor Corp. | 31,528 | ||||||||||
300 | Jacobs Engineering Group, Inc.* | 11,283 | ||||||||||
42,811 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen INTECH Risk-Managed Core Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Engines – Internal Combustion – 0% | ||||||||||||
100 | Cummins, Inc. | $ | 4,586 | |||||||||
Enterprise Software/Services – 2.0% | ||||||||||||
3,400 | BMC Software, Inc.* | 136,340 | ||||||||||
600 | CA, Inc. | 13,476 | ||||||||||
8,876 | Oracle Corp. | 217,817 | ||||||||||
367,633 | ||||||||||||
Fiduciary Banks – 0.9% | ||||||||||||
2,800 | Bank of New York Mellon Corp. | 78,316 | ||||||||||
300 | Northern Trust Corp. | 15,720 | ||||||||||
1,600 | State Street Corp. | 69,664 | ||||||||||
163,700 | ||||||||||||
Finance – Consumer Loans – 0.1% | ||||||||||||
1,600 | SLM Corp.* | 18,032 | ||||||||||
Finance – Credit Card – 0.7% | ||||||||||||
2,300 | American Express Co. | 93,196 | ||||||||||
1,900 | Discover Financial Services | 27,949 | ||||||||||
121,145 | ||||||||||||
Finance – Investment Bankers/Brokers – 0% | ||||||||||||
300 | Charles Schwab Corp. | 5,646 | ||||||||||
Finance – Other Services – 0.9% | ||||||||||||
200 | CME Group, Inc. | 67,190 | ||||||||||
300 | IntercontinentalExchange, Inc.* | 33,690 | ||||||||||
2,600 | NYSE Euronext | 65,780 | ||||||||||
166,660 | ||||||||||||
Food – Confectionery – 0.1% | ||||||||||||
200 | Hershey Co. | 7,158 | ||||||||||
100 | J.M. Smucker Co. | 6,175 | ||||||||||
13,333 | ||||||||||||
Food – Dairy Products – 0% | ||||||||||||
200 | Dean Foods Co.* | 3,608 | ||||||||||
Food – Meat Products – 0.5% | ||||||||||||
1,300 | Hormel Foods Corp. | 49,985 | ||||||||||
2,800 | Tyson Foods, Inc. – Class A | 34,356 | ||||||||||
84,341 | ||||||||||||
Food – Miscellaneous/Diversified – 0.3% | ||||||||||||
600 | ConAgra Foods, Inc. | 13,830 | ||||||||||
200 | General Mills, Inc. | 14,162 | ||||||||||
1,200 | Kraft Foods, Inc. – Class A | 32,616 | ||||||||||
200 | Sara Lee Corp. | 2,436 | ||||||||||
63,044 | ||||||||||||
Food – Retail – 0.4% | ||||||||||||
1,000 | Supervalu, Inc. | 12,710 | ||||||||||
1,900 | Whole Foods Market, Inc.* | 52,155 | ||||||||||
64,865 | ||||||||||||
Food – Wholesale/Distribution – 0% | ||||||||||||
100 | Sysco Corp. | 2,794 | ||||||||||
Gas – Distribution – 0.5% | ||||||||||||
300 | NiSource, Inc. | 4,614 | ||||||||||
1,600 | Sempra Energy | 89,568 | ||||||||||
94,182 | ||||||||||||
Gold Mining – 0.2% | ||||||||||||
600 | Newmont Mining Corp. | 28,386 | ||||||||||
Home Decoration Products – 0% | ||||||||||||
600 | Newell Rubbermaid, Inc. | 9,006 | ||||||||||
Hotels and Motels – 0.5% | ||||||||||||
2,410 | Marriott International, Inc. – Class A | 65,673 | ||||||||||
400 | Starwood Hotels & Resorts Worldwide, Inc. | 14,628 | ||||||||||
500 | Wyndham Worldwide Corp. | 10,085 | ||||||||||
90,386 | ||||||||||||
Human Resources – 0.2% | ||||||||||||
1,200 | Monster Worldwide, Inc.* | 20,880 | ||||||||||
500 | Robert Half International, Inc. | 13,365 | ||||||||||
34,245 | ||||||||||||
Industrial Automation and Robotics – 0.4% | ||||||||||||
1,500 | Rockwell Automation, Inc. | 70,470 | ||||||||||
Industrial Gases – 0.8% | ||||||||||||
1,400 | Air Products & Chemicals, Inc. | 113,484 | ||||||||||
500 | Praxair, Inc. | 40,155 | ||||||||||
153,639 | ||||||||||||
Instruments – Scientific – 0.2% | ||||||||||||
800 | PerkinElmer, Inc. | 16,472 | ||||||||||
300 | Thermo Fisher Scientific, Inc.* | 14,307 | ||||||||||
100 | Waters Corp.* | 6,196 | ||||||||||
36,975 | ||||||||||||
Internet Infrastructure Software – 0% | ||||||||||||
200 | Akamai Technologies, Inc.* | 5,066 | ||||||||||
Internet Security – 0.2% | ||||||||||||
700 | McAfee, Inc.* | 28,399 | ||||||||||
700 | Symantec Corp.* | 12,523 | ||||||||||
100 | VeriSign, Inc.* | 2,424 | ||||||||||
43,346 | ||||||||||||
Investment Management and Advisory Services – 1.0% | ||||||||||||
1,100 | Ameriprise Financial, Inc. | 42,702 | ||||||||||
1,500 | Federated Investors, Inc. – Class B | 41,250 | ||||||||||
400 | Franklin Resources, Inc. | 42,140 | ||||||||||
1,800 | INVESCO, Ltd. | 42,282 | ||||||||||
200 | Legg Mason, Inc. | 6,032 | ||||||||||
200 | T. Rowe Price Group, Inc. | 10,650 | ||||||||||
185,056 | ||||||||||||
Life and Health Insurance – 0.6% | ||||||||||||
300 | AFLAC, Inc. | 13,875 | ||||||||||
800 | Lincoln National Corp. | 19,904 | ||||||||||
800 | Principal Financial Group, Inc. | 19,232 | ||||||||||
1,200 | Prudential Financial, Inc. | 59,712 | ||||||||||
100 | Torchmark Corp. | 4,395 | ||||||||||
117,118 | ||||||||||||
Linen Supply and Related Items – 0.1% | ||||||||||||
500 | Cintas Corp. | 13,025 | ||||||||||
Machinery – Construction and Mining – 0.1% | ||||||||||||
400 | Caterpillar, Inc. | 22,796 | ||||||||||
Machinery – Farm – 0.4% | ||||||||||||
1,400 | Deere & Co. | 75,726 | ||||||||||
Machinery – General Industrial – 0% | ||||||||||||
100 | Roper Industries, Inc. | 5,237 | ||||||||||
Machinery – Pumps – 0.1% | ||||||||||||
100 | Flowserve Corp. | 9,453 |
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Medical – Biomedical and Genetic – 0.9% | ||||||||||||
400 | Amgen, Inc.* | $ | 22,628 | |||||||||
100 | Biogen Idec, Inc.* | 5,350 | ||||||||||
100 | Gilead Sciences, Inc.* | 4,328 | ||||||||||
1,900 | Life Technologies Corp.* | 99,237 | ||||||||||
400 | Millipore Corp.* | 28,940 | ||||||||||
160,483 | ||||||||||||
Medical – Drugs – 3.3% | ||||||||||||
700 | Abbott Laboratories | 37,793 | ||||||||||
900 | Allergan, Inc. | 56,709 | ||||||||||
3,500 | Bristol-Myers Squibb Co. | 88,375 | ||||||||||
100 | Eli Lilly & Co. | 3,571 | ||||||||||
1,300 | Forest Laboratories, Inc.* | 41,743 | ||||||||||
200 | King Pharmaceuticals, Inc.* | 2,454 | ||||||||||
6,214 | Merck & Co., Inc. | 227,060 | ||||||||||
8,059 | Pfizer, Inc. | 146,593 | ||||||||||
604,298 | ||||||||||||
Medical – Generic Drugs – 0.7% | ||||||||||||
4,900 | Mylan, Inc.* | 90,307 | ||||||||||
900 | Watson Pharmaceuticals, Inc.* | 35,649 | ||||||||||
125,956 | ||||||||||||
Medical – HMO – 1.5% | ||||||||||||
300 | Aetna, Inc. | 9,510 | ||||||||||
1,400 | CIGNA Corp. | 49,378 | ||||||||||
1,900 | Coventry Health Care, Inc.* | 46,151 | ||||||||||
200 | Humana, Inc.* | 8,778 | ||||||||||
2,300 | UnitedHealth Group, Inc. | 70,104 | ||||||||||
1,600 | WellPoint, Inc.* | 93,264 | ||||||||||
277,185 | ||||||||||||
Medical – Hospitals – 0.2% | ||||||||||||
6,300 | Tenet Healthcare Corp.* | 33,957 | ||||||||||
Medical – Wholesale Drug Distributors – 0.4% | ||||||||||||
1,400 | AmerisourceBergen Corp. | 36,498 | ||||||||||
700 | McKesson Corp. | 43,750 | ||||||||||
80,248 | ||||||||||||
Medical Instruments – 0.6% | ||||||||||||
5,300 | Boston Scientific Corp.* | 47,700 | ||||||||||
100 | Intuitive Surgical, Inc.* | 30,332 | ||||||||||
300 | Medtronic, Inc. | 13,194 | ||||||||||
600 | St. Jude Medical, Inc.* | 22,068 | ||||||||||
113,294 | ||||||||||||
Medical Labs and Testing Services – 0.1% | ||||||||||||
200 | Quest Diagnostics, Inc. | 12,076 | ||||||||||
Medical Products – 2.2% | ||||||||||||
300 | Baxter International, Inc. | 17,604 | ||||||||||
1,000 | Hospira, Inc.* | 51,000 | ||||||||||
4,600 | Johnson & Johnson | 296,286 | ||||||||||
700 | Zimmer Holdings, Inc.* | 41,377 | ||||||||||
406,267 | ||||||||||||
Metal – Aluminum – 0.1% | ||||||||||||
600 | Alcoa, Inc. | 9,672 | ||||||||||
Metal – Copper – 0.1% | ||||||||||||
300 | Freeport-McMoRan Copper & Gold, Inc. – Class B | 24,087 | ||||||||||
Metal – Iron – 0% | ||||||||||||
200 | Cliffs Natural Resources, Inc. | 9,218 | ||||||||||
Metal Processors and Fabricators – 0.2% | ||||||||||||
300 | Precision Castparts Corp. | 33,105 | ||||||||||
Multi-Line Insurance – 1.5% | ||||||||||||
1,200 | American International Group, Inc.* | 35,976 | ||||||||||
400 | Assurant, Inc. | 11,792 | ||||||||||
500 | Cincinnati Financial Corp. | 13,120 | ||||||||||
3,100 | Genworth Financial, Inc. – Class A* | 35,185 | ||||||||||
1,000 | Hartford Financial Services Group, Inc. | 23,260 | ||||||||||
1,200 | Loews Corp. | 43,620 | ||||||||||
1,000 | MetLife, Inc. | 35,350 | ||||||||||
4,000 | XL Capital, Ltd. – Class A | 73,320 | ||||||||||
271,623 | ||||||||||||
Multimedia – 2.6% | ||||||||||||
2,700 | McGraw-Hill Cos., Inc. | 90,477 | ||||||||||
500 | Meredith Corp. | 15,425 | ||||||||||
5,800 | News Corp. – Class A | 79,402 | ||||||||||
2,733 | Time Warner, Inc. | 79,640 | ||||||||||
5,500 | Viacom, Inc. – Class B* | 163,515 | ||||||||||
1,600 | Walt Disney Co. | 51,600 | ||||||||||
480,059 | ||||||||||||
Networking Products – 1.3% | ||||||||||||
9,700 | Cisco Systems, Inc.* | 232,218 | ||||||||||
300 | Juniper Networks, Inc.* | 8,001 | ||||||||||
240,219 | ||||||||||||
Non-Hazardous Waste Disposal – 0% | ||||||||||||
200 | Waste Management, Inc. | 6,762 | ||||||||||
Oil – Field Services – 0.9% | ||||||||||||
200 | Baker Hughes, Inc. | 8,096 | ||||||||||
1,500 | BJ Services Co. | 27,900 | ||||||||||
1,300 | Halliburton Co. | 39,117 | ||||||||||
1,400 | Schlumberger, Ltd. (U.S. Shares) | 91,126 | ||||||||||
166,239 | ||||||||||||
Oil and Gas Drilling – 0.2% | ||||||||||||
200 | Diamond Offshore Drilling, Inc. | 19,684 | ||||||||||
400 | Nabors Industries, Ltd. | 8,756 | ||||||||||
28,440 | ||||||||||||
Oil Companies – Exploration and Production – 2.6% | ||||||||||||
1,100 | Anadarko Petroleum Corp. | 68,662 | ||||||||||
500 | Cabot Oil & Gas Corp. | 21,795 | ||||||||||
500 | Chesapeake Energy Corp. | 12,940 | ||||||||||
200 | EOG Resources, Inc. | 19,460 | ||||||||||
2,300 | EQT Corp. | 101,016 | ||||||||||
800 | Noble Energy, Inc. | 56,976 | ||||||||||
1,100 | Occidental Petroleum Corp. | 89,485 | ||||||||||
200 | Pioneer Natural Resources Co. | 9,634 | ||||||||||
300 | Questar Corp. | 12,471 | ||||||||||
700 | Range Resources Corp. | 34,895 | ||||||||||
400 | Southwestern Energy Co.* | 19,280 | ||||||||||
600 | XTO Energy, Inc. | 27,918 | ||||||||||
474,532 | ||||||||||||
Oil Companies – Integrated – 7.4% | ||||||||||||
3,665 | Chevron Corp. | 282,168 | ||||||||||
600 | ConocoPhillips | 30,642 | ||||||||||
14,200 | Exxon Mobil Corp. | 968,297 | ||||||||||
100 | Hess Corp. | 6,050 | ||||||||||
540 | Marathon Oil Corp. | 16,859 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen INTECH Risk-Managed Core Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Oil Companies – Integrated – (continued) | ||||||||||||
700 | Murphy Oil Corp. | $ | 37,940 | |||||||||
1,341,956 | ||||||||||||
Oil Field Machinery and Equipment – 0.4% | ||||||||||||
400 | Cameron International Corp.* | 16,720 | ||||||||||
600 | FMC Technologies, Inc.* | 34,704 | ||||||||||
400 | National Oilwell Varco, Inc. | 17,636 | ||||||||||
69,060 | ||||||||||||
Oil Refining and Marketing – 0% | ||||||||||||
400 | Tesoro Corp. | 5,420 | ||||||||||
200 | Valero Energy Corp. | 3,350 | ||||||||||
8,770 | ||||||||||||
Paper and Related Products – 0.4% | ||||||||||||
700 | International Paper Co. | 18,746 | ||||||||||
1,900 | MeadWestvaco Corp. | 54,397 | ||||||||||
73,143 | ||||||||||||
Pharmacy Services – 0.3% | ||||||||||||
100 | Express Scripts, Inc. – Class A* | 8,645 | ||||||||||
834 | Medco Health Solutions, Inc.* | 53,301 | ||||||||||
61,946 | ||||||||||||
Pipelines – 0.1% | ||||||||||||
2,000 | El Paso Corp. | 19,660 | ||||||||||
200 | Williams Companies, Inc. | 4,216 | ||||||||||
23,876 | ||||||||||||
Printing – Commercial – 0.2% | ||||||||||||
1,800 | R.R. Donnelley & Sons Co. | 40,086 | ||||||||||
Property and Casualty Insurance – 0.5% | ||||||||||||
1,900 | Progressive Corp. | 34,181 | ||||||||||
1,100 | Travelers Cos., Inc. | 54,846 | ||||||||||
89,027 | ||||||||||||
Real Estate Management/Services – 0.2% | ||||||||||||
2,300 | CB Richard Ellis Group, Inc. – Class A* | 31,211 | ||||||||||
REIT – Health Care – 0.1% | ||||||||||||
300 | HCP, Inc. | 9,162 | ||||||||||
300 | Ventas, Inc. | 13,122 | ||||||||||
22,284 | ||||||||||||
REIT – Hotels – 0.1% | ||||||||||||
1,135 | Host Hotels & Resorts, Inc.* | 13,245 | ||||||||||
REIT – Regional Malls – 0% | ||||||||||||
11 | Simon Property Group, Inc. | 878 | ||||||||||
REIT – Storage – 0.1% | ||||||||||||
200 | Public Storage | 16,290 | ||||||||||
Retail – Apparel and Shoe – 0.6% | ||||||||||||
400 | Abercrombie & Fitch Co. – Class A | 13,940 | ||||||||||
1,900 | Gap, Inc. | 39,805 | ||||||||||
1,100 | Limited Brands, Inc. | 21,164 | ||||||||||
500 | Nordstrom, Inc. | 18,790 | ||||||||||
500 | Ross Stores, Inc. | 21,355 | ||||||||||
115,054 | ||||||||||||
Retail – Auto Parts – 1.0% | ||||||||||||
500 | AutoZone, Inc.* | 79,035 | ||||||||||
2,700 | O’Reilly Automotive, Inc.* | 102,924 | ||||||||||
181,959 | ||||||||||||
Retail – Automobile – 0.1% | ||||||||||||
900 | Auto Nation, Inc.* | 17,235 | ||||||||||
Retail – Bedding – 0.3% | ||||||||||||
1,300 | Bed Bath & Beyond, Inc.* | 50,219 | ||||||||||
Retail – Building Products – 0.6% | ||||||||||||
3,500 | Home Depot, Inc. | 101,255 | ||||||||||
400 | Lowe’s Cos., Inc. | 9,356 | ||||||||||
110,611 | ||||||||||||
Retail – Consumer Electronics – 0.5% | ||||||||||||
2,000 | Best Buy Co., Inc. | 78,920 | ||||||||||
200 | RadioShack Corp. | 3,900 | ||||||||||
82,820 | ||||||||||||
Retail – Discount – 1.2% | ||||||||||||
400 | Big Lots, Inc.* | 11,592 | ||||||||||
100 | Family Dollar Stores, Inc. | 2,783 | ||||||||||
300 | Target Corp. | 14,511 | ||||||||||
3,400 | Wal-Mart Stores, Inc. | 181,730 | ||||||||||
210,616 | ||||||||||||
Retail – Drug Store – 0.6% | ||||||||||||
1,202 | CVS Caremark Corp. | 38,716 | ||||||||||
1,700 | Walgreen Co. | 62,424 | ||||||||||
101,140 | ||||||||||||
Retail – Jewelry – 0% | ||||||||||||
100 | Tiffany & Co. | 4,300 | ||||||||||
Retail – Major Department Stores – 0.6% | ||||||||||||
1,000 | JC Penney Co., Inc. | 26,610 | ||||||||||
100 | Sears Holdings Corp.* | 8,345 | ||||||||||
1,900 | TJX Cos., Inc. | 69,445 | ||||||||||
104,400 | ||||||||||||
Retail – Office Supplies – 0.3% | ||||||||||||
2,500 | Office Depot, Inc.* | 16,125 | ||||||||||
1,300 | Staples, Inc. | 31,967 | ||||||||||
48,092 | ||||||||||||
Retail – Regional Department Stores – 0.5% | ||||||||||||
1,500 | Kohl’s Corp.* | 80,895 | ||||||||||
500 | Macy’s, Inc. | 8,380 | ||||||||||
89,275 | ||||||||||||
Retail – Restaurants – 1.7% | ||||||||||||
2,100 | Darden Restaurants, Inc. | 73,647 | ||||||||||
1,500 | McDonald’s Corp. | 93,660 | ||||||||||
4,600 | Starbucks Corp.* | 106,076 | ||||||||||
1,300 | Yum! Brands, Inc. | 45,461 | ||||||||||
318,844 | ||||||||||||
Rubber – Tires – 0.1% | ||||||||||||
1,500 | Goodyear Tire & Rubber Co.* | 21,150 | ||||||||||
Savings/Loan/Thrifts – 0% | ||||||||||||
200 | People’s United Financial, Inc. | 3,340 | ||||||||||
Semiconductor Components/Integrated Circuits – 0.4% | ||||||||||||
2,200 | Analog Devices, Inc. | 69,476 | ||||||||||
200 | Linear Technology Corp. | 6,108 | ||||||||||
75,584 | ||||||||||||
Semiconductor Equipment – 0.9% | ||||||||||||
1,400 | Applied Materials, Inc. | 19,516 | ||||||||||
2,500 | KLA-Tencor Corp. | 90,400 |
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Semiconductor Equipment – (continued) | ||||||||||||
1,800 | Novellus Systems, Inc.* | $ | 42,012 | |||||||||
1,000 | Teradyne, Inc.* | 10,730 | ||||||||||
162,658 | ||||||||||||
Steel – Producers – 0.3% | ||||||||||||
1,200 | Nucor Corp. | 55,980 | ||||||||||
Steel – Specialty – 0% | ||||||||||||
100 | Allegheny Technologies, Inc. | 4,477 | ||||||||||
Super-Regional Banks – 2.0% | ||||||||||||
1,300 | Capital One Financial Corp. | 49,842 | ||||||||||
700 | Comerica, Inc. | 20,699 | ||||||||||
5,900 | Fifth Third Bancorp | 57,525 | ||||||||||
10,000 | Huntington Bancshares, Inc. | 36,500 | ||||||||||
1,300 | Keycorp | 7,215 | ||||||||||
900 | PNC Financial Services Group, Inc. | 47,511 | ||||||||||
200 | SunTrust Banks, Inc. | 4,058 | ||||||||||
500 | U.S. Bancorp | 11,255 | ||||||||||
4,737 | Wells Fargo & Co. | 127,852 | ||||||||||
362,457 | ||||||||||||
Telecommunication Equipment – 0.2% | ||||||||||||
6,500 | Tellabs Inc.* | 36,920 | ||||||||||
Telecommunication Equipment – Fiber Optics – 0.4% | ||||||||||||
3,200 | Corning, Inc. | 61,792 | ||||||||||
800 | JDS Uniphase Corp.* | 6,600 | ||||||||||
68,392 | ||||||||||||
Telephone – Integrated – 4.4% | ||||||||||||
21,172 | AT&T, Inc. | 593,451 | ||||||||||
1,092 | CenturyTel, Inc. | 39,541 | ||||||||||
6,700 | Qwest Communications International Inc. | 28,207 | ||||||||||
2,000 | Sprint Nextel Corp.* | 7,320 | ||||||||||
3,800 | Verizon Communications, Inc. | 125,894 | ||||||||||
794,413 | ||||||||||||
Television – 0% | ||||||||||||
300 | CBS Corp. – Class B | 4,215 | ||||||||||
Tobacco – 1.1% | ||||||||||||
2,600 | Altria Group, Inc. | 51,038 | ||||||||||
500 | Lorillard, Inc. | 40,115 | ||||||||||
2,100 | Philip Morris International, Inc. | 101,199 | ||||||||||
192,352 | ||||||||||||
Tools – Hand Held – 0% | ||||||||||||
100 | Stanley Works | 5,151 | ||||||||||
Toys – 0.1% | ||||||||||||
500 | Mattel, Inc. | 9,990 | ||||||||||
Transportation – Railroad – 0.2% | ||||||||||||
200 | Burlington Northern Santa Fe Corp. | 19,724 | ||||||||||
300 | CSX Corp. | 14,547 | ||||||||||
100 | Union Pacific Corp. | 6,390 | ||||||||||
40,661 | ||||||||||||
Transportation – Services – 0.1% | ||||||||||||
200 | C.H. Robinson Worldwide, Inc. | 11,746 | ||||||||||
100 | United Parcel Service, Inc. – Class B | 5,737 | ||||||||||
17,483 | ||||||||||||
Vitamins and Nutrition Products – 0.1% | ||||||||||||
300 | Mead Johnson Nutrition Co. – Class A | 13,110 | ||||||||||
Web Portals/Internet Service Providers – 1.4% | ||||||||||||
300 | Google, Inc. – Class A* | 185,994 | ||||||||||
4,100 | Yahoo!, Inc.* | 68,798 | ||||||||||
254,792 | ||||||||||||
Wireless Equipment – 1.3% | ||||||||||||
9,900 | Motorola, Inc.* | 76,824 | ||||||||||
3,400 | QUALCOMM, Inc. | 157,284 | ||||||||||
234,108 | ||||||||||||
Total Common Stock (cost $15,847,122) | 18,332,393 | |||||||||||
Money Market – 0.3% | ||||||||||||
63,000 | Janus Cash Liquidity Fund, LLC, 0% (cost $63,000) | 63,000 | ||||||||||
Total Investments (total cost $15,910,122) – 101.0% | 18,395,393 | |||||||||||
Liabilities, net of Cash, Receivables and Other Assets – (1.0)% | (185,346) | |||||||||||
Net Assets – 100% | $ | 18,210,047 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Bermuda | $ | 51,038 | 0.3% | |||||
Cayman Islands | 73,320 | 0.4% | ||||||
Netherlands Antilles | 91,126 | 0.5% | ||||||
Panama | 19,014 | 0.1% | ||||||
United States†† | 18,160,895 | 98.7% | ||||||
Total | $ | 18,395,393 | 100.0% |
†† | Includes Cash Equivalents (98.4% excluding Cash Equivalents) |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
INTECH | ||||||
Risk-Managed | ||||||
As of December 31, 2009 | Core | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 15,910 | ||||
Unaffiliated investments at value | $ | 18,332 | ||||
Affiliated money market investments | 63 | |||||
Cash | 25 | |||||
Receivables: | ||||||
Investments sold | 640 | |||||
Portfolio shares sold | – | |||||
Dividends | 20 | |||||
Non-interested Trustees’ deferred compensation | – | |||||
Other Assets | 1 | |||||
Total Assets | 19,081 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | 667 | |||||
Portfolio shares repurchased | 111 | |||||
Advisory fees | 3 | |||||
Printing expense | 44 | |||||
Transfer agent fees and expenses | 1 | |||||
Administrative fees – Service Shares | 2 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 4 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | – | |||||
Accrued expenses and other payables | 38 | |||||
Total Liabilities | 871 | |||||
Net Assets | $ | 18,210 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 25,393 | ||||
Undistributed net investment income/(loss)* | 35 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (9,703) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 2,485 | |||||
Total Net Assets | $ | 18,210 | ||||
Net Assets – Service Shares | $ | 18,210 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 1,896 | |||||
Net Asset Value Per Share | $ | 9.60 |
* | See Note 5 in Notes to Financial Statements. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statement of Operations
Janus Aspen | ||||||
INTECH | ||||||
Risk-Managed | ||||||
For the fiscal year ended December 31, 2009 | Core | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | – | ||||
Dividends | 491 | |||||
Dividends from affiliates | – | |||||
Total Investment Income | 491 | |||||
Expenses: | ||||||
Advisory fees | 80 | |||||
Transfer agent fees and expenses | 3 | |||||
Registration fees | 1 | |||||
Custodian fees | 31 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Audit fees | 46 | |||||
Legal fees | 14 | |||||
Systems fees | 30 | |||||
Administrative service fees – Service Shares | 20 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 49 | |||||
Other expenses | 12 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 288 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 288 | |||||
Less: Excess Expense Reimbursement | (3) | |||||
Net Expenses after Expense Reimbursement | 285 | |||||
Net Investment Income/(Loss) | 206 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (3,769) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 7,608 | |||||
Net Gain/(Loss) on Investments | 3,839 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 4,045 |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
INTECH | ||||||||||
Risk-Managed | ||||||||||
Core | ||||||||||
For the fiscal years ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 206 | $ | 220 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (3,769) | (5,838) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 7,608 | (7,066) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 4,045 | (12,684) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Service Shares | (217) | (193) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Service Shares | – | (1,602) | ||||||||
Net (Decrease) from Dividends and Distributions | (217) | (1,795) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Service Shares | 3,704 | 21,175 | ||||||||
Reinvested dividends and distributions | ||||||||||
Service Shares | 217 | 1,795 | ||||||||
Shares repurchased | ||||||||||
Service Shares | (11,298) | (18,772) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (7,377) | 4,198 | ||||||||
Net Increase/(Decrease) in Net Assets | (3,549) | (10,281) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 21,759 | 32,040 | ||||||||
End of period | $ | 18,210 | $ | 21,759 | ||||||
Undistributed net investment income/(loss)* | $ | 35 | $ | 46 |
* | See Note 5 in Notes to Financial Statements |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Financial Highlights
Service Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen INTECH Risk-Managed Core Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005(1) | ||||||||||||||||||
Net Asset Value, Beginning of Period | $7.92 | $13.29 | $12.71 | $12.47 | $13.60 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .10 | .08 | .06 | .02 | .04 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.68 | (4.70) | .71 | 1.33 | 1.22 | |||||||||||||||||
Total from Investment Operations | 1.78 | (4.62) | .77 | 1.35 | 1.26 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.10) | (.08) | (.06) | (.02) | (.04) | |||||||||||||||||
Distributions (from capital gains)* | – | (.67) | (.13) | (1.09) | (2.35) | |||||||||||||||||
Total Distributions | (.10) | (.75) | (.19) | (1.11) | (2.39) | |||||||||||||||||
Net Asset Value, End of Period | $9.60 | $7.92 | $13.29 | $12.71 | $12.47 | |||||||||||||||||
Total Return | 22.55% | (36.24)% | 6.05% | 10.77% | 10.92% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $18,210 | $21,759 | $32,040 | $16,721 | $19,754 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $19,599 | $28,507 | $22,388 | $18,260 | $19,174 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 1.45% | 1.45% | 1.45% | 1.45% | 1.35% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.45% | 1.45% | 1.45% | 1.45% | 1.34% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 1.05% | 0.79% | 0.61% | 0.17% | 0.42% | |||||||||||||||||
Portfolio Turnover Rate | 116% | 128% | 101% | 141% | 109% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Certain prior year amounts have been reclassified to conform with current year presentation. | |
(2) | See Note 6 in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Large-Cap Core Funds | Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. | |
S&P 500® Index | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
REIT | Real Estate Investment Trust | |
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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | |||||||||||
Common Stock | $ | 18,332,393 | $ | – | $ | – | |||||
Money Market | – | 63,000 | – | ||||||||
Total Investments in Securities | $ | 18,332,393 | $ | 63,000 | $ | – | |||||
16 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 Risk-Managed Core 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. The Trust includes fourteen Portfolios 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 one class of shares: Service Shares. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Certain prior year amounts in the Financial Highlights have been reclassified to conform with current year presentation.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
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.
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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3
18 | DECEMBER 31, 2009
Table of Contents
Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives. 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, and other equity-linked derivatives.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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’s ability to establish and maintain appropriate systems and trading.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 Europeanstyle option is an option contract that can only be exercised on the option’s expiration date. The Portfolio may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable),
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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value
20 | DECEMBER 31, 2009
Table of Contents
amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. There were no derivatives held by the Portfolio during the fiscal year ended December 31, 2009.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Average Daily | ||||||||
Net Assets | Base Fee Rate | |||||||
Portfolio | of the Portfolio | (%) (annual rate) | ||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | N/A | 0.50 | ||||||
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 previous table. 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 INTECH Risk-Managed Core Portfolio | S&P 500® Index | ||||
Only the base fee rate applied until January 2007 for the Portfolio, at which time the calculation of the performance adjustment applied 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 is equal to the time that has elapsed since the performance-based fee structure took effect. As noted above, any applicable Performance Adjustment began January 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. 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
22 | DECEMBER 31, 2009
Table of Contents
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 evenly each day throughout the month. The investment fee is paid monthly in arrears.
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 its benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) across each other class of shares of the Portfolio.
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 prospectus and statement 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 fiscal year ended December 31, 2009, the Portfolio recorded a negative Performance Adjustment of $17,712.
Janus Capital has agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, the administrative services fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 1.10% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
INTECH Investment Management LLC (“INTECH”) serves as subadviser to the Portfolio. Janus Capital pays INTECH 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). Janus Capital owns approximately 92% of INTECH.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services. In addition, Janus Services receives from the Portfolio a fee at an annual rate of up to 0.10% of the average daily net assets of the Service Shares of the Portfolio to compensate Janus Services for providing, or arranging for the provision of record keeping, subaccounting, and administrative services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 4,614,195 | $ | 4,552,195 | $ | 286 | $ | 63,000 | ||||||
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and
24 | DECEMBER 31, 2009
Table of Contents
(3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | $ | 35,384 | $ | – | $ | (9,433,067) | $ | – | $ | (491) | $ | 2,215,617 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | ||||||||||||||||
Portfolio | 2016 | 2017 | Accumulated Capital Losses | ||||||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | $ | (2,644,826) | $ | (6,788,241) | $ | (9,433,067) | |||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | $ | 16,179,776 | $ | 2,523,008 | $ | (307,391) | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | $ | 217,667 | $ | – | $ | – | $ | – | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | $ | 196,149 | $ | 1,598,789 | $ | – | $ | – | |||||||||
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
(reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
For each fiscal year ended December 31
Janus Aspen INTECH | ||||
Portfolio | Risk-Managed Core Portfolio | |||
Service Shares | ||||
2009(1) | 1.47% | |||
2008(1) | 1.71% | |||
2007(1) | 1.76% | |||
2006(1) | 1.86% | |||
2005(1) | 1.35% | |||
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
7. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen INTECH Risk-Managed Core Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 465 | 1,824 | ||||||||
Reinvested dividends and distributions | 25 | 167 | ||||||||
Shares repurchased | (1,341) | (1,655) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (851) | 336 | ||||||||
Shares Outstanding, Beginning of Period | 2,747 | 2,411 | ||||||||
Shares Outstanding, End of Period | 1,896 | 2,747 |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 Risk-Managed Core Portfolio | $ | 22,543,866 | $ | 29,673,502 | $ | – | $ | – | ||||||
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the
26 | DECEMBER 31, 2009
Table of Contents
Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
On December 11, 2009, the Board of Trustees of Janus Aspen Series approved a plan to liquidate and terminate the Portfolio. Effective April 28, 2010, the Portfolio will no longer be offered for sale and will be liquidated on or about April 30, 2010.
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, the date of issuance of the Portfolio’s financial statements, and determined that there were no other material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
Janus Aspen Series | 27
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen INTECH Risk-Managed Core Portfolio:
of Janus Aspen INTECH Risk-Managed Core Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen INTECH Risk-Managed Core Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
28 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
30 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 31
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
32 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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.
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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual total return reported the last day of the period. The total
Janus Aspen Series | 33
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
34 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen INTECH Risk-Managed Core Portfolio | 100% | |||||||||
Janus Aspen Series |��35
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
36 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 37
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
38 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 39
Table of Contents
Notes
40 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81121 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
(formerly named Janus Aspen Large Cap Growth Portfolio)
HIGHLIGHTS
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 9 | |
Statement of Operations | 10 | |
Statements of Changes in Net Assets | 11 | |
Financial Highlights | 12 | |
Notes to Schedule of Investments | 13 | |
Notes to Financial Statements | 15 | |
Report of Independent Registered Public Accounting Firm | 29 | |
Additional Information | 30 | |
Explanations of Charts, Tables and Financial Statements | 33 | |
Designation Requirements | 36 | |
Trustees and Officers | 37 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of their best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Janus Portfolio (unaudited)
Portfolio Snapshot We seek to deliver strong risk-adjusted returns over an entire market cycle by managing a diversified, moderately positioned, classic large cap growth portfolio. We look for durable franchises with consistent free cash flow growth, high and improving returns, diversified revenue streams and properly incentivized management teams. | Jonathan Coleman lead co-portfolio manager | Daniel Riff co-portfolio manager |
Performance Review
For the 12-month period ended December 31, 2009, Janus Aspen Janus Portfolio’s Institutional Shares and Service Shares returned 36.35% and 36.01%, respectively. Meanwhile, the Portfolio’s primary benchmark, the Russell 1000® Growth Index, returned 37.21% and its secondary benchmark, the S&P 500® Index, returned 26.46%.
Economic Overview
Equity markets began the year in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the rest of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher. For the year, growth-style indices also outperformed value indices, as information technology was easily the best performing sector within the Russell 1000® Growth Index followed distantly by materials. Consumer staples and utilities were relative laggards. Commodities were strongly higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Detractors from Relative Performance
Managed care company UnitedHealth Group, Inc. was negatively impacted by the health care debate that hurt the entire group. While we think the company can add a lot of value in a world of more consumer directed health care, we trimmed our position throughout the year and continue to monitor the legislative developments.
Casino owner MGM Mirage was negatively impacted by its leveraged balance sheet during a time of tight credit and declining fundamentals in the gaming industry. We exited our position in the first quarter of 2009 as weakening conditions in Las Vegas and balance sheet concerns led us to re-consider our investment thesis.
The difficult credit environment also provided a negative backdrop for AES Corp. earlier in the year. During the period, investors generally shied away from companies with leverage on their balance sheet. While this electric utility company has historically earned returns above its cost of capital, we decided to exit the position in favor of opportunities with better risk/reward profiles.
Contributors to Relative Performance
Anheuser-Busch InBev N.V., the world’s largest brewer, continued to de-lever its balance sheet and benefit from a number of operational efficiencies and market share gains. The stock has been a strong performer for the Portfolio and we continue to like the company’s long term prospects and strong brands. However, we have trimmed our number of shares significantly to manage the exposure.
Apple, Inc. remained a top performer for the Portfolio, as the company continues to gain share in the PC space and remains a key player in the smart phone market with its iPhone. The product cycle has been robust and customers seem to be centering much of their digital lives on Apple products. We like the company’s durable franchise, long-term growth prospects and multiple ways to win in various economic environments.
Wireless tower company Crown Castle International Corp. continued its strong performance late in the period. We believe Crown Castle will continue to benefit from wireless carriers’ need to improve their networks given the demand generated by the data usage of smart phones. We like its relatively stable and historically predictable cash flows and its strong position in a market characterized by high barriers to entry.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Outlook
The market’s continued strength during the latter part of 2009 was largely fueled by improving economic conditions and generally better-than-expected corporate earnings reports. Despite many indices closing near the highs of the year, the sustainability of this rally, the U.S. economic recovery, and the improving corporate earnings picture remain uncertain. While we do not invest based on a macroeconomic forecast, there are a number of factors we are watching that could provide clues to the pace of future economic growth. We think the continued healing and overall health of the financial system remain critical given the implications this has for credit availability and business and consumer spending. The Federal Reserve’s (Fed) eventual move away from quantitative easing and ultra loose monetary policy, as well as the ballooning fiscal budget deficit and rising sovereign debt represent structural challenges for economic growth and inflation. We think the Fed has a difficult task in determining when to unwind its support for the housing market and the financial system without spurring an increase in inflation or negatively impacting economic growth.
Given this uncertainty, we are focusing on investments we think can do well over the long term regardless of the economic environment. These include companies we believe will grow with or outgrow their end markets through organic market share gains or by acquiring weaker franchises. While the Portfolio is not immune to adverse economic conditions, we think focusing on investments we believe have multiple ways to win over the longer term, will help us successfully navigate this uncertain period.
(Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.)
Thank you for your investment in Janus Aspen Janus Portfolio.
Janus Aspen Janus Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Anheuser-Busch InBev N.V. | 5.65% | |||
Apple, Inc. | 4.33% | |||
Crown Castle International Corp. | 3.01% | |||
Marvell Technology Group, Ltd. | 1.91% | |||
EOG Resources, Inc. | 1.71% |
5 Bottom Performers – Holdings
Contribution | ||||
UnitedHealth Group, Inc. | –0.57% | |||
MGM Mirage | –0.45% | |||
AES Corp. | –0.44% | |||
Gilead Sciences, Inc. | –0.35% | |||
Wells Fargo & Co. | –0.31% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell 1000® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Information Technology | 17.47% | 29.80% | 31.24% | |||||||||
Consumer Staples | 7.90% | 15.73% | 14.91% | |||||||||
Energy | 4.18% | 9.82% | 6.32% | |||||||||
Telecommunication Services | 3.01% | 3.12% | 0.67% | |||||||||
Industrials | 3.00% | 9.90% | 11.28% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell 1000® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Utilities | –0.55% | 1.55% | 1.41% | |||||||||
Health Care | 0.75% | 13.81% | 15.69% | |||||||||
Materials | 1.13% | 4.11% | 3.96% | |||||||||
Consumer Discretionary | 1.23% | 3.96% | 10.20% | |||||||||
Financials | 2.57% | 8.21% | 4.33% |
* | 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 Series | 3
Table of Contents
Janus Aspen Janus Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Anheuser-Busch InBev N.V. Brewery | 5.1% | |||
Crown Castle International Corp. Wireless Equipment | 4.2% | |||
Apple, Inc. Computers | 4.0% | |||
International Business Machines Corp. Computers | 3.5% | |||
Cisco Systems, Inc. Networking Products | 3.5% | |||
20.3% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 3.3% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Janus Portfolio – Institutional Shares | 36.35% | 1.90% | –3.30% | 6.55% | 0.67% | ||||||
Janus Aspen Janus Portfolio – Service Shares | 36.01% | 1.65% | –3.54% | 6.25% | 0.92% | ||||||
Russell 1000® Growth Index | 37.21% | 1.63% | –3.99% | 6.75% | |||||||
S&P 500® Index | 26.46% | 0.42% | –0.95% | 7.58% | |||||||
Lipper Quartile – Institutional Shares | 3rd | 2nd | 3rd | 3rd | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Large-Cap Growth Funds | 131/228 | 63/191 | 51/85 | 16/28 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Janus Portfolio (unaudited)
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
September 30, 1993 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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.
As of May 1, 2009, Janus Aspen Large Cap Growth Portfolio changed its name to Janus Aspen Janus Portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – September 13, 1993 |
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,237.90 | $ | 3.78 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.83 | $ | 3.41 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,236.40 | $ | 5.19 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.67% for Institutional Shares and 0.92% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
6 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Janus Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 95.0% | ||||||||||||
Aerospace and Defense – 0.4% | ||||||||||||
198,450 | Northrop Grumman Corp. | $ | 11,083,433 | |||||||||
Aerospace and Defense – Equipment – 0.5% | ||||||||||||
166,430 | United Technologies Corp. | 11,551,906 | ||||||||||
Agricultural Chemicals – 1.4% | ||||||||||||
133,330 | Monsanto Co. | 10,899,728 | ||||||||||
220,720 | Potash Corporation of Saskatchewan, Inc. (U.S. Shares) | 23,948,120 | ||||||||||
34,847,848 | ||||||||||||
Applications Software – 1.4% | ||||||||||||
1,114,875 | Microsoft Corp. | 33,992,539 | ||||||||||
Athletic Footwear – 0.6% | ||||||||||||
270,531 | Adidas A.G.** | 14,617,089 | ||||||||||
Beverages – Non-Alcoholic – 1.1% | ||||||||||||
463,940 | Coca-Cola Co. | 26,444,580 | ||||||||||
Beverages – Wine and Spirits – 0.6% | ||||||||||||
911,360 | Diageo PLC** | 15,887,594 | ||||||||||
Brewery – 5.1% | ||||||||||||
2,443,922 | Anheuser-Busch InBev N.V.** | 126,355,230 | ||||||||||
2,113,456 | Anheuser-Busch InBev N.V. – VVPR Strip*,** | 15,141 | ||||||||||
126,370,371 | ||||||||||||
Casino Hotels – 0.8% | ||||||||||||
2,715,114 | Crown, Ltd.** | 19,457,399 | ||||||||||
Commercial Banks – 0.7% | ||||||||||||
929,628 | ICICI Bank, Ltd. | 17,336,370 | ||||||||||
Computers – 8.1% | ||||||||||||
467,227 | Apple, Inc.* | 98,519,484 | ||||||||||
672,790 | International Business Machines Corp. | 88,068,211 | ||||||||||
225,881 | Research In Motion, Ltd. (U.S. Shares)* | 15,256,003 | ||||||||||
201,843,698 | ||||||||||||
Consumer Products – Miscellaneous – 0.4% | ||||||||||||
150,660 | Kimberly-Clark Corp. | 9,598,549 | ||||||||||
Cosmetics and Toiletries – 1.3% | ||||||||||||
407,180 | Colgate-Palmolive Co. | 33,449,837 | ||||||||||
Diversified Banking Institutions – 3.6% | ||||||||||||
522,959 | Bank of America Corp. | 7,875,763 | ||||||||||
260,455 | Goldman Sachs Group, Inc. | 43,975,222 | ||||||||||
890,655 | JPMorgan Chase & Co. | 37,113,594 | ||||||||||
88,964,579 | ||||||||||||
Diversified Operations – 3.5% | ||||||||||||
487,455 | Danaher Corp. | 36,656,616 | ||||||||||
273,895 | Illinois Tool Works, Inc. | 13,144,221 | ||||||||||
1,009,315 | Tyco International, Ltd. (U.S. Shares)** | 36,012,359 | ||||||||||
85,813,196 | ||||||||||||
E-Commerce/Services – 1.6% | ||||||||||||
1,670,175 | eBay, Inc.* | 39,315,920 | ||||||||||
Electric Products – Miscellaneous – 0.9% | ||||||||||||
502,640 | Emerson Electric Co. | 21,412,464 | ||||||||||
Electronic Components – Semiconductors – 0.6% | ||||||||||||
585,986 | Texas Instruments, Inc. | 15,270,795 | ||||||||||
Electronic Connectors – 1.0% | ||||||||||||
532,530 | Amphenol Corp. – Class A | 24,592,235 | ||||||||||
Enterprise Software/Services – 2.6% | ||||||||||||
2,663,440 | Oracle Corp. | 65,360,818 | ||||||||||
Food – Retail – 2.0% | ||||||||||||
7,343,356 | Tesco PLC** | 50,435,938 | ||||||||||
Forestry – 0.8% | ||||||||||||
468,990 | Weyerhaeuser Co. | 20,232,229 | ||||||||||
Gold Mining – 0.8% | ||||||||||||
142,610 | Agnico-Eagle Mines, Ltd. (U.S. Shares) | 7,700,940 | ||||||||||
264,705 | Newmont Mining Corp. | 12,523,194 | ||||||||||
20,224,134 | ||||||||||||
Independent Power Producer – 0.7% | ||||||||||||
730,883 | NRG Energy, Inc.* | 17,256,148 | ||||||||||
Industrial Gases – 1.3% | ||||||||||||
398,145 | Praxair, Inc. | 31,975,025 | ||||||||||
Internet Security – 0.8% | ||||||||||||
1,079,535 | Symantec Corp.* | 19,312,881 | ||||||||||
Investment Management and Advisory Services – 1.2% | ||||||||||||
548,510 | T. Rowe Price Group, Inc. | 29,208,158 | ||||||||||
Medical – Biomedical and Genetic – 4.4% | ||||||||||||
1,275,626 | Celgene Corp.* | 71,026,855 | ||||||||||
873,245 | Gilead Sciences, Inc.* | 37,794,044 | ||||||||||
108,820,899 | ||||||||||||
Medical – Drugs – 2.4% | ||||||||||||
863,105 | Bristol-Myers Squibb Co. | 21,793,401 | ||||||||||
217,683 | Roche Holding A.G.** | 37,065,439 | ||||||||||
58,858,840 | ||||||||||||
Medical – HMO – 0.6% | ||||||||||||
469,311 | UnitedHealth Group, Inc.** | 14,304,599 | ||||||||||
Medical Instruments – 0.6% | ||||||||||||
401,609 | St. Jude Medical, Inc.* | 14,771,179 | ||||||||||
Medical Products – 3.4% | ||||||||||||
449,650 | Baxter International, Inc. | 26,385,462 | ||||||||||
1,213,475 | Covidien PLC (U.S. Shares)** | 58,113,318 | ||||||||||
84,498,780 | ||||||||||||
Metal Processors and Fabricators – 1.5% | ||||||||||||
330,890 | Precision Castparts Corp. | 36,513,712 | ||||||||||
Multi-Line Insurance – 0.9% | ||||||||||||
466,340 | ACE, Ltd. (U.S. Shares)** | 23,503,536 | ||||||||||
Networking Products – 3.5% | ||||||||||||
3,677,202 | Cisco Systems, Inc.* | 88,032,216 | ||||||||||
Oil Companies – Exploration and Production – 7.4% | ||||||||||||
164,875 | Apache Corp. | 17,010,154 | ||||||||||
784,680 | EOG Resources, Inc. | 76,349,363 | ||||||||||
947,705 | Occidental Petroleum Corp. | 77,095,801 | ||||||||||
307,035 | XTO Energy, Inc. | 14,286,339 | ||||||||||
184,741,657 | ||||||||||||
Oil Companies – Integrated – 1.6% | ||||||||||||
956,415 | Petroleo Brasileiro S.A. (U.S. Shares) | 40,542,432 | ||||||||||
Reinsurance – 1.1% | ||||||||||||
8,311 | Berkshire Hathaway, Inc. – Class B* | 27,309,946 | ||||||||||
Retail – Building Products – 1.4% | ||||||||||||
1,205,535 | Home Depot, Inc. | 34,876,128 | ||||||||||
Retail – Drug Store – 1.7% | ||||||||||||
1,281,311 | CVS Caremark Corp.** | 41,271,027 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Janus Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Retail – Restaurants – 0.5% | ||||||||||||
203,687 | McDonald’s Corp. | $ | 12,718,216 | |||||||||
Semiconductor Components/Integrated Circuits – 2.8% | ||||||||||||
2,217,915 | Marvell Technology Group, Ltd. | 46,021,736 | ||||||||||
11,660,942 | Taiwan Semiconductor Manufacturing Co., Ltd. | 23,416,738 | ||||||||||
69,438,474 | ||||||||||||
Semiconductor Equipment – 1.5% | ||||||||||||
1,035,311 | KLA-Tencor Corp. | 37,436,846 | ||||||||||
Soap and Cleaning Preparations – 0.8% | ||||||||||||
376,553 | Reckitt Benckiser Group PLC** | 20,393,190 | ||||||||||
Telecommunication Equipment – 0% | ||||||||||||
1,184 | Nortel Networks Corp. (U.S. Shares)* | 27 | ||||||||||
Telecommunication Equipment – Fiber Optics – 0.8% | ||||||||||||
1,033,135 | Corning, Inc. | 19,949,837 | ||||||||||
Television – 0.9% | ||||||||||||
1,622,790 | CBS Corp. – Class B | 22,800,200 | ||||||||||
Tobacco – 0.4% | ||||||||||||
559,020 | Altria Group, Inc. | 10,973,563 | ||||||||||
Transportation – Railroad – 1.4% | ||||||||||||
637,805 | Canadian National Railway Co. (U.S. Shares) | 34,671,080 | ||||||||||
Transportation – Services – 2.0% | ||||||||||||
266,925 | C.H. Robinson Worldwide, Inc. | 15,676,505 | ||||||||||
552,230 | Expeditors International of Washington, Inc. | 19,178,948 | ||||||||||
272,235 | United Parcel Service, Inc. – Class B | 15,618,122 | ||||||||||
50,473,575 | ||||||||||||
Web Portals/Internet Service Providers – 3.3% | ||||||||||||
86,540 | Google, Inc. – Class A* | 53,653,070 | ||||||||||
1,755,157 | Yahoo!, Inc.* | 29,451,534 | ||||||||||
83,104,604 | ||||||||||||
Wireless Equipment – 6.3% | ||||||||||||
2,653,135 | Crown Castle International Corp.* | 103,578,390 | ||||||||||
1,414,690 | Motorola, Inc.* | 10,977,994 | ||||||||||
918,470 | QUALCOMM, Inc. | 42,488,422 | ||||||||||
157,044,806 | ||||||||||||
Total Common Stock (cost $1,919,374,338) | 2,362,905,102 | |||||||||||
Preferred Stock – 0.4% | ||||||||||||
Diversified Banking Institutions – 0.4% | ||||||||||||
624,175 | Bank of America, Corp., 10.0000% (cost $9,362,625) | 9,312,691 | ||||||||||
Money Market – 4.9% | ||||||||||||
122,868,782 | Janus Cash Liquidity Fund LLC, 0% (cost $122,868,782) | 122,868,782 | ||||||||||
Total Investments (total cost $2,051,605,745) – 100.3% | 2,495,086,575 | |||||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.3)% | (6,270,352) | |||||||||||
Net Assets – 100% | $ | 2,488,816,223 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 19,457,399 | 0.8% | |||||
Belgium | 126,370,372 | 5.1% | ||||||
Bermuda | 46,021,736 | 1.8% | ||||||
Brazil | 40,542,432 | 1.6% | ||||||
Canada | 81,576,170 | 3.3% | ||||||
Germany | 14,617,089 | 0.6% | ||||||
India | 17,336,370 | 0.7% | ||||||
Ireland | 58,113,318 | 2.3% | ||||||
Switzerland | 96,581,334 | 3.9% | ||||||
Taiwan | 23,416,738 | 0.9% | ||||||
United Kingdom | 86,716,722 | 3.5% | ||||||
United States†† | 1,884,336,895 | 75.5% | ||||||
Total | $ | 2,495,086,575 | 100.0% |
†† | Includes Cash Equivalents (70.6% excluding Cash Equivalents). |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
Australian Dollar 1/14/10 | 2,675,000 | $ | 2,402,556 | $ | 41,859 | |||||||
Australian Dollar 1/21/10 | 9,590,000 | 8,606,184 | 275,958 | |||||||||
Australian Dollar 2/4/10 | 2,540,000 | 2,275,762 | 20,169 | |||||||||
British Pound 1/14/10 | 6,400,000 | 10,332,802 | 203,397 | |||||||||
British Pound 1/21/10 | 8,625,000 | 13,924,425 | 561,349 | |||||||||
British Pound 2/4/10 | 18,400,000 | 29,702,674 | 259,335 | |||||||||
Euro 1/14/10 | 35,850,000 | 51,429,555 | 2,468,536 | |||||||||
Euro 1/21/10 | 17,700,000 | 25,391,715 | 1,119,700 | |||||||||
Euro 2/4/10 | 11,700,000 | 16,783,930 | 476,378 | |||||||||
Swiss Franc 1/21/10 | 19,000,000 | 18,386,978 | 134,880 | |||||||||
Total | $ | 179,236,581 | $ | 5,561,561 |
Schedule of Written Options – Calls | Value | |||
UnitedHealth Group, Inc. expires January 2010 2,346 contracts exercise price $34.00 (Premiums received $115,587) | $ | (13,466) | ||
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Janus | |||||
(all numbers in thousands except net asset value per share) | Portfolio(1) | |||||
Assets: | ||||||
Investments at cost | $ | 2,051,606 | ||||
Unaffiliated investments at value | $ | 2,372,218 | ||||
Affiliated money market investments | 122,869 | |||||
Receivables: | ||||||
Investments sold | 11,767 | |||||
Portfolio shares sold | 111 | |||||
Dividends | 2,056 | |||||
Non-interested Trustees’ deferred compensation | 61 | |||||
Forward currency contracts | 5,562 | |||||
Other assets | 191 | |||||
Total Assets | 2,514,835 | |||||
Liabilities: | ||||||
Payables: | ||||||
Options written, at value(2) | 13 | |||||
Due to custodian | 130 | |||||
Investments purchased | 22,144 | |||||
Portfolio shares repurchased | 1,486 | |||||
Advisory fees | 1,328 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 426 | |||||
Non-interested Trustees’ fees and expenses | 3 | |||||
Non-interested Trustees’ deferred compensation fees | 61 | |||||
Foreign tax liability | 344 | |||||
Accrued expenses and other payables | 83 | |||||
Total Liabilities | 26,019 | |||||
Net Assets | $ | 2,488,816 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 2,698,715 | ||||
Undistributed net investment income/(loss)* | 735 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (659,437) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation(3) | 448,803 | |||||
Total Net Assets | $ | 2,488,816 | ||||
Net Assets – Institutional Shares | $ | 441,921 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 20,623 | |||||
Net Asset Value Per Share | $ | 21.43 | ||||
Net Assets – Service Shares | $ | 2,046,895 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 96,975 | |||||
Net Asset Value Per Share | $ | 21.11 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. | |
(2) | Includes premiums of $115,587 on written options. | |
(3) | Net of foreign taxes on investments of $344,141. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Janus | |||||
(all numbers in thousands) | Portfolio(1) | |||||
Investment Income: | ||||||
Interest | $ | 491 | ||||
Dividends | 23,924 | |||||
Dividends from affiliates | 357 | |||||
Foreign tax withheld | (954) | |||||
Total Investment Income | 23,818 | |||||
Expenses: | ||||||
Advisory fees | 12,199 | |||||
Transfer agent fees and expenses | 5 | |||||
Registration fees | 31 | |||||
Custodian fees | 70 | |||||
Audit fees | 45 | |||||
Non-interested Trustees’ fees and expenses | 56 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 3,822 | |||||
Other expenses | 486 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 16,714 | |||||
Expense and Fee Offset | (1) | |||||
Net Expenses | 16,713 | |||||
Net Investment Income/(Loss) | 7,105 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (270,835) | |||||
Net realized gain/(loss) from options contracts | 4,911 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations, options contracts | ||||||
and non-interested Trustees’ deferred compensation(2) | 886,824 | |||||
Net Gain/(Loss) on Investments | 620,900 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 628,005 |
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. | |
(2) | Net of foreign taxes on investments of $344,141. |
See Notes to Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Janus | ||||||||||
For the fiscal year ended December 31 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 7,105 | $ | 12,153 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (270,835) | (215,836) | ||||||||
Net realized gain/(loss) from options contracts | 4,911 | (2,112) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations, options | ||||||||||
contracts and non-interested Trustees’ deferred compensation | 886,824 | (646,954) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 628,005 | (852,749) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (2,061) | (3,843) | ||||||||
Service Shares | (5,830) | (7,989) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net (Decrease) from Dividends and Distributions | (7,891) | (11,832) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 23,365 | 18,981 | ||||||||
Service Shares | 500,512 | 660,611 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 2,061 | 3,843 | ||||||||
Service Shares | 5,830 | 7,989 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (55,027) | (96,241) | ||||||||
Service Shares | (113,326) | (114,289) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 363,415 | 480,894 | ||||||||
Net Increase/(Decrease) in Net Assets | 983,529 | (383,687) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 1,505,287 | 1,888,974 | ||||||||
End of period | $ | 2,488,816 | $ | 1,505,287 | ||||||
Undistributed net investment income/(loss)* | $ | 735 | $ | 1,465 |
* | See Note 5 in Notes to Financial Statements | |
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Janus Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $15.81 | $26.43 | $23.12 | $20.86 | $20.08 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .12 | .22 | .24 | .12 | .09 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 5.60 | (10.68) | 3.25 | 2.25 | .76 | |||||||||||||||||
Total from Investment Operations | 5.72 | (10.46) | 3.49 | 2.37 | .85 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.10) | (.16) | (.18) | (.11) | (.07) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.10) | (.16) | (.18) | (.11) | (.07) | |||||||||||||||||
Net Asset Value, End of Period | $21.43 | $15.81 | $26.43 | $23.12 | $20.86 | |||||||||||||||||
Total Return | 36.26% | (39.70)% | 15.14% | 11.38% | 4.23% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $441,921 | $353,051 | $677,593 | $677,289 | $730,374 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $380,924 | $525,042 | $686,441 | $693,731 | $857,660 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.68% | 0.66% | 0.66% | 0.69% | 0.66% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.68% | 0.66% | 0.66% | 0.69% | 0.66% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.59% | 0.87% | 0.89% | 0.49% | 0.31% | |||||||||||||||||
Portfolio Turnover Rate | 56% | 69% | 78% | 54% | 87% |
Service Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Janus Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $15.59 | $26.08 | $22.84 | $20.62 | $19.85 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .07 | .14 | .32 | .02 | (.02) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 5.52 | (10.50) | 3.07 | 2.26 | .82 | |||||||||||||||||
Total from Investment Operations | 5.59 | (10.36) | 3.39 | 2.28 | .80 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.07) | (.13) | (.15) | (.06) | (.03) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.07) | (.13) | (.15) | (.06) | (.03) | |||||||||||||||||
Net Asset Value, End of Period | $21.11 | $15.59 | $26.08 | $22.84 | $20.62 | |||||||||||||||||
Total Return | 35.93% | (39.85)% | 14.84% | 11.08% | 4.01% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $2,046,895 | $1,152,236 | $1,211,381 | $149,718 | $157,041 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $1,528,802 | $1,251,357 | $569,659 | $148,875 | $163,753 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.92% | 0.91% | 0.91% | 0.94% | 0.91% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.92% | 0.91% | 0.91% | 0.94% | 0.91% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.32% | 0.61% | 0.58% | 0.24% | 0.06% | |||||||||||||||||
Portfolio Turnover Rate | 56% | 69% | 78% | 54% | 87% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. | |
(2) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(3) | See “Explanations of Charts, Tables and Financial Statements.” |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Large-Cap Growth Funds | Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. | |
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 | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. | |
VVPR Strip | The Voter Verified Paper Record (VVPR) strip is a coupon which, if presented along with the dividend coupon of the ordinary share, allows the benefit of a reduced withholding tax on the dividends paid by the company. This strip is quoted separately from the ordinary share and is freely negotiable. |
* | Non-income producing security. | |
** | A portion of this security has been segregated by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Janus Portfolio(1) | |||||||||||
Common Stock | |||||||||||
Athletic Footwear | $ | – | $ | 14,617,089 | $ | – | |||||
Beverages – Wine and Spirits | – | 15,887,594 | – | ||||||||
Brewery | – | 126,370,371 | – | ||||||||
Casino Hotels | – | 19,457,399 | – | ||||||||
Commercial Banks | – | 17,336,370 | – | ||||||||
Food – Retail | – | 50,435,938 | – | ||||||||
Medical – Drugs | 21,793,401 | 37,065,439 | – | ||||||||
Oil Companies – Integrated | – | 40,542,432 | – | ||||||||
Semiconductor Components/Integrated Circuits | 46,021,736 | 23,416,738 | – | ||||||||
Soap and Cleaning Preparations | – | 20,393,190 | – | ||||||||
All Other | 1,929,567,405 | – | – | ||||||||
Preferred Stock | |||||||||||
Diversified Banking Institutions | – | 9,312,691 | – | ||||||||
Money Market | – | 122,868,782 | – | ||||||||
Total Investments in Securities | $ | 1,997,382,542 | $ | 497,704,033 | $ | – | |||||
Other Financial Instruments(a): | $ | – | $ | 5,548,095 | $ | – | |||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. | |
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Janus Aspen Series | 13
Table of Contents
Notes to Schedule of Investments (continued)
Aggregate collateral segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, option contracts, swap agreements and/or securities with extended settlement dates as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Janus Portfolio(1) | $ | 425,917,092 | |||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
14 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 (formerly named Janus Aspen Large Cap Growth 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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (continued)
and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
16 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
18 | DECEMBER 31, 2009
Table of Contents
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
The Portfolio recognized realized gains/(losses) from written options contracts during the fiscal year ended December 31, 2009 as indicated in the table below:
Portfolio | Gain | ||||
Janus Aspen Janus Portfolio(1) | $ | 5,502,243 | |||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
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.
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
Written option activity for the fiscal year ended December 31, 2009 is indicated in the tables below:
Number of | Premiums | |||||||
Call Options | Contracts | Received | ||||||
Janus Aspen Janus Portfolio(1) | ||||||||
Options outstanding at December 31, 2008 | 36,079 | $ | 5,032,899 | |||||
Options written | 3,514 | 859,689 | ||||||
Options closed | (1,670) | (497,693) | ||||||
Options expired | (34,409) | (4,535,206) | ||||||
Options exercised | (1,168) | (744,102) | ||||||
Options outstanding at December 31, 2009 | 2,346 | $ | 115,587 | |||||
Number of | Premiums | |||||||
Put Options | Contracts | Received | ||||||
Janus Aspen Janus Portfolio(1) | ||||||||
Options outstanding at December 31, 2008 | 39,147 | $ | 5,933,179 | |||||
Options written | 570 | 257,344 | ||||||
Options closed | (27,911) | (4,999,145) | ||||||
Options expired | (570) | (257,344) | ||||||
Options exercised | (11,236) | (934,034) | ||||||
Options outstanding at December 31, 2009 | – | $ | – | |||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to
20 | DECEMBER 31, 2009
Table of Contents
allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Derivatives not accounted for as | Asset Derivatives | Liability Derivatives | ||||||||||
hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Equity Contracts | ||||||||||||
Options | Unaffiliated investments at value | $ | – | Options written, at value | $ | 13,466 | ||||||
Foreign Exchange Contracts | Forward currency contracts | 5,561,561 | Forward currency contracts | – | ||||||||
Total | $ | 5,561,561 | $ | 13,466 | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | 4,910,952 | $ | – | $ | 4,910,952 | ||||||||||
Foreign Exchange Contracts | – | – | – | (9,151,614 | ) | (9,151,614 | ) | |||||||||||||
Total | $ | – | $ | – | $ | 4,910,952 | $ | (9,151,614 | ) | $ | (4,240,662 | ) | ||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (8,729,881 | ) | $ | – | $ | (8,729,881 | ) | ||||||||
Foreign Exchange Contracts | – | – | – | 6,901,766 | 6,901,766 | |||||||||||||||
Total | $ | – | $ | – | $ | (8,729,881 | ) | $ | 6,901,766 | $ | (1,828,115 | ) | ||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or
22 | DECEMBER 31, 2009
Table of Contents
more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Janus Portfolio(1) | All Asset Levels | 0.64 | ||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004.
24 | DECEMBER 31, 2009
Table of Contents
Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Janus Portfolio(1) | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 825,062,821 | $ | 702,396,039 | $ | 231,495 | $ | 122,868,782 | ||||||
Janus Institutional Cash Management Fund – Institutional Shares(2) | 117,756 | 47,133,174 | 91,807 | – | ||||||||||
Janus Institutional Money Market Fund – Institutional Shares(2) | 59,206 | 25,265,787 | 34,266 | – | ||||||||||
$ | 825,239,783 | $ | 774,795,000 | $ | 357,568 | $ | 122,868,782 | |||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. | |
(2) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes (reduced by foreign tax liability).
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Janus Portfolio(1) | $ | 835,343 | $ | – | $ | (602,089,119) | $ | (15,254) | $ | 20,239 | $ | 391,350,169 | ||||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | December 31, | December 31, | Accumulated | |||||||||||||||||||
Portfolio | 2010 | 2011 | 2016 | 2017 | Capital Losses | ||||||||||||||||||
Janus Aspen Janus Portfolio(1)(2) | $ | (84,773,612) | $ | (84,773,612) | $ | (100,329,195) | $ | (332,212,700) | $ | (602,089,119) | |||||||||||||
(1) | Capital loss carryover is subject to annual limitations. | |
(2) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Expired | ||||||||||||||||||||||
Janus Aspen Janus Portfolio(1) | $ | 378,164,191 | |||||||||||||||||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Janus Portfolio(1) | $ | 2,103,392,265 | $ | 416,738,772 | $ | (25,044,462) | |||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Janus Portfolio(1) | $ | 7,890,956 | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Janus Portfolio(1) | $ | 11,831,747 | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
26 | DECEMBER 31, 2009
Table of Contents
6. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Janus Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 1,328 | 874 | ||||||||
Reinvested dividends and distributions | 112 | 185 | ||||||||
Shares repurchased | (3,143) | (4,373) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,703) | (3,314) | ||||||||
Shares Outstanding, Beginning of Period | 22,326 | 25,640 | ||||||||
Shares Outstanding, End of Period | 20,623 | 22,326 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 29,112 | 32,127 | ||||||||
Reinvested dividends and distributions | 325 | 395 | ||||||||
Shares repurchased | (6,355) | (5,083) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 23,082 | 27,439 | ||||||||
Shares Outstanding, Beginning of Period | 73,893 | 46,454 | ||||||||
Shares Outstanding, End of Period | 96,975 | 73,893 |
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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(1) | $ | 1,388,062,264 | $ | 1,000,177,448 | $ | – | $ | – | ||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
28 | DECEMBER 31, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Janus Portfolio:
of Janus Aspen Janus Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Janus Portfolio (formerly Janus Aspen Large Cap Growth Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
30 | DECEMBER 31, 2009
Table of Contents
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
Janus Aspen Series | 31
Table of Contents
Additional Information (unaudited) (continued)
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
32 | DECEMBER 31, 2009
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
Janus Aspen Series | 33
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
34 | DECEMBER 31, 2009
Table of Contents
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
Janus Aspen Series | 35
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Janus Portfolio(1) | 100% | |||||||||
(1) | Formerly named Janus Aspen Large Cap Growth Portfolio. |
36 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 37
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
38 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Jonathan D. Coleman 151 Detroit Street Denver, CO 80206 DOB: 1971 | Executive Vice President and Co-Portfolio Manager Janus Aspen Janus Portfolio | 11/07-Present | Co-Chief Investment Officer and Executive Vice President of Janus Capital, and Portfolio Manager for other Janus accounts. Formerly, Portfolio Manager (2002-2007) for Enterprise Portfolio and Vice President (1998-2006) of Janus Capital. | |||
Daniel Riff 151 Detroit Street Denver, CO 80206 DOB: 1972 | Executive Vice President and Co-Portfolio Manager Janus Aspen Janus Portfolio | 11/07-Present | Portfolio manager for other Janus accounts. Formerly, Analyst (2003-2007) for Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 39
Table of Contents
Notes
40 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81111 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
(formerly named Janus Aspen International Growth Portfolio)
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics
and holdings
and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 11 | |
Statement of Operations | 12 | |
Statements of Changes in Net Assets | 13 | |
Financial Highlights | 14 | |
Notes to Schedule of Investments | 16 | |
Notes to Financial Statements | 19 | |
Report of Independent Registered Public Accounting Firm | 33 | |
Additional Information | 34 | |
Explanations of Charts, Tables and Financial Statements | 37 | |
Designation Requirements | 40 | |
Trustees and Officers | 41 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of their best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares and Service II Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
Portfolio Snapshot I believe that company fundamentals drive share prices over the long term. I use fundamental research to make high-conviction, long-term investments in the most compelling international growth companies regardless of geography. | Brent Lynn portfolio manager |
Performance Overview
Janus Aspen Overseas Portfolio’s Institutional Shares, Service Shares and Service II Shares returned 79.56%, 79.07% and 79.07%, respectively, over the 12-month period ended December 31, 2009. The Portfolio’s primary benchmark, the Morgan Stanley Capital International (MSCI) All Country World ex-U.S. IndexSMreturned 41.45%, and its secondary benchmark, the MSCI EAFE® Index returned 31.78% during the period.
Economic Overview
I believe that the unprecedented response to the 2008 crisis by central banks and governments around the world prevented a disastrous meltdown in global financial markets and a possible global economic depression. Aggressive intervention by central banks to provide liquidity and to reduce interest rates, combined with huge government stimulus programs helped to stabilize market sentiment and to provide a base level of economic activity. As 2009 progressed, evidence increased of stabilization in the U.S. and European economies and of corporate revenues. However, despite a clear pickup of activity from the trough levels of late 2008 and early 2009, I believe most businesses still have only limited visibility into 2010, and the path back to sustained global economic growth remains uncertain. Concerns about the speed and magnitude of the inevitable withdrawal of central bank liquidity and government fiscal support compound the uncertainty. In addition, many Western countries face longer-term economic headwinds from the unwinding of the real-estate bubble, consumer deleveraging and high fiscal deficits.
Emerging countries, particularly China, stood out as beacons of strength in an otherwise bleak global economy. Globalization, urbanization, and infrastructure development remain powerful structural drivers of growth in these emerging economies. Also, the banks and financial systems in China, India, Brazil, and other key emerging markets generally suffered far less damage than the U.S. and Europe during the 2008 crisis. China’s massive government stimulus program appears to be successfully underpinning strong growth in that economy.
The short- and long-term health of the U.S. economy is critical to the economies of all other major countries and to global stock markets. Although I am concerned about the cyclical and structural headwinds facing the U.S., I am not convinced that we are doomed to an era of extremely low growth. The U.S. remains the most dynamic and flexible large economy in the world and has historically shown an ability to reinvent its economy. Furthermore, China and other emerging markets have become a much larger part of the global economy, and for the first time, emerging markets have the size to become a key driver of U.S. and global growth.
Portfolio Positioning
In the midst of the 2008 financial crisis and in the early months of 2009, when the world’s financial markets and economies were under great stress, I sharply concentrated the portfolio into our highest conviction ideas. I initiated or added to positions in companies such as Hong Kong-based Li & Fung, the global leader in sourcing for retailers; India-based Reliance Industries, an energy and petrochemicals conglomerate and India’s largest private sector company; Canada-based Potash Corporation of Saskatchewan, the global leader in fertilizer; and Brazil-based Petroleo Brasileiro SA (Petrobras), one of the world’s fastest growing major oil companies. I believed these companies had very strong franchises and would outperform their peers in the difficult economic environment. With the stocks down sharply in the market collapse, they offered what I considered compelling valuations. As the global outlook improved during 2009, many of these stocks rallied, and I cut position sizes based on valuation. I reallocated the proceeds into a number of “special situations” ideas. During the period, the Portfolio made meaningful investments in stocks such as airline companies Delta Air Lines, Continental Airlines, and Deutsche Lufthansa AG, auto companies Ford Motor Company and Daimler AG, and refining company Valero Energy. In these industries, the current environment is
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
challenging and longer-term growth opportunities may be limited. However, we believed that the franchises were under-appreciated by the market, structural changes such as capacity reductions offered the potential for higher medium-term profitability, and the stocks were trading at very low valuations.
As I cut positions in a number of stocks that rose with the market rebound, the Portfolio’s emerging market weighting fell. The Portfolio’s weighting in U.S.-based companies rose due to the increased investments in the stocks I described as special situations. Nevertheless, emerging market stocks remain a very important part of Janus Aspen Overseas Portfolio. I expect economic growth in China, India, Brazil and other key emerging markets to significantly outpace the U.S. and Western countries for many years. In an environment of rapidly expanding economies, I believe that emerging markets will continue to offer some of the most exciting opportunities for investment in great growth companies.
Our exposure to U.S.-based companies increased during the period. Although within the guidelines of the Portfolio, these positions warrant discussion. Janus Aspen Overseas Portfolio is opportunistic and has often had some investments in special situations companies and in the U.S. In the aftermath of the global meltdown, I found a much greater number of special situations opportunities and many of them happened to be U.S.-based companies.
Contributors to Performance
Li & Fung, the Portfolio’s largest position, was the largest contributor to performance during the period. Analyst Andy Tam’s superb in-depth research on the company and the logistics outsourcing industry gave us the conviction to hold a very significant position in Li & Fung through the crisis. Li & Fung’s competitive advantages from its scale, huge network of supplier relationships, strong balance sheet, and ability to cut costs proved critical during the economic downturn, and the stock rose with the market rebound.
Reliance Industries, the India-based energy and petrochemicals conglomerate, rebounded during the year. The stock had fallen previously due to project delays, concerns about refining and petrochemical margins, and severe declines in Indian equity markets in 2008. The scale and complexity of the company’s refineries could result in significantly better-than-industry average refining margins in my view. I also believe that the company’s offshore oil and gas fields offer potentially significant increases in oil and gas reserves and production growth. A solid balance sheet at period end in my view and significant cash flow growth potential from the new projects could put the company in a strong financial position.
Ford was also a key contributor. By addressing its financial troubles earlier than General Motors and Chrysler, the U.S. auto maker is well positioned to capture market share in the U.S. in my opinion. Additionally, the company’s products are selling well, while its cost controls and spin-offs have improved margins.
Currency added to the Portfolio’s absolute performance but hurt the performance relative to its primary benchmark, the MSCI All-Country World ex-U.S IndexSM, as the dollar depreciated versus most global currencies. In the midst of the financial crisis, the dollar generally rose due to its safe haven status. However, as the crisis eased and risk tolerance rose again, the dollar fell against most major currencies. The Portfolio was underweight some currencies that outperformed such as the euro, Australian dollar, and Japanese yen. It was also overweight some currencies that underperformed such as the Chinese renminbi, Hong Kong dollar and Indian rupee. The Portfolio was partially hedged for its exposure to the euro. Please see the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
Detractors from Performance
Arcandor, the German retail and travel conglomerate, was a significant detractor during the period. The difficult economic environment hurt sales and cash flow generation in the company’s department store and mail order businesses. In an extremely restrictive credit environment, Arcandor found itself unable to rollover funding necessary to run its businesses. When the German government rejected Arcandor’s request for state aid, the company filed for insolvency. We initially purchased Arcandor stock believing that the company could benefit from restructuring opportunities in its industries. In hindsight, this was a mistake, especially following the onset of the credit crisis and global recession. After the company filed for insolvency, we sold all of our remaining position.
U.S.-based SunPower Corp, a leading manufacturer of solar cells, was the second largest detractor. The business environment for solar cells has been difficult since the crisis. Lower natural gas and oil prices have made alternative energy relatively less attractive, and more importantly, the availability of financing for solar cell buyers has grown much tighter. Despite near-term weakness, I continue to believe that over the next decade, solar power will be a key growth industry for
Janus Aspen Series | 3
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
environmental and energy security reasons, and SunPower should benefit from its competitive advantages in solar-cell technology and distribution.
We initiated a position in British Airways, another detractor, during the third quarter on my view that the airline is well positioned in its key markets to benefit when passenger traffic returns to more normal levels.
Outlook
Global stock markets often experience significant volatility. However, the recent collapse and subsequent partial rebound of global equities has been extreme. During difficult times, the conviction to hold onto existing positions or to buy new ones is critical. My conviction comes from our team’s tremendous, in-depth fundamental research. Janus’ investment team travels millions of miles every year, meeting with companies and their competitors, suppliers and customers. These meetings help us understand our companies better and lay the foundation for high-conviction investments.
Although the performance of the markets and the Portfolio was positive over the past 12 months, the future performance of the Portfolio could be considerably worse or perhaps negative. I certainly do not envision another period like the 2008 crisis, but I also recognize the futility of attempting to predict short-term market trends.
Despite volatile markets and a relatively bleak near-term picture for the global economy, I remain optimistic about the long-term. I am excited about the prospects for our companies to improve their competitive positions and to grow revenues and profits. I have not changed my investment approach. I believe the best way to generate solid long-term returns is to make high conviction, long-term investments in world-class companies with exciting growth prospects trading at undeservedly low valuations. As manager of the Portfolio, my sole focus is to deliver strong, long-term performance for you. I will perform this job to the best of my ability.
Thank you for your continued investment in Janus Aspen Overseas Portfolio.
Janus Aspen Overseas Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Li & Fung, Ltd. | 8.55% | |||
Reliance Industries, Ltd. | 4.39% | |||
Ford Motor Co. | 4.38% | |||
Petroleo Brasileiro S.A. (ADR) | 4.06% | |||
Cyrela Commercial Properties S.A. Empreendimentos e Participacoes | 3.49% |
5 Bottom Performers – Holdings
Contribution | ||||
Arcandor A.G. | –0.74% | |||
SunPower Corp. – Class A | –0.67% | |||
British Airways PLC | –0.58% | |||
Genzyme Corp. | –0.39% | |||
Nintendo Co., Ltd. | –0.30% |
5 Top Performers – Sectors*
Portfolio Weighting | MSCI All Country World ex-U.S. | |||||||||||
Portfolio Contribution | (Average % of Equity) | IndexSM Weighting | ||||||||||
Consumer Discretionary | 27.72% | 22.75% | 8.54% | |||||||||
Financials | 17.59% | 25.84% | 24.59% | |||||||||
Energy | 11.34% | 14.52% | 11.40% | |||||||||
Information Technology | 10.53% | 15.09% | 6.56% | |||||||||
Industrials | 6.79% | 8.47% | 10.12% |
5 Bottom Performers – Sectors*
Portfolio Weighting | MSCI All Country World ex-U.S. | |||||||||||
Portfolio Contribution | (Average % of Equity) | IndexSM Weighting | ||||||||||
Telecommunication Services | –0.28% | 1.05% | 6.93% | |||||||||
Utilities | 0.40% | 0.20% | 5.57% | |||||||||
Health Care | 1.28% | 3.15% | 6.86% | |||||||||
Materials | 2.70% | 4.34% | 10.86% | |||||||||
Consumer Staples | 5.66% | 4.61% | 8.59% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Li & Fung, Ltd. Distribution/Wholesale | 7.0% | |||
Reliance Industries, Ltd. Oil Refining and Marketing | 4.9% | |||
Ford Motor Co. Automotive – Cars and Light Trucks | 4.8% | |||
Delta Air Lines, Inc. Airlines | 4.1% | |||
CapitaLand, Ltd. Real Estate Operating/Development | 3.5% | |||
24.3% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 21.0% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Overseas Portfolio – Institutional Shares | 79.56% | 16.50% | 5.16% | 12.97% | 0.69% | ||||||
Janus Aspen Overseas Portfolio – Service Shares | 79.07% | 16.20% | 4.90% | 12.87% | 0.94% | ||||||
Janus Aspen Overseas Portfolio – Service II Shares | 79.07% | 16.25% | 4.95% | 12.91% | 0.94% | ||||||
Morgan Stanley Capital International All Country World ex-U.S. IndexSM | 41.45% | 5.83% | 2.71% | N/A** | |||||||
Morgan Stanley Capital International EAFE® Index | 31.78% | 3.54% | 1.17% | 4.70% | |||||||
Lipper Quartile – Institutional Shares | 1st | 1st | 1st | 1st | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity International Funds | 1/274 | 1/195 | 7/99 | 1/36 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
For Service II Shares, a 1% redemption fee may be imposed on shares held for 60 days or less. Performance shown does not reflect this redemption fee and, if reflected, performance would have been lower.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 Portfolio, and therefore the Portfolio’s performance, may decline in response to such risks.
This Portfolio may have significant exposure to emerging markets. In general, emerging market investments have historically been subject to significant gains and/or losses. As such, the Portfolio’s returns and NAV may be subject to volatility.
Janus Aspen Overseas Portfolio held approximately 7.2% and 11.7%, respectively, of its assets in Brazilian and Indian securities as of December 31, 2009 and the Portfolio may have experienced significant gains or losses due, in part, to its investments in Brazil and India. While holdings are subject to change without notice, the Portfolio’s returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in Brazil and India.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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 and Service II Shares for periods prior to December 31, 1999 and December 31, 2001, respectively, are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expense of Service Shares and Service II 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
May 31, 1994 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments 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.
As of May 1, 2009, Janus Aspen International Growth Portfolio changed its name to Janus Aspen Overseas Portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – May 2, 1994 | |
** | Since inception return is not shown for the index because the index’s inception date, December 31, 1998, differs significantly from the Portfolio’s inception date. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,255.90 | $ | 3.87 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,254.00 | $ | 5.28 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service II Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,254.20 | $ | 5.28 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.68% for Institutional Shares, 0.93% for Service Shares and 0.93% for Service II Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Overseas Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 98.3% | ||||||||||||
Agricultural Chemicals – 2.5% | ||||||||||||
504,848 | Potash Corporation of Saskatchewan, Inc. | $ | 55,099,287 | |||||||||
34,470 | Potash Corporation of Saskatchewan, Inc. (U.S. Shares) | 3,739,995 | ||||||||||
58,839,282 | ||||||||||||
Agricultural Operations – 2.3% | ||||||||||||
46,586,847 | Chaoda Modern Agriculture Holdings, Ltd. | 49,432,257 | ||||||||||
4,482,025 | China Green Holdings, Ltd. | 4,236,490 | ||||||||||
53,668,747 | ||||||||||||
Airlines – 9.2% | ||||||||||||
9,208,103 | British Airways PLC* | 27,459,579 | ||||||||||
2,709,965 | Continental Airlines, Inc. – Class B* | 48,562,573 | ||||||||||
8,346,755 | Delta Air Lines, Inc.* | 94,986,071 | ||||||||||
1,272,871 | Deutsche Lufthansa A.G.** | 21,385,210 | ||||||||||
1,623,430 | UAL Corp.* | 20,958,481 | ||||||||||
213,351,914 | ||||||||||||
Automotive – Cars and Light Trucks – 5.6% | ||||||||||||
342,296 | Daimler A.G.** | 18,301,201 | ||||||||||
11,200,310 | Ford Motor Co.* | 112,003,100 | ||||||||||
130,304,301 | ||||||||||||
Automotive – Truck Parts and Equipment – Original – 0.4% | ||||||||||||
246,538 | Valeo S.A.*,** | 8,578,518 | ||||||||||
Building – Residential and Commercial – 1.5% | ||||||||||||
4,314,300 | MRV Engenharia e Participacoes S.A. | 34,401,999 | ||||||||||
Casino Hotels – 1.3% | ||||||||||||
4,065,334 | Crown, Ltd. | 29,133,519 | ||||||||||
Commercial Banks – 1.5% | ||||||||||||
7,815,169 | Anglo Irish Bank Corp., Ltd.*,**,° | 11 | ||||||||||
8,216,400 | Banco de Oro Unibank, Inc. | 6,917,752 | ||||||||||
166,780 | Banco de Oro Unibank, Inc. (GDR) (144A) | 2,807,789 | ||||||||||
1,236,547 | Punjab National Bank, Ltd. | 23,964,283 | ||||||||||
33,689,835 | ||||||||||||
Commercial Banks – Non-U.S. – 1.2% | ||||||||||||
553,560 | State Bank of India, Ltd. | 26,818,470 | ||||||||||
Computers – 1.4% | ||||||||||||
486,630 | Research In Motion, Ltd. (U.S. Shares)* | 32,866,990 | ||||||||||
Distribution/Wholesale – 7.0% | ||||||||||||
39,818,970 | Li & Fung, Ltd. | 163,865,687 | ||||||||||
Diversified Banking Institutions – 3.7% | ||||||||||||
4,570,300 | Bank of America Corp. | 68,828,718 | ||||||||||
493,097 | Julius Baer Group, Ltd. | 17,237,526 | ||||||||||
86,066,244 | ||||||||||||
Diversified Operations – 1.5% | ||||||||||||
1,324,985 | MAX India, Ltd.* | 6,268,847 | ||||||||||
22,233,465 | Melco International Development, Ltd.* | 10,169,503 | ||||||||||
253,186 | Orascom Development Holding A.G.* | 17,794,261 | ||||||||||
34,232,611 | ||||||||||||
Diversified Operations/Commercial Services – 0.6% | ||||||||||||
9,025,904 | John Keells Holdings PLC | 13,524,009 | ||||||||||
Electronic Components – Semiconductors – 3.1% | ||||||||||||
25,144,371 | ARM Holdings PLC | 71,873,156 | ||||||||||
Electronic Connectors – 1.9% | ||||||||||||
429,100 | Hirose Electric Co., Ltd.** | 44,750,915 | ||||||||||
Finance – Investment Bankers/Brokers – 0.3% | ||||||||||||
1,076,800 | Nomura Holdings, Inc.** | 7,940,242 | ||||||||||
Finance – Mortgage Loan Banker – 0.5% | ||||||||||||
213,827 | Housing Development Finance Corp. | 12,269,125 | ||||||||||
Finance – Other Services – 0.9% | ||||||||||||
3,385,643 | IG Group Holdings PLC | 20,600,595 | ||||||||||
Food – Catering – 0% | ||||||||||||
5,684,000 | FU JI Food & Catering Services Holdings, Ltd.*, mu ,°° | 0 | ||||||||||
Gambling – Non-Hotel – 0.1% | ||||||||||||
62,581,453 | Amax Entertainment Holdings, Ltd.* | 1,569,597 | ||||||||||
Hotels and Motels – 2.9% | ||||||||||||
4,032,700 | Kingdom Hotel Investments (GDR) | 14,114,450 | ||||||||||
28,743,835 | Shangri-La Asia, Ltd. | 53,762,137 | ||||||||||
67,876,587 | ||||||||||||
Insurance Brokers – 0% | ||||||||||||
429,254 | Eurodekania, Ltd. – Private Placement (U.S. Shares)°° ,§ | 400,274 | ||||||||||
Investment Management and Advisory Services – 0.5% | ||||||||||||
2,365,300 | BlueBay Asset Management PLC | 11,610,768 | ||||||||||
Life and Health Insurance – 0.6% | ||||||||||||
1,320,091 | Prudential PLC | 13,442,815 | ||||||||||
Medical – Biomedical and Genetic – 3.2% | ||||||||||||
862,530 | Celgene Corp.* | 48,025,671 | ||||||||||
551,935 | Genzyme Corp.* | 27,050,334 | ||||||||||
75,076,005 | ||||||||||||
Medical – Drugs – 1.3% | ||||||||||||
362,885 | Forest Laboratories, Inc.* | 11,652,237 | ||||||||||
110,672 | Roche Holding A.G. | 18,844,404 | ||||||||||
30,496,641 | ||||||||||||
Multi-Line Insurance – 1.5% | ||||||||||||
2,573,711 | Aegon N.V.*,** | 16,413,856 | ||||||||||
1,834,453 | ING Groep N.V.*,** | 17,746,929 | ||||||||||
34,160,785 | ||||||||||||
Oil Companies – Exploration and Production – 1.6% | ||||||||||||
405,417 | Niko Resources, Ltd. | 38,062,239 | ||||||||||
Oil Companies – Integrated – 1.8% | ||||||||||||
873,870 | Petroleo Brasileiro S.A. (ADR) | 41,666,122 | ||||||||||
Oil Field Machinery and Equipment – 0.5% | ||||||||||||
1,354,596 | Wellstream Holdings PLC | 11,541,897 | ||||||||||
Oil Refining and Marketing – 7.0% | ||||||||||||
4,948,050 | Reliance Industries, Ltd. | 115,148,489 | ||||||||||
2,873,215 | Valero Energy Corp. | 48,126,351 | ||||||||||
163,274,840 | ||||||||||||
Paper and Related Products – 2.1% | ||||||||||||
3,303,532 | Stora Enso Oyj – Class R*,** | 23,172,870 | ||||||||||
2,102,694 | UPM-Kymmene Oyj** | 25,025,401 | ||||||||||
48,198,271 | ||||||||||||
Power Converters and Power Supply Equipment – 1.4% | ||||||||||||
651,070 | SunPower Corp. – Class A* | 15,417,338 | ||||||||||
999,630 | Suntech Power Holdings Co., Ltd. (ADR)* | 16,623,847 | ||||||||||
32,041,185 | ||||||||||||
Property and Casualty Insurance – 2.4% | ||||||||||||
3,122,857 | Reliance Capital, Ltd. | 56,942,440 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Overseas Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Real Estate Management/Services – 2.5% | ||||||||||||
3,670,000 | Mitsubishi Estate Co., Ltd.** | $ | 58,245,993 | |||||||||
Real Estate Operating/Development – 11.5% | ||||||||||||
42,731,286 | Ayala Land, Inc. | 10,389,298 | ||||||||||
27,650,505 | CapitaLand, Ltd. | 81,973,011 | ||||||||||
24,654,000 | China Overseas Land & Investment, Ltd. | 51,619,485 | ||||||||||
2,403,110 | Cyrela Brazil Realty S.A. | 33,269,865 | ||||||||||
970,360 | Cyrela Commercial Properties S.A. Empreendimentos e Participacoes | 6,814,871 | ||||||||||
14,133,000 | Hang Lung Properties, Ltd. | 55,214,276 | ||||||||||
1,121,810 | PDG Realty S.A. Empreendimentos e Participacoes | 10,996,371 | ||||||||||
390,850 | Rodobens Negocios Imobiliarios S.A. | 4,026,242 | ||||||||||
1,472,021 | Rossi Residencial S.A. | 12,687,689 | ||||||||||
266,991,108 | ||||||||||||
Retail – Apparel and Shoe – 0.3% | ||||||||||||
15,198,335 | Trinity, Ltd. – Private Placement*,°° ,§ | 5,940,127 | ||||||||||
Retail – Consumer Electronics – 1.3% | ||||||||||||
453,820 | Yamada Denki Co., Ltd.** | 30,514,332 | ||||||||||
Retail – Miscellaneous/Diversified – 0.7% | ||||||||||||
2,460,276 | SM Investments Corp. | 17,221,782 | ||||||||||
Semiconductor Components/Integrated Circuits – 0% | ||||||||||||
1 | Taiwan Semiconductor Manufacturing Co., Ltd. | 2 | ||||||||||
Semiconductor Equipment – 2.2% | ||||||||||||
1,506,905 | ASML Holding N.V.** | 51,291,755 | ||||||||||
Steel – Producers – 0.4% | ||||||||||||
858,900 | Tokyo Steel Manufacturing Co., Ltd.** | 9,668,522 | ||||||||||
Sugar – 2.7% | ||||||||||||
2,612,014 | Bajaj Hindusthan, Ltd. | 12,521,894 | ||||||||||
426,300 | Bajaj Hindusthan, Ltd. (GDR) (144A) | 2,043,437 | ||||||||||
1,570,503 | Cosan S.A. Industria e Comercio* | 22,870,044 | ||||||||||
3,032,876 | Cosan, Ltd. – Class A | 26,386,021 | ||||||||||
63,821,396 | ||||||||||||
Telecommunication Services – 2.1% | ||||||||||||
1,237,231 | Amdocs, Ltd. (U.S. Shares) | 35,298,200 | ||||||||||
3,915,909 | Reliance Communications, Ltd. | 14,326,027 | ||||||||||
49,624,227 | ||||||||||||
Toys – 1.3% | ||||||||||||
130,400 | Nintendo Co., Ltd.** | 30,931,705 | ||||||||||
Total Common Stock (cost $1,848,598,034) | 2,287,387,574 | |||||||||||
Money Market – 1.2% | ||||||||||||
28,356,000 | Janus Cash Liquidity Fund LLC, 0% (cost $28,356,000) | 28,356,000 | ||||||||||
Total Investments (total cost $1,876,954,034) – 99.5% | 2,315,743,574 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.5% | 11,188,630 | |||||||||||
Net Assets – 100% | $ | 2,326,932,204 | ||||||||||
Summary of Investments by Country – Long Positions
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 29,133,519 | 1.3% | |||||
Bermuda | 255,760,059 | 11.0% | ||||||
Brazil | 166,733,202 | 7.2% | ||||||
Canada | 129,768,511 | 5.6% | ||||||
Cayman Islands | 80,170,554 | 3.5% | ||||||
Finland | 48,198,271 | 2.1% | ||||||
France | 8,578,518 | 0.4% | ||||||
Germany | 39,686,411 | 1.7% | ||||||
Guernsey | 35,298,200 | 1.5% | ||||||
Hong Kong | 117,003,264 | 5.0% | ||||||
India | 270,303,013 | 11.7% | ||||||
Ireland | 11 | 0.0% | ||||||
Japan | 182,051,710 | 7.9% | ||||||
Netherlands | 85,452,540 | 3.7% | ||||||
Philippines | 37,336,620 | 1.6% | ||||||
Singapore | 81,973,011 | 3.5% | ||||||
Sri Lanka | 13,524,009 | 0.6% | ||||||
Switzerland | 53,876,190 | 2.3% | ||||||
Taiwan | 2 | 0.0% | ||||||
United Kingdom | 156,929,084 | 6.8% | ||||||
United States†† | 523,966,875 | 22.6% | ||||||
Total | $ | 2,315,743,574 | 100.0% |
†† | Includes Cash Equivalents (21.4% excluding Cash Equivalents). |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
Euro 1/14/10 | 10,500,000 | $ | 15,063,050 | $ | 582,580 | |||||||
Euro 1/21/10 | 13,400,000 | 19,223,106 | 847,682 | |||||||||
Euro 2/4/10 | 7,900,000 | 11,332,739 | 321,657 | |||||||||
Japanese Yen 1/14/10 | 1,400,000,000 | 15,041,606 | 531,253 | |||||||||
Japanese Yen 1/21/10 | 4,600,000,000 | 49,424,664 | 2,098,057 | |||||||||
Japanese Yen 2/4/10 | 3,500,000,000 | 37,609,021 | 2,042,499 | |||||||||
Total | $ | 147,694,186 | $ | 6,423,728 |
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Overseas | |||||
(all numbers in thousands except net asset value per share) | Portfolio(1) | |||||
Assets: | ||||||
Investments at cost | $ | 1,876,954 | ||||
Unaffiliated investments at value | $ | 2,287,388 | ||||
Affiliated money market investments | 28,356 | |||||
Cash | – | |||||
Receivables: | ||||||
Investments sold | 6,523 | |||||
Portfolio shares sold | 2,076 | |||||
Dividends | 315 | |||||
Non-interested Trustees’ deferred compensation | 57 | |||||
Forward currency contracts | 6,424 | |||||
Other assets | 37 | |||||
Total Assets | 2,331,176 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | – | |||||
Portfolio shares repurchased | 2,356 | |||||
Dividends | 1 | |||||
Advisory fees | 1,249 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 263 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | 75 | |||||
Transfer agent fees and expenses | 2 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | 57 | |||||
Accrued expenses and other payables | 240 | |||||
Total Liabilities | 4,244 | |||||
Net Assets | $ | 2,326,932 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 2,070,703 | ||||
Undistributed net investment income/(loss)* | 5,897 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (194,892) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 445,224 | |||||
Total Net Assets | $ | 2,326,932 | ||||
Net Assets – Institutional Shares | $ | 716,237 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 15,608 | |||||
Net Asset Value Per Share | $ | 45.89 | ||||
Net Assets – Service Shares | $ | 1,254,824 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 27,833 | |||||
Net Asset Value Per Share | $ | 45.08 | ||||
Net Assets – Service II Shares | $ | 355,871 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 7,849 | |||||
Net Asset Value Per Share | $ | 45.34 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen International Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Overseas | |||||
(all numbers in thousands) | Portfolio(1) | |||||
Investment Income: | ||||||
Interest | $ | 15 | ||||
Dividends | 25,791 | |||||
Dividends from affiliates | 107 | |||||
Foreign tax withheld | (1,348) | |||||
Total Investment Income | 24,565 | |||||
Expenses: | ||||||
Advisory fees | 11,715 | |||||
Audit fees | 37 | |||||
Transfer agent fees and expenses | 7 | |||||
Custodian fees | 450 | |||||
Registration fees | 31 | |||||
Non-interested Trustees’ fees and expenses | 51 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 2,503 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | 689 | |||||
Other expenses | 575 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 16,058 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 16,058 | |||||
Net Investment Income/(Loss) | 8,507 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (114,173) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 1,125,371 | |||||
Net Gain/(Loss) on Investments | 1,011,198 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 1,019,705 |
(1) | Formerly named Janus Aspen International Growth Portfolio. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Overseas | ||||||||||
For the fiscal years ended December 31 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 8,507 | $ | 27,323 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (114,173) | (15,764) | ||||||||
Net realized gain/(loss) from options contracts | – | 8,460 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 1,125,371 | (1,552,181) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 1,019,705 | (1,532,162) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (3,183) | (8,908) | ||||||||
Service Shares | (4,118) | (14,079) | ||||||||
Service II Shares | (1,140) | (4,142) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | (15,349) | (116,712) | ||||||||
Service Shares | (28,510) | (203,366) | ||||||||
Service II Shares | (7,738) | (59,910) | ||||||||
Net (Decrease) from Dividends and Distributions | (60,038) | (407,117) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 95,251 | 72,797 | ||||||||
Service Shares | 180,271 | 261,708 | ||||||||
Service II Shares | 55,995 | 100,688 | ||||||||
Redemption fees | ||||||||||
Service II Shares | 45 | 138 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 18,532 | 125,620 | ||||||||
Service Shares | 32,628 | 217,445 | ||||||||
Service II Shares | 8,878 | 64,052 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (90,656) | (186,116) | ||||||||
Service Shares | (241,694) | (230,420) | ||||||||
Service II Shares | (53,294) | (101,447) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 5,956 | 324,465 | ||||||||
Net Increase/(Decrease) in Net Assets | 965,623 | (1,614,814) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 1,361,309 | 2,976,123 | ||||||||
End of period | $ | 2,326,932 | $ | 1,361,309 | ||||||
Undistributed net investment income/(loss)* | $ | 5,897 | $ | (4,594) |
* | See Note 5 in Notes to Financial Statements | |
(1) | Formerly named Janus Aspen International Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Overseas Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $26.49 | $65.36 | $51.21 | $35.54 | $27.19 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .43 | .76 | .50 | .56 | .41 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 20.22 | (30.76) | 14.02 | 15.97 | 8.30 | |||||||||||||||||
Total from Investment Operations | 20.65 | (30.00) | 14.52 | 16.53 | 8.71 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.21) | (.63) | (.37) | (.86) | (.36) | |||||||||||||||||
Distributions (from capital gains)* | (1.04) | (8.24) | – | – | – | |||||||||||||||||
Total Distributions | (1.25) | (8.87) | (.37) | (.86) | (.36) | |||||||||||||||||
Net Asset Value, End of Period | 45.89 | $26.49 | $65.36 | $51.21 | $35.54 | |||||||||||||||||
Total Return | 79.15% | (52.04)% | 28.41% | 46.98% | 32.28% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $716,237 | $402,911 | $987,570 | $844,734 | $549,948 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $554,581 | $736,913 | $915,608 | $691,150 | $473,781 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.70% | 0.69% | 0.70% | 0.71% | 0.70% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.70% | 0.69% | 0.70% | 0.71% | 0.70% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.64% | 1.31% | 0.70% | 1.79% | 1.05% | |||||||||||||||||
Portfolio Turnover Rate | 44% | 56% | 59% | 60% | 57% |
Service Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Overseas Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $26.07 | $64.56 | $50.62 | $35.17 | $26.94 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .34 | .68 | .38 | .46 | .31 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 19.86 | (30.36) | 13.82 | 15.79 | 8.24 | |||||||||||||||||
Total from Investment Operations | 20.20 | (29.68) | 14.20 | 16.25 | 8.55 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.15) | (.57) | (.26) | (.80) | (.32) | |||||||||||||||||
Distributions (from capital gains)* | (1.04) | (8.24) | – | – | – | |||||||||||||||||
Total Distributions | (1.19) | (8.81) | (.26) | (.80) | (.32) | |||||||||||||||||
Net Asset Value, End of Period | 45.08 | $26.07 | $64.56 | $50.62 | $35.17 | |||||||||||||||||
Total Return | 78.66% | (52.15)% | 28.09% | 46.66% | 31.94% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $1,254,824 | $757,331 | $1,549,980 | $1,072,922 | $635,357 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $1,001,144 | $1,251,214 | $1,326,458 | $826,815 | $523,662 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2)(3) | 0.95% | 0.94% | 0.95% | 0.96% | 0.95% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(3) | 0.95% | 0.94% | 0.95% | 0.96% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.39% | 1.10% | 0.44% | 1.49% | 0.78% | |||||||||||||||||
Portfolio Turnover Rate | 44% | 56% | 59% | 60% | 57% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(2) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(3) | See “Explanation of Charts, Tables, and Financial Statements.” |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Service II Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Overseas Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $26.20 | $64.83 | $50.80 | $35.38 | $27.11 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .34 | .67 | .38 | .49 | .30 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 19.98 | (30.51) | 13.89 | 15.85 | 8.31 | |||||||||||||||||
Total from Investment Operations | 20.32 | (29.84) | 14.27 | 16.34 | 8.61 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.15) | (.57) | (.26) | (.94) | (.34) | |||||||||||||||||
Distributions (from capital gains)* | (1.04) | (8.24) | – | – | – | |||||||||||||||||
Redemption fees | .01 | .02 | .02 | .02 | –(2) | |||||||||||||||||
Total Distributions and Other | (1.18) | (8.79) | (.24) | (.92) | (.34) | |||||||||||||||||
Net Asset Value, End of Period | $45.34 | $26.20 | $64.83 | $50.80 | $35.38 | |||||||||||||||||
Total Return | 78.77% | (52.15)% | 28.17% | 46.70% | 31.97% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $355,871 | $201,067 | $438,573 | $303,730 | $113,120 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $275,760 | $364,379 | $363,622 | $186,734 | $82,746 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(3)(4) | 0.95% | 0.94% | 0.95% | 0.96% | 0.95% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(4) | 0.95% | 0.94% | 0.95% | 0.95% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.38% | 1.07% | 0.42% | 1.26% | 0.78% | |||||||||||||||||
Portfolio Turnover Rate | 44% | 56% | 59% | 60% | 57% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(2) | Redemption fees aggregated less than $.01 on a per share basis for the fiscal year ended. | |
(3) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of gross expenses to average net assets and was less than 0.01%. | |
(4) | See “Explanation of Charts, Tables, and Financial Statements” |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity International Funds | Funds that invest their assets in securities with primary trading markets outside of the United States. | |
Morgan Stanley Capital International All Country World ex-U.S. IndexSM | Is 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. | |
Morgan Stanley Capital International EAFE® Index | Is 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. | |
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. | |
ADR | American Depositary Receipt | |
GDR | Global Depositary Receipt | |
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 by the custodian 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. | |
mu | On October 20, 2009, FU JI Food & Catering Services Holdings, Ltd. filed a petition to wind up the company. | |
o | On January 23, 2009, Anglo Irish Bank Corporation PLC was acquired by the Republic of Ireland. The Portfolio’s investment in this issuer, as reflected in the Schedule of Investments, exposes investors to the negative (or positive) performance resulting from this and other events. |
°° ∞ Schedule of Fair Valued Securities (as of December 31, 2009)
Value as a | |||||||
Value | % of Net Assets | ||||||
Janus Aspen Overseas Portfolio(1) | |||||||
Eurodekania, Ltd. – Private Placement (U.S. Shares) | $ | 400,274 | 0.0% | ||||
FU JI Food & Catering Services Holdings, Ltd. | – | 0.0% | |||||
Trinity, Ltd. – Private Placement | 5,940,127 | 0.3% | |||||
$ | 6,340,401 | 0.3% | |||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
Securities are valued at “fair value” pursuant to procedures adopted by the Portfolios’ trustees. The Schedule of Fair Valued Securities does not include international equity securities fair valued pursuant to a systematic fair valuation model.
§ Schedule of Restricted and Illiquid Securities (as of December 31, 2009)
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Overseas Portfolio(1) | ||||||||||||
Eurodekania, Ltd. – Private Placement (U.S. Shares) | 3/8/07 | $ | 5,628,245 | $ | 400,274 | 0.0% | ||||||
Trinity, Ltd. – Private Placement | 11/14/07 | 6,995,780 | 5,940,127 | 0.3% | ||||||||
$ | 12,624,025 | $ | 6,340,401 | 0.3% | ||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
The Portfolio has registration rights for certain restricted securities held as of December 31, 2009. The issuer incurs all registration costs.
16 | DECEMBER 31, 2009
Table of Contents
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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Overseas Portfolio(1) | |||||||||||
Common Stock | |||||||||||
Agricultural Operations | $ | – | $ | 53,668,747 | $ | – | |||||
Airlines | 164,507,125 | 48,844,789 | – | ||||||||
Automotive – Cars and Light Trucks | 112,003,100 | 18,301,201 | – | ||||||||
Automotive – Truck Parts and Equipment – Original | – | 8,578,518 | – | ||||||||
Building – Residential and Commercial | – | 34,401,999 | – | ||||||||
Casino Hotels | – | 29,133,519 | – | ||||||||
Commercial Banks | – | 33,689,835 | – | ||||||||
Commercial Banks – Non-U.S. | – | 26,818,470 | – | ||||||||
Distribution/Wholesale | – | 163,865,687 | – | ||||||||
Diversified Banking Institutions | 68,828,718 | 17,237,526 | – | ||||||||
Diversified Operations | – | 34,232,611 | – | ||||||||
Diversified Operations – Commercial Services | – | 13,524,009 | – | ||||||||
Electronic Components – Semiconductors | – | 71,873,156 | – | ||||||||
Electronic Connectors | – | 44,750,915 | – | ||||||||
Finance – Investment Bankers/Brokers | – | 7,940,242 | – | ||||||||
Finance – Mortgage Loan Banker | – | 12,269,125 | – | ||||||||
Finance – Other Services | – | 20,600,595 | – | ||||||||
Gambling – Non-Hotel | – | 1,569,597 | – | ||||||||
Hotels and Motels | – | 67,876,587 | – | ||||||||
Insurance Brokers | – | – | 400,274 | ||||||||
Investment Management and Advisory Services | – | 11,610,768 | – | ||||||||
Life and Health Insurance | – | 13,442,815 | – | ||||||||
Medical – Drugs | 11,652,237 | 18,844,404 | – | ||||||||
Multi-Line Insurance | – | 34,160,785 | – | ||||||||
Oil Companies – Integrated | – | 41,666,122 | – | ||||||||
Oil Field Machinery and Equipment | – | 11,541,897 | – | ||||||||
Oil Refining and Marketing | 48,126,351 | 115,148,489 | – | ||||||||
Paper and Related Products | – | 48,198,271 | – | ||||||||
Power Converters and Power Supply Equipment | 15,417,338 | 16,623,847 | – | ||||||||
Property and Casualty Insurance | – | 56,942,440 | – | ||||||||
Real Estate Management/Services | – | 58,245,993 | – | ||||||||
Real Estate Operating/Development | – | 266,991,108 | – | ||||||||
Retail – Apparel and Shoe | – | – | 5,940,127 | ||||||||
Retail – Consumer Electronics | – | 30,514,332 | – | ||||||||
Retail – Miscellaneous/Diversified | – | 17,221,782 | – | ||||||||
Semiconductor Components/Integrated Circuits | – | 2 | – | ||||||||
Semiconductor Equipment | – | 51,291,755 | – | ||||||||
Steel – Producers | – | 9,668,522 | – | ||||||||
Sugar | 26,386,021 | 37,435,375 | – | ||||||||
Telecommunication Services | 35,298,200 | 14,326,027 | – | ||||||||
Toys | – | 30,931,705 | – | ||||||||
All Other | 204,844,516 | – | – | ||||||||
Money Market | – | 28,356,000 | – | ||||||||
Total Investments in Securities | $ | 687,063,606 | $ | 1,622,339,567 | $ | 6,340,401 | |||||
Other Financial Instruments(a): | $ | – | $ | 6,423,728 | $ | – | |||||
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Janus Aspen Series | 17
Table of Contents
Notes to Schedule of Investments (continued)
Level 3 Valuation Reconciliation of Assets (as of the fiscal period ended December 31, 2009)
Change in | Transfers | ||||||||||||||||||||||
Balance as of | Accrued | Unrealized | Net | In and/or | Balance as of | ||||||||||||||||||
December | Discounts/ | Realized | Appreciation/ | Purchases/ | Out of | December | |||||||||||||||||
31, 2008 | Premiums | Gain/(Loss) | (Depreciation)(1) | (Sales) | Level 3 | 31, 2009 | |||||||||||||||||
Investments in Securities: | |||||||||||||||||||||||
Janus Aspen Overseas Portfolio(2) | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||
Insurance Brokers | $ | 4,751,075 | $ | – | $ | – | $ | 1,189,052 | $ | – | $ | – | $ | 5,940,127 | |||||||||
Retail – Apparel and Shoe | – | – | – | – | – | 400,274 | 400,274 | ||||||||||||||||
(1) | Included in “Change in unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustee’s deferred compensation” on the Statement of Operations. | |
(2) | Formerly named Janus Aspen International Growth Portfolio. |
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Overseas Portfolio(1) | $ | 363,967,460 | |||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
18 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 (formerly named Janus Aspen International Growth 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. The Trust includes fourteen 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 three classes of shares: Institutional Shares, Service Shares and Service II Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans. Service Shares and Service II Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants. For Service II Shares, a redemption fee of 1% may be imposed on interests in separate accounts or plans held 60 days or less.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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.
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (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 expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
20 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its
22 | DECEMBER 31, 2009
Table of Contents
investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
24 | DECEMBER 31, 2009
Table of Contents
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Derivatives not accounted for | Asset Derivatives | Liability Derivatives | ||||||||||
as hedging instruments | Statement of Assets and Liabilities Locations | Fair Value | Statement of Assets and Liabilities Locations | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 6,423,728 | Forward currency contracts | $ | – | ||||||
Total | $ | 6,423,728 | $ | – | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | 2,680,003 | $ | 2,680,003 | ||||||||||
Total | $ | – | $ | – | $ | – | $ | 2,680,003 | $ | 2,680,003 | ||||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Foreign Exchange Contracts | $ | – | $ | – | $ | – | $ | 7,371,527 | $ | 7,371,527 | ||||||||||
Total | $ | – | $ | – | $ | – | $ | 7,371,527 | $ | 7,371,527 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
(“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with
26 | DECEMBER 31, 2009
Table of Contents
Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 Overseas Portfolio(1) | All Asset Levels | 0.64 | ||||||
(1) | Formerly names Janus Aspen International Growth Portfolio |
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares and Service II Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
payments by the Portfolio in connection with the distribution of Service Shares and Service II Shares at an annual rate of up to 0.25% of Service Shares’ and Service II Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown on the Statement of Operations.
A 1.00% redemption fee may be imposed on Service II Shares of the Portfolio held for 60 days or less. This fee is paid to the Portfolio rather than Janus Capital, and is designed to deter excessive short-term trading and to offset the brokerage commissions, market impact, and other costs associated with changes in the Portfolio’s asset level and cash flow due to short-term money movements in and out of the Portfolio. The redemption fee is accounted for as an addition to Paid-in Capital. Total redemption fees for the fiscal year ended December 31, 2009 were $45,529 for the Portfolio.
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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 maintains a NAV of $1.00 per share and distributes income daily in a manner
28 | DECEMBER 31, 2009
Table of Contents
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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Overseas Portfolio(1) | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 616,242,799 | $ | 587,938,799 | $ | 74,071 | $ | 28,356,000 | ||||||
Janus Institutional Money Market Fund – Institutional Shares(2) | 62,389 | 32,597,464 | 32,520 | – | ||||||||||
$ | 616,305,188 | $ | 620,536,263 | $ | 106,591 | $ | 28,356,000 | |||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(2) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Overseas Portfolio(1)(2) | 7,613,836 | – | (186,146,702) | (23,725) | (46,571) | 434,831,922 | ||||||||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(2) | Capital loss carryover is subject to annual limitations. |
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | Accumulated | |||||||||||||||
Portfolio | 2010 | 2017 | Capital Losses | ||||||||||||||
Janus Aspen Overseas Portfolio(1)(2) | $ | (133,087) | $ | (186,013,615) | $ | (186,146,702) | |||||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. | |
(2) | Capital loss carryover is subject to annual limitations. |
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Overseas Portfolio(1) | $ | 133,087 | ||||||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Overseas Portfolio(1) | $ | 1,880,911,652 | $ | 674,264,232 | $ | (239,432,310) | |||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Overseas Portfolio(1) | $ | 8,441,483 | $ | 51,596,078 | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Overseas Portfolio(1) | $ | 59,193,419 | $ | 347,924,328 | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
30 | DECEMBER 31, 2009
Table of Contents
6. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Overseas Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 2,467 | 1,439 | ||||||||
Reinvested dividends and distributions | 506 | 2,596 | ||||||||
Shares repurchased | (2,575) | (3,934) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 398 | 101 | ||||||||
Shares Outstanding, Beginning of Period | 15,210 | 15,109 | ||||||||
Shares Outstanding, End of Period | 15,608 | 15,210 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 4,966 | 5,920 | ||||||||
Reinvested dividends and distributions | 912 | 4,562 | ||||||||
Shares repurchased | (7,099) | (5,435) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,221) | 5,047 | ||||||||
Shares Outstanding, Beginning of Period | 29,054 | 24,007 | ||||||||
Shares Outstanding, End of Period | 27,833 | 29,054 | ||||||||
Transactions in Portfolio Shares – Service II Shares | ||||||||||
Shares sold | 1,546 | 1,835 | ||||||||
Reinvested dividends and distributions | 247 | 1,338 | ||||||||
Shares repurchased | (1,617) | (2,265) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 176 | 908 | ||||||||
Shares Outstanding, Beginning of Period | 7,673 | 6,765 | ||||||||
Shares Outstanding, End of Period | 7,849 | 7,673 |
(1) | Formerly named Janus Aspen International Growth Portfolio. |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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(1) | $ | 779,232,640 | $ | 775,529,099 | $ | – | $ | – | ||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the
Janus Aspen Series | 31
Table of Contents
Notes to Financial Statements (continued)
shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
32 | DECEMBER 31, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Overseas Portfolio:
of Janus Aspen Overseas Portfolio:
In our opinion, the accompanying statements of asset and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Overseas Portfolio (formerly Janus Aspen International Growth Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
Janus Aspen Series | 33
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
34 | DECEMBER 31, 2009
Table of Contents
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
Janus Aspen Series | 35
Table of Contents
Additional Information (unaudited) (continued)
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
36 | DECEMBER 31, 2009
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
Janus Aspen Series | 37
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. “Redemption Fees” (if applicable) refers to the fee paid to the Portfolio for shares held for 90 days or less by a shareholder. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses),
38 | DECEMBER 31, 2009
Table of Contents
realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
Janus Aspen Series | 39
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Overseas Portfolio(1) | $ | 51,596,078 | ||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Overseas Portfolio(1) | 11% | |||||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
Foreign Taxes Paid and Foreign Source Income
Portfolio | Foreign Taxes Paid | Foreign Source Income | ||||||||
Janus Aspen Overseas Portfolio(1) | $ | 1,208,707 | $ | 23,969,635 | ||||||
(1) | Formerly named Janus Aspen International Growth Portfolio. |
40 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 41
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
42 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Brent A. Lynn 151 Detroit Street Denver, CO 80206 DOB: 1964 | Executive Vice President and Portfolio Manager Janus Aspen Overseas Portfolio | 1/01-Present | Vice President of Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 43
Table of Contents
Notes
44 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 45
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81120 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 13 | |
Statement of Operations | 14 | |
Statements of Changes in Net Assets | 15 | |
Financial Highlights | 16 | |
Notes to Schedule of Investments | 17 | |
Notes to Financial Statements | 19 | |
Report of Independent Registered Public Accounting Firm | 34 | |
Additional Information | 35 | |
Explanations of Charts, Tables and Financial Statements | 38 | |
Designation Requirements | 41 | |
Trustees and Officers | 42 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of their best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, the administrative service fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectuses.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
Portfolio Snapshot This Portfolio seeks to uncover what the portfolio managers believe are fundamentally and financially strong mid-sized companies exhibiting favorable risk-reward characteristics. | Managed by Perkins Investment Management LLC |
Performance Overview
During the 12-months ended December 31, 2009, Janus Aspen Perkins Mid Cap Value Portfolio’s Institutional Shares and Service Shares returned 33.69% and 32.92%, respectively, underperforming the Portfolio’s benchmark, the Russell Midcap® Value Index, which returned 34.21%.
Equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher.
We continue to believe that sustained economic growth will be more muted than in past recoveries. Seventy percent of U.S. Gross Domestic Product (GDP) is tied to consumer spending and we still see significant headwinds. While there are signs of employment growth in the near future, unemployment was above 10% through December, and is likely to remain at elevated levels for an extended period. Housing remains a concern with the Mortgage Bankers Association citing rising delinquencies and foreclosures through September of this year. Commercial, governmental, and consumer balance sheets need to be de-levered, and at some point fiscal and monetary stimulus must be reduced. Financial markets have stabilized and corporate debt and equity markets have had substantial rallies. While we think the U.S. has averted systemic collapse, we continue to believe financial markets are fragile. Financial institutions still carry significant toxic assets that have not been marked down, bank lending is restricted as capital is held to absorb future loan losses, and the shadow banking system, including securitization, is functioning at much smaller capacity with significant government involvement.
Portfolio Comments
Our focus on financially strong companies and our attempt to limit losses in the first three months of the year was the key to our positive full year returns. This attention to risk has been central to our ability to substantially outperform over the long term. Stock selection was positive during the year, but our larger than average cash position was the largest detractor to relative results as markets recovered significantly during much of the year. Our small investment in index put options and our selections in health care, consumer discretionary and information technology weighed on comparable returns, as did an overweight in consumer staples. Our most significant contributors were our holdings in energy and industrials. An underweight in financials and holdings in materials were also responsible for the good relative and absolute returns. We remained overweight technology and materials at the end of the period and held underweight exposure in energy, telecommunication services and utilities.
Derivatives
In an attempt to help minimize downside risk in the portfolio we used relatively small positions in put options on the Russell Midcap® Value Index during the period given our view of greater market uncertainty and risk. Though helpful early on, these positions proved to be a drag on relative results later in the period as the market rallied. Please see the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
Stocks that hurt relative results
Notable individual underperformers for the period included a couple of banks. Commercial bank Synovus Financial Corp. suffered from the real estate problems in the Southeast. Our relatively small investment in Synovus provided the largest drag on results. We sold the name given its potential to have larger loss problems. We continue to focus on what we believe are the higher quality players in this group that have the liquidity to weather the difficult economic environment.
Aluminum producer Alcoa, Inc. was originally purchased in 2006 on the basis of attractive valuation and our view that increasing global demand would lift aluminum prices, and the stock higher. As the stock moved into the high $40s in 2007 amid news that a major competitor was being acquired, Alcoa’s stock price spiked, and we trimmed our position a number of times at attractive levels, but did not exit the position completely. Early in 2009, we eliminated
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
the remainder of our Alcoa position in favor of Freeport-McMoRan as a relative valuation suggested better risk/reward trade-off for the latter.
ATM manufacturer NCR Corp. underperformed for the period after disappointing earnings releases and its unfunded pension liability increased. We reduced our position in the stock. A relatively small position in AFLAC, Inc. proved to be a drag on results during the period. The stock was particularly weak on concerns of potential additional capital raises due to losses in the industry’s investment portfolios. We exited our position, as we were concerned about its balance sheet.
Stocks that aided relative results
Specialty chemical producer Lubrizol Corp. was our top performer for the year. Increasingly stringent fuel regulations have increased the technical requirements of the historically commodity-like lubricant additive business, and producers have opted to focus on select market segments, which reduced competition and increased margins to new peak levels. The company has been a consistent generator of above average free cash flow and has also benefitted from the weak U.S. dollar as approximately 50% of sales occur outside of North America. We reduced our position on strength as the risk/reward became less favorable.
Investment manager INVESCO, Ltd. rose as financial market conditions improved during the year. INVESCO, Ltd. remained a core holding through period end as the company continued to generate strong free cash flow, has done a good job of cutting costs and has a strong global platform across asset classes that we think could benefit from the ongoing shift towards international diversification.
Copper producers, such as Freeport-McMoRan Copper & Gold, Inc., rallied from oversold levels on a weaker U.S. dollar and news that China’s official manufacturing index rose, suggesting that the country could be recovering despite the slump in global demand. We think copper has among the best supply/demand fundamentals of any material given emerging market demand for electricity and water, and increasingly restrictive and difficult supply additions. Additionally, China imports approximately 50% of their growing needs.
Conclusion
The historically strong stock market has maintained its momentum. At the bottom of the market in early March we thought that stocks were undervalued and we became more aggressive buyers. However, our opinion continues to be that the strong and rapid market bounce of over 60% in the S&P 500® Index and over 80% in the Russell Midcap® Value Index since early March has taken stocks to what we believe to be slightly overvalued levels. A record 80% of S&P 500® Index companies reported earnings above expectations in the third quarter and this might continue to be the case over the short term due to rigorous cost controls. However, in order to see sustainable earnings growth, we need to see revenue growth. As previously stated, we believe revenue and economic growth over the next several years is likely to be below past experience due to secular deleveraging. On a short-to-intermediate term basis we believe stocks could continue to rally as interest rates are low, inventory rebuilding leads to above average GDP growth, alternative investments are not priced relatively attractively, and investors might feel underexposed to equities.
However, even with the consensus’ perhaps aggressive estimate of 35% earnings growth in 2010 (to $75 on the S&P 500) stocks were selling at almost 15 times 2010 estimated operating earnings at period end, which is in line with the long-term trend. In addition, operating earnings are at a historically high 20% premium to Generally Accepted Accounting Principles (GAAP) earnings, making stocks in our view more expensive on a GAAP basis. With valuations at these levels, we have found fewer stocks with favorable risk/reward characteristics. With a longer term perspective we are concerned about continuing potential structural problems related to personal balance sheets, U.S. governmental budget deficits, a weakening dollar, increasing U.S. government intervention in business, and geopolitical instability. We are disappointed that many of the imbalances that led to last year’s near meltdown have not been addressed adequately in our view. We think the financial system is still fragile and that U.S. government is performing a huge financial experiment with an outcome that we think is difficult to gauge. Despite these long-term issues, in the near term, investors have become somewhat complacent as reflected in volatility (as measured by CBOE VIX Index) declining by 50% this year to levels below those of the mid-to-late 1990’s. With this background we have allowed our cash balances to rise rather than stretch our valuation discipline.
We believe that our long term emphasis on balance sheets, free cash flow and reasonable valuations will serve us well in an environment that is likely to remain difficult and volatile. This consistent focus on long-term value might lead to short-term underperformance in a momentum driven market. But more importantly our risk sensitive discipline has historically helped lead to outperformance in down markets, such as 2008, and
Janus Aspen Series | 3
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
longer term, well above average returns as exhibited by our double-digit annualized 10-year returns in what was a difficult decade for the stock market.
Thank you for your investment in Janus Aspen Perkins Mid Cap Value Portfolio.
Janus Aspen Perkins Mid Cap Value Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Lubrizol Corp. | 1.56% | |||
INVESCO, Ltd. | 0.97% | |||
Freeport-McMoRan Copper & Gold, Inc. – Class B | 0.91% | |||
Tyco International, Ltd. (U.S. Shares) | 0.86% | |||
Tech Data Corp. | 0.83% |
5 Bottom Performers – Holdings
Contribution | ||||
Synovus Financial Corp. | –0.46% | |||
Alcoa, Inc. | –0.26% | |||
AFLAC, Inc. | –0.22% | |||
NCR Corp. | –0.17% | |||
Brown & Brown, Inc. | –0.16% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell Midcap® Value | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Energy | 6.14% | 11.54% | 7.53% | |||||||||
Information Technology | 5.63% | 11.16% | 7.14% | |||||||||
Financials | 5.59% | 23.38% | 27.89% | |||||||||
Industrials | 5.29% | 11.46% | 9.09% | |||||||||
Health Care | 4.94% | 13.10% | 4.77% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell Midcap® Value | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Telecommunication Services | 0.49% | 1.05% | 2.19% | |||||||||
Utilities | 1.06% | 4.47% | 13.56% | |||||||||
Consumer Staples | 1.98% | 8.18% | 7.71% | |||||||||
Consumer Discretionary | 3.89% | 8.83% | 13.08% | |||||||||
Materials | 4.52% | 6.83% | 7.03% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Noble Energy, Inc. Oil Companies – Exploration and Production | 1.4% | |||
Kansas City Southern Transportation – Railroad | 1.4% | |||
People’s United Financial, Inc. Savings/Loan/Thrifts | 1.3% | |||
Allstate Corp. Multi-Line Insurance | 1.3% | |||
CenturyTel, Inc. Telephone – Integrated | 1.3% | |||
6.7% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 0.5% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Since | Total Annual Fund | Net Annual Fund | |||||||
Year | Year | Inception | Operating Expenses | Operating Expenses | |||||||
Janus Aspen Perkins Mid Cap Value Portfolio – Institutional Shares | 33.69% | 5.77% | 11.92%# | 1.30% | 1.24%(a) | ||||||
Janus Aspen Perkins Mid Cap Value Portfolio – Service Shares | 32.92% | 5.39% | 11.07%* | 1.64% | 1.59%(b) | ||||||
Russell Midcap® Value Index | 34.21% | 1.98% | 9.47%** | ||||||||
Lipper Quartile – Institutional Shares | 2nd | 1st | 1st | ||||||||
Lipper Quartile – Institutional Shares based on total returns for Variable Annuity Multi-Cap Core Funds | 64/233 | 2/126 | 1/104 | ||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
(a) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
(b) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, the administrative services fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
The Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio’s performance may be affected by risks that include those associated with undervalued or overlooked companies and investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio invests in Real Estate Investment Trusts (REITs), which may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic region. REITs may be subject to risks including, but not limited to: legal, political, liquidity, and interest rate risks, a decline in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrowers. To the extent the Portfolio invests in foreign REITs, the Portfolio may be subject to fluctuations in currency rates or political or economic conditions in a particular country.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
Returns include reinvestment of dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
May 31, 2003 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
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 for index definitions.
The Portfolio’s holdings may differ significantly from the securities held in the index. The index is unmanaged and is not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | Service Shares inception date – December 31, 2002 | |
# | Institutional Shares inception date – May 1, 2003 | |
** | The Russell Midcap Value® Index’s since inception returns are calculated from December 31, 2002. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in this chart.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,227.30 | $ | 4.32 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.32 | $ | 3.92 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,222.80 | $ | 6.78 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.11 | $ | 6.16 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.77% for Institutional Shares and 1.21% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include effect of contractual waivers by Janus Capital. |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio
Schedule of Investments
As of December 31, 2009
Shares/Principal/Contract Amounts | Value | |||||||||||
Common Stock – 90.7% | ||||||||||||
Aerospace and Defense – 0.7% | ||||||||||||
13,300 | Rockwell Collins, Inc. | $ | 736,288 | |||||||||
Apparel Manufacturers – 0.4% | ||||||||||||
5,400 | VF Corp. | 395,496 | ||||||||||
Automotive – Truck Parts and Equipment – Original – 1.0% | ||||||||||||
16,400 | BorgWarner, Inc* | 544,808 | ||||||||||
20,700 | Johnson Controls, Inc. | 563,868 | ||||||||||
1,108,676 | ||||||||||||
Brewery – 0.8% | ||||||||||||
19,700 | Molson Coors Brewing Co. – Class B | 889,652 | ||||||||||
Building – Residential and Commercial – 0.7% | ||||||||||||
31,300 | KB Home | 428,184 | ||||||||||
37,300 | Pulte Homes, Inc.* | 373,000 | ||||||||||
801,184 | ||||||||||||
Cable Television – 0.3% | ||||||||||||
20,200 | Comcast Corp. – Class A | 340,572 | ||||||||||
Chemicals – Diversified – 0.5% | ||||||||||||
9,577 | FMC Corp. | 534,014 | ||||||||||
Chemicals – Specialty – 0.9% | ||||||||||||
13,800 | Lubrizol Corp. | 1,006,710 | ||||||||||
Coal – 0.5% | ||||||||||||
23,500 | Arch Coal, Inc. | 522,875 | ||||||||||
Commercial Banks – 0.8% | ||||||||||||
33,100 | BB&T Corp. | 839,747 | ||||||||||
Computer Aided Design – 0.2% | ||||||||||||
9,700 | Autodesk, Inc.* | 246,477 | ||||||||||
Computer Services – 1.0% | ||||||||||||
15,600 | Accenture, Ltd. – Class A (U.S. Shares) | 647,400 | ||||||||||
23,500 | SRA International, Inc.* | 448,850 | ||||||||||
1,096,250 | ||||||||||||
Computers – 0.7% | ||||||||||||
14,500 | Hewlett-Packard Co. | 746,895 | ||||||||||
Computers – Integrated Systems – 1.2% | ||||||||||||
32,900 | Diebold, Inc. | 936,005 | ||||||||||
34,030 | NCR Corp.* | 378,754 | ||||||||||
1,314,759 | ||||||||||||
Computers – Memory Devices – 0.8% | ||||||||||||
52,300 | EMC Corp.* | 913,681 | ||||||||||
Consumer Products – Miscellaneous – 0.8% | ||||||||||||
5,200 | Fortune Brands, Inc. | 224,640 | ||||||||||
10,500 | Kimberly-Clark Corp. | 668,955 | ||||||||||
893,595 | ||||||||||||
Containers – Metal and Glass – 0.9% | ||||||||||||
18,000 | Ball Corp. | 930,600 | ||||||||||
Containers – Paper and Plastic – 0.3% | ||||||||||||
15,800 | Temple-Inland, Inc. | 333,538 | ||||||||||
Cosmetics and Toiletries – 0.5% | ||||||||||||
8,300 | Procter & Gamble Co. | 503,229 | ||||||||||
Diagnostic Equipment – 0.4% | ||||||||||||
9,700 | Gen-Probe, Inc.* | 416,130 | ||||||||||
Disposable Medical Products – 0.5% | ||||||||||||
6,900 | C.R. Bard, Inc. | 537,510 | ||||||||||
Distribution/Wholesale – 0.6% | ||||||||||||
14,500 | Tech Data Corp.* | 676,570 | ||||||||||
Diversified Banking Institutions – 0.9% | ||||||||||||
16,900 | HSBC Holdings PLC | 964,821 | ||||||||||
Diversified Operations – 1.0% | ||||||||||||
31,700 | Tyco International, Ltd. (U.S. Shares) | 1,131,056 | ||||||||||
Electric – Integrated – 1.8% | ||||||||||||
9,900 | Entergy Corp. | 810,216 | ||||||||||
14,200 | PPL Corp. | 458,802 | ||||||||||
19,700 | Public Service Enterprise Group, Inc. | 655,025 | ||||||||||
1,924,043 | ||||||||||||
Electronic Components – Miscellaneous – 0.3% | ||||||||||||
10,300 | Garmin, Ltd. | 316,210 | ||||||||||
Electronic Components – Semiconductors – 1.3% | ||||||||||||
58,400 | Intersil Corp. – Class A | 895,856 | ||||||||||
24,200 | QLogic Corp.* | 456,654 | ||||||||||
6,471 | Semtech Corp.* | 110,072 | ||||||||||
1,462,582 | ||||||||||||
Electronic Connectors – 0.5% | ||||||||||||
16,600 | Thomas & Betts Corp.* | 594,114 | ||||||||||
Engineering – Research and Development Services – 2.5% | ||||||||||||
23,700 | Jacobs Engineering Group, Inc.* | 891,357 | ||||||||||
24,200 | McDermott International, Inc. (U.S. Shares)* | 581,042 | ||||||||||
27,500 | URS Corp.* | 1,224,300 | ||||||||||
2,696,699 | ||||||||||||
Entertainment Software – 0.4% | ||||||||||||
26,500 | Electronic Arts, Inc.* | 470,375 | ||||||||||
Fiduciary Banks – 0.4% | ||||||||||||
8,000 | Northern Trust Corp. | 419,200 | ||||||||||
Finance – Investment Bankers/Brokers – 0.3% | ||||||||||||
15,900 | Raymond James Financial, Inc. | 377,943 | ||||||||||
Food – Baking – 0.6% | ||||||||||||
27,600 | Flowers Foods, Inc. | 655,776 | ||||||||||
Food – Miscellaneous/Diversified – 1.7% | ||||||||||||
9,300 | General Mills, Inc. | 658,533 | ||||||||||
14,700 | Kellogg Co. | 782,040 | ||||||||||
4,600 | Kraft Foods, Inc. – Class A | 125,028 | ||||||||||
10,300 | Unilever PLC (ADR) | 328,570 | ||||||||||
1,894,171 | ||||||||||||
Food – Retail – 1.1% | ||||||||||||
57,900 | Kroger Co. | 1,188,687 | ||||||||||
Footwear and Related Apparel – 0.4% | ||||||||||||
14,800 | Wolverine World Wide, Inc. | 402,856 | ||||||||||
Forestry – 1.1% | ||||||||||||
20,200 | Potlatch Corp. | 643,976 | ||||||||||
12,200 | Weyerhaeuser Co. | 526,308 | ||||||||||
1,170,284 | ||||||||||||
Gold Mining – 1.2% | ||||||||||||
32,600 | Goldcorp, Inc. (U.S. Shares) | 1,282,484 | ||||||||||
Hotels and Motels – 0.3% | ||||||||||||
3,000 | Hyatt Hotels Corp.* | 89,430 | ||||||||||
7,658 | Marriott International, Inc. – Class A | 208,681 | ||||||||||
298,111 | ||||||||||||
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio
Schedule of Investments
As of December 31, 2009
Shares/Principal/Contract Amounts | Value | |||||||||||
Instruments – Scientific – 1.5% | ||||||||||||
30,500 | PerkinElmer, Inc. | $ | 627,995 | |||||||||
21,700 | Thermo Fisher Scientific, Inc.* | 1,034,873 | ||||||||||
1,662,868 | ||||||||||||
Insurance Brokers – 1.4% | ||||||||||||
17,400 | AON Corp. | 667,116 | ||||||||||
48,800 | Brown & Brown, Inc. | 876,936 | ||||||||||
1,544,052 | ||||||||||||
Internet Infrastructure Software – 0.6% | ||||||||||||
25,700 | Akamai Technologies, Inc.* | 650,981 | ||||||||||
Internet Security – 0.8% | ||||||||||||
48,600 | Symantec Corp.* | 869,454 | ||||||||||
Investment Management and Advisory Services – 1.8% | ||||||||||||
22,000 | AllianceBernstein Holding L.P. | 618,200 | ||||||||||
57,800 | INVESCO, Ltd. | 1,357,722 | ||||||||||
1,975,922 | ||||||||||||
Life and Health Insurance – 0.4% | ||||||||||||
17,245 | Lincoln National Corp. | 429,056 | ||||||||||
Machinery – Farm – 0.7% | ||||||||||||
14,700 | Deere & Co. | 795,123 | ||||||||||
Machinery – General Industrial – 0.6% | ||||||||||||
21,000 | IDEX Corp. | 654,150 | ||||||||||
Medical – Biomedical and Genetic – 1.5% | ||||||||||||
26,500 | Charles River Laboratories International, Inc.* | 892,785 | ||||||||||
4,400 | Genzyme Corp.* | 215,644 | ||||||||||
10,900 | Life Technologies Corp.* | 569,307 | ||||||||||
1,677,736 | ||||||||||||
Medical – Drugs – 0.8% | ||||||||||||
13,500 | Endo Pharmaceuticals Holdings, Inc.* | 276,885 | ||||||||||
17,600 | Forest Laboratories, Inc.* | 565,136 | ||||||||||
842,021 | ||||||||||||
Medical – HMO – 0.4% | ||||||||||||
20,000 | Health Net, Inc.* | 465,800 | ||||||||||
Medical – Wholesale Drug Distributors – 0.9% | ||||||||||||
17,000 | Cardinal Health, Inc. | 548,080 | ||||||||||
7,100 | McKesson Corp. | 443,750 | ||||||||||
991,830 | ||||||||||||
Medical Instruments – 0.7% | ||||||||||||
20,600 | St. Jude Medical, Inc.* | 757,668 | ||||||||||
Medical Labs and Testing Services – 1.1% | ||||||||||||
15,700 | Laboratory Corp. of America Holdings* | 1,174,988 | ||||||||||
Medical Products – 2.6% | ||||||||||||
14,000 | Becton, Dickinson and Co. | 1,104,039 | ||||||||||
18,400 | Covidien PLC (U.S. Shares) | 881,176 | ||||||||||
14,900 | Zimmer Holdings, Inc.* | 880,739 | ||||||||||
2,865,954 | ||||||||||||
Medical Sterilization Products – 0.3% | ||||||||||||
11,100 | STERIS Corp. | 310,467 | ||||||||||
Metal – Copper – 0.6% | ||||||||||||
8,600 | Freeport-McMoRan Copper & Gold, Inc. – Class B | 690,494 | ||||||||||
Metal Processors and Fabricators – 0.3% | ||||||||||||
7,900 | Kaydon Corp. | 282,504 | ||||||||||
Multi-Line Insurance – 1.9% | ||||||||||||
46,300 | Allstate Corp. | 1,390,852 | ||||||||||
72,550 | Old Republic International Corp. | 728,402 | ||||||||||
2,119,254 | ||||||||||||
Multimedia – 0.9% | ||||||||||||
10,300 | McGraw-Hill Cos., Inc. | 345,153 | ||||||||||
21,500 | Viacom, Inc. – Class B* | 639,195 | ||||||||||
984,348 | ||||||||||||
Networking Products – 1.1% | ||||||||||||
24,600 | Cisco Systems, Inc.* | 588,924 | ||||||||||
25,800 | Polycom, Inc.* | 644,226 | ||||||||||
1,233,150 | ||||||||||||
Non-Hazardous Waste Disposal – 0.5% | ||||||||||||
19,200 | Republic Services, Inc. | 543,552 | ||||||||||
Oil and Gas Drilling – 0.6% | ||||||||||||
8,059 | Transocean, Ltd. (U.S. Shares) | 667,285 | ||||||||||
Oil Companies – Exploration and Production – 8.5% | ||||||||||||
17,800 | Anadarko Petroleum Corp. | 1,111,076 | ||||||||||
19,500 | Bill Barrett Corp.* | 606,645 | ||||||||||
9,500 | Cabot Oil & Gas Corp. | 414,105 | ||||||||||
10,600 | Devon Energy Corp. | 779,100 | ||||||||||
18,600 | EnCana Corp. (U.S. Shares) | 602,454 | ||||||||||
16,400 | EQT Corp. | 720,288 | ||||||||||
55,400 | Forest Oil Corp.* | 1,232,650 | ||||||||||
21,718 | Noble Energy, Inc. | 1,546,755 | ||||||||||
24,500 | Questar Corp. | 1,018,465 | ||||||||||
13,800 | St. Mary Land & Exploration Co. | 472,512 | ||||||||||
14,500 | Ultra Petroleum Corp. (U.S. Shares)* | 722,970 | ||||||||||
9,227,020 | ||||||||||||
Oil Companies – Integrated – 1.2% | ||||||||||||
20,900 | Hess Corp. | 1,264,450 | ||||||||||
Oil Field Machinery and Equipment – 0.3% | ||||||||||||
8,400 | National Oilwell Varco, Inc. | 370,356 | ||||||||||
Paper and Related Products – 0.3% | ||||||||||||
6,400 | Rayonier, Inc. | 269,824 | ||||||||||
Pharmacy Services – 0.3% | ||||||||||||
13,600 | Omnicare, Inc. | 328,848 | ||||||||||
Pipelines – 1.3% | ||||||||||||
9,900 | Kinder Morgan Energy Partners L.P. | 603,702 | ||||||||||
15,200 | Plains All American Pipeline L.P. | 803,320 | ||||||||||
1,407,022 | ||||||||||||
Property and Casualty Insurance – 1.4% | ||||||||||||
7,400 | Chubb Corp. | 363,932 | ||||||||||
20,727 | HCC Insurance Holdings, Inc. | 579,734 | ||||||||||
14,700 | Mercury General Corp. | 577,122 | ||||||||||
1,520,788 | ||||||||||||
Reinsurance – 2.2% | ||||||||||||
377 | Berkshire Hathaway, Inc. – Class B* | 1,238,822 | ||||||||||
14,000 | Everest Re Group, Ltd. | 1,199,520 | ||||||||||
2,438,342 | ||||||||||||
REIT – Apartments – 1.1% | ||||||||||||
4,128 | Avalonbay Communities, Inc. | 338,950 | ||||||||||
13,700 | BRE Properties, Inc. – Class A | 453,196 | ||||||||||
13,400 | Equity Residential | 452,652 | ||||||||||
1,244,798 | ||||||||||||
See Notes to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Schedule of Investments
As of December 31, 2009
Shares/Principal/Contract Amounts | Value | |||||||||||
REIT – Diversified – 0.3% | ||||||||||||
10,500 | Liberty Property Trust | $ | 336,105 | |||||||||
REIT – Mortgage – 0.4% | ||||||||||||
27,100 | Chimera Investment Corp. | 105,148 | ||||||||||
25,500 | Redwood Trust, Inc. | 368,730 | ||||||||||
473,878 | ||||||||||||
REIT – Office Property – 0.5% | ||||||||||||
3,600 | Alexandria Real Estate Equities, Inc. | 231,444 | ||||||||||
10,600 | Mack-Cali Realty Corp. | 366,442 | ||||||||||
597,886 | ||||||||||||
REIT – Storage – 0.7% | ||||||||||||
9,469 | Public Storage | 771,250 | ||||||||||
REIT – Warehouse/Industrial – 0.8% | ||||||||||||
22,400 | AMB Property Corp. | 572,320 | ||||||||||
23,965 | ProLogis | 328,081 | ||||||||||
900,401 | ||||||||||||
Rental Auto/Equipment – 0.5% | ||||||||||||
21,200 | Aaron Rents, Inc. | 587,876 | ||||||||||
Retail – Apparel and Shoe – 1.4% | ||||||||||||
22,200 | American Eagle Outfitters, Inc. | 376,956 | ||||||||||
30,081 | Gap, Inc. | 630,197 | ||||||||||
22,300 | Men’s Wearhouse, Inc. | 469,638 | ||||||||||
1,476,791 | ||||||||||||
Retail – Auto Parts – 1.3% | ||||||||||||
21,200 | Advance Auto Parts, Inc. | 858,176 | ||||||||||
14,100 | O’Reilly Automotive, Inc.* | 537,492 | ||||||||||
1,395,668 | ||||||||||||
Retail – Automobile – 0.4% | ||||||||||||
12,100 | Copart, Inc.* | 443,223 | ||||||||||
Retail – Computer Equipment – 0.5% | ||||||||||||
24,200 | GameStop Corp. – Class A* | 530,948 | ||||||||||
Retail – Discount – 1.4% | ||||||||||||
19,500 | Big Lots, Inc.* | 565,110 | ||||||||||
18,300 | Wal-Mart Stores, Inc. | 978,135 | ||||||||||
1,543,245 | ||||||||||||
Retail – Drug Store – 1.2% | ||||||||||||
24,127 | CVS Caremark Corp. | 777,131 | ||||||||||
13,300 | Walgreen Co. | 488,376 | ||||||||||
1,265,507 | ||||||||||||
Retail – Pet Food and Supplies – 0.5% | ||||||||||||
20,600 | PetSmart, Inc. | 549,814 | ||||||||||
Savings/Loan/Thrifts – 2.4% | ||||||||||||
44,500 | NewAlliance Bancshares, Inc. | 534,445 | ||||||||||
87,800 | People’s United Financial, Inc. | 1,466,260 | ||||||||||
33,617 | Washington Federal, Inc. | 650,153 | ||||||||||
2,650,858 | ||||||||||||
Schools – 0.3% | ||||||||||||
5,900 | Apollo Group, Inc. – Class A* | 357,422 | ||||||||||
Semiconductor Components/Integrated Circuits – 0.4% | ||||||||||||
12,300 | Analog Devices, Inc. | 388,434 | ||||||||||
Semiconductor Equipment – 0.7% | ||||||||||||
57,800 | Applied Materials, Inc. | 805,732 | ||||||||||
Super-Regional Banks – 0.8% | ||||||||||||
8,100 | PNC Financial Services Group, Inc. | 427,599 | ||||||||||
19,900 | SunTrust Banks, Inc. | 403,771 | ||||||||||
831,370 | ||||||||||||
Telephone – Integrated – 1.6% | ||||||||||||
11,800 | AT&T, Inc. | 330,754 | ||||||||||
37,600 | CenturyTel, Inc. | 1,361,496 | ||||||||||
1,692,250 | ||||||||||||
Textile – Home Furnishings – 0.4% | ||||||||||||
8,100 | Mohawk Industries, Inc.* | 385,560 | ||||||||||
Tools – Hand Held – 1.1% | ||||||||||||
27,900 | Snap-On, Inc. | 1,179,054 | ||||||||||
Toys – 0.5% | ||||||||||||
26,700 | Mattel, Inc. | 533,466 | ||||||||||
Transportation – Marine – 0.3% | ||||||||||||
9,900 | Kirby Corp.* | 344,817 | ||||||||||
Transportation – Railroad – 2.4% | ||||||||||||
45,100 | Kansas City Southern* | 1,501,379 | ||||||||||
7,800 | Norfolk Southern Corp. | 408,876 | ||||||||||
11,400 | Union Pacific Corp. | 728,460 | ||||||||||
2,638,715 | ||||||||||||
Wireless Equipment – 0.4% | ||||||||||||
36,600 | Nokia OYJ | 470,310 | ||||||||||
X-Ray Equipment – 0.6% | ||||||||||||
43,700 | Hologic, Inc.* | 633,650 | ||||||||||
Total Common Stock (cost $83,890,997) | 99,078,195 | |||||||||||
Purchased Options – Puts – 0.4% | ||||||||||||
386 | iShares Russell Midcap® Value Index expires January 2010 exercise price $33.22** | 8,754 | ||||||||||
240 | iShares Russell Midcap® Value Index expires January 2010 exercise price $35.12** | 9,631 | ||||||||||
256 | iShares Russell Midcap® Value Index expires March 2010 exercise price $33.81** | 23,132 | ||||||||||
258 | iShares Russell Midcap® Value Index expires April 2010 exercise price $36.57** | 50,189 | ||||||||||
316 | iShares Russell Midcap® Value Index expires June 2010 exercise price $35.18** | 76,851 | ||||||||||
20 | S&P MidCap 400 Index expires March 2010 exercise price $679.19** | 33,939 | ||||||||||
14 | S&P MidCap 400 Index expires June 2010 exercise price $682.28** | 48,606 | ||||||||||
20 | S&P MidCap 400 Index expires July 2010 exercise price $684.98** | 80,248 | ||||||||||
12 | S&P MidCap 400 Index expires July 2010 exercise price $723.25** | 69,506 | ||||||||||
Total Purchased Options – Puts (premiums paid $693,593) | 400,856 | |||||||||||
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 11
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio
Schedule of Investments
As of December 31, 2009
Shares/Principal/Contract Amounts | Value | |||||||||||
Repurchase Agreement – 9.2% | ||||||||||||
$ | 10,100,000 | Calyon New York Branch, 0.0100% dated 12/31/09, maturing 1/4/10 to be repurchased at $10,100,011 collateralized by $9,944,836 in U.S. Treasuries 0.0875% – 5.7500% 8/15/10 – 1/15/28 with a value of $10,302,000 (cost $10,100,000) | $ | 10,100,000 | ||||||||
Total Investments (total cost $94,684,590) – 100.3% | 109,579,051 | |||||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.3)% | (385,052) | |||||||||||
Net Assets – 100% | $ | 109,193,999 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Bermuda | $ | 2,557,242 | 2.3% | |||||
Canada | 2,607,908 | 2.4% | ||||||
Cayman Islands | 316,210 | 0.3% | ||||||
Finland | 470,310 | 0.4% | ||||||
Ireland | 1,528,576 | 1.4% | ||||||
Panama | 581,042 | 0.5% | ||||||
Switzerland | 1,798,341 | 1.7% | ||||||
United Kingdom | 1,293,391 | 1.2% | ||||||
United States†† | 98,424,031 | 89.8% | ||||||
Total | $ | 109,579,051 | 100.0% |
†† | Includes Cash Equivalents (80.6% excluding Cash Equivalents) |
Schedule of Written Options – Puts | Value | |||
iShares Russell Midcap® Value Index expires January 2010 193 contracts exercise price $29.83 | $ | (1,247) | ||
iShares Russell Midcap® Value Index expires January 2010 120 contracts exercise price $31.53 | (1,099) | |||
iShares Russell Midcap® Value Index expires March 2010 128 contracts exercise price $30.36 | (5,029) | |||
iShares Russell Midcap® Value Index expires April 2010 129 contracts exercise price $32.84 | (10,766) | |||
iShares Russell Midcap® Value Index expires June 2010 158 contracts exercise price $31.59 | (21,155) | |||
S&P MidCap 400 Index expires March 2010 10 contracts exercise price $609.86 | (6,289) | |||
S&P MidCap 400 Index expires June 2010 7 contracts exercise price $612.66 | (12,340) | |||
S&P MidCap 400 Index expires July 2010 13 contracts exercise price $615.08 | (27,820) | |||
S&P MidCap 400 Index expires July 2010 6 contracts exercise price $649.45 | (18,964) | |||
Total Written Options – Puts | ||||
(premiums received $176,846) | $ | (104,709) | ||
See Notes to Schedule of Investments and Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Perkins | ||||||
Mid Cap | ||||||
As of December 31, 2009 | Value | |||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||
Assets: | ||||||
Investments at cost | $ | 94,685 | ||||
Investments at value | $ | 109,579 | ||||
Cash | 58 | |||||
Receivables: | ||||||
Investments sold | 159 | |||||
Portfolio shares sold | 73 | |||||
Dividends | 112 | |||||
Interest | – | |||||
Non-interested Trustees’ deferred compensation | 3 | |||||
Other assets | 2 | |||||
Total Assets | 109,986 | |||||
Liabilities: | ||||||
Payables: | ||||||
Options written, at value(1) | 105 | |||||
Investments purchased | 266 | |||||
Portfolio shares repurchased | 271 | |||||
Distributions | 3 | |||||
Advisory fees | 69 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 16 | |||||
Administrative service fees – Service Shares | 8 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | 3 | |||||
Accrued expenses and other payables | 49 | |||||
Total Liabilities | 792 | |||||
Net Assets | $ | 109,194 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in-surplus)* | $ | 106,281 | ||||
Undistributed net investment income/(loss)* | (3) | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (12,050) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 14,966 | |||||
Total Net Assets | $ | 109,194 | ||||
Net Assets – Institutional Shares | $ | 31,424 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 2,269 | |||||
Net Asset Value Per Share | $ | 13.85 | ||||
Net Assets – Service Shares | $ | 77,766 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,670 | |||||
Net Asset Value Per Share | $ | 13.72 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Premiums received of $176,846. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Perkins | ||||||
Mid Cap | ||||||
For the fiscal year ended December 31, 2009 | Value | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 9 | ||||
Dividends | 1,606 | |||||
Foreign tax withheld | (7) | |||||
Total Investment Income | 1,608 | |||||
Expenses: | ||||||
Advisory fees | 655 | |||||
Transfer agent expenses | 5 | |||||
Registration fees | 16 | |||||
Custodian fees | 24 | |||||
Audit fees | 45 | |||||
Non-interested Trustees’ fees and expenses | 4 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 161 | |||||
Administrative service fees – Service Shares | 64 | |||||
Other expenses | 107 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 1,081 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 1,081 | |||||
Less: Excess Expense Reimbursement | – | |||||
Net Expenses after Expense Reimbursement | 1,081 | |||||
Net Investment Income/(Loss) | 527 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (7,439) | |||||
Net realized gain/(loss) from options contracts | (1,683) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 33,364 | |||||
Net Gain/(Loss) on Investments | 24,242 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 24,769 |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Perkins | ||||||||||
Mid | ||||||||||
Cap | ||||||||||
Value | ||||||||||
For the fiscal years ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 527 | $ | 483 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (7,439) | (3,576) | ||||||||
Net realized gain/(loss) from options contracts | (1,683) | 1,811 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 33,364 | (24,576) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 24,769 | (25,858) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (145) | (96) | ||||||||
Service Shares | (235) | (282) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | (482) | (1,417) | ||||||||
Service Shares | (1,685) | (6,678) | ||||||||
Return of Capital | ||||||||||
Institutional Shares | (18) | N/A | ||||||||
Service Shares | (43) | N/A | ||||||||
Net (Decrease) from Dividends and Distributions | (2,608) | (8,473) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 21,708 | 12,571 | ||||||||
Service Shares | 16,809 | 27,390 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 645 | 1,513 | ||||||||
Service Shares | 1,963 | 6,960 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (10,414) | (5,750) | ||||||||
Service Shares | (14,404) | (14,066) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 16,307 | 28,618 | ||||||||
Net Increase/(Decrease) in Net Assets | 38,468 | (5,713) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 70,726 | 76,439 | ||||||||
End of period | $ | 109,194 | $ | 70,726 | ||||||
Undistributed net investment income/(loss)* | $ | (3) | $ | (1) |
* | See Note 5 in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Perkins Mid Cap Value Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $10.71 | $16.77 | $16.64 | $15.32 | $15.54 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .05 | .07 | .27 | .20 | .19 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.48 | (4.27) | .99 | 2.06 | 1.31 | |||||||||||||||||
Total from Investment Operations | 3.53 | (4.20) | 1.26 | 2.26 | 1.50 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.07) | (.08) | (.27) | (.20) | (.13) | |||||||||||||||||
Distributions (from capital gains)* | (.31) | (1.78) | (.86) | (.74) | (1.59) | |||||||||||||||||
Return of Capital | (.01) | N/A | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | (.39) | (1.86) | (1.13) | (.94) | (1.72) | |||||||||||||||||
Net Asset Value, End of Period | $13.85 | $10.71 | $16.77 | $16.64 | $15.32 | |||||||||||||||||
Total Return | 33.69% | (27.68)%(1) | 7.42% | 15.42% | 10.43% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $31,424 | $14,221 | $12,758 | $11,227 | $9,922 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $20,308 | $13,956 | $13,220 | $9,223 | $10,160 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 0.95% | 1.24% | 0.92% | 0.94% | 0.87% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 0.95% | 1.24% | 0.91% | 0.94% | 0.86% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.93% | 0.97% | 1.66% | 1.45% | 1.16% | |||||||||||||||||
Portfolio Turnover Rate | 77% | 100% | 83% | 89% | 74% |
Service Shares
For a share outstanding during each
fiscal year ended December 31
fiscal year ended December 31
Janus Aspen Perkins Mid Cap Value Portfolio | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $10.63 | $16.67 | $16.56 | $15.26 | $15.52 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .04 | .06 | .22 | .14 | .11 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.41 | (4.26) | .97 | 2.06 | 1.32 | |||||||||||||||||
Total from Investment Operations | 3.45 | (4.20) | 1.19 | 2.20 | 1.43 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.04) | (.06) | (.22) | (.16) | (.10) | |||||||||||||||||
Distributions (from capital gains)* | (.31) | (1.78) | (.86) | (.74) | (1.59) | |||||||||||||||||
Return of Capital | (.01) | N/A | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | (.36) | (1.84) | (1.08) | (.90) | (1.69) | |||||||||||||||||
Net Asset Value, End of Period | $13.72 | $10.63 | $16.67 | $16.56 | $15.26 | |||||||||||||||||
Total Return | 33.14% | (27.88)%(1) | 7.04% | 15.06% | 9.93% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $77,766 | $56,505 | $63,681 | $69,217 | $46,394 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $64,356 | $58,398 | $68,765 | $58,793 | $36,590 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 1.38% | 1.59% | 1.26% | 1.30% | 1.22% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.38% | 1.59% | 1.26% | 1.30% | 1.22% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.53% | 0.59% | 1.31% | 1.08% | 0.86% | |||||||||||||||||
Portfolio Turnover Rate | 77% | 100% | 83% | 89% | 74% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Impact on performance due to reimbursement from subadviser was 1.74% and 1.75% for Institutional and Service Shares, respectively. | |
(2) | See Note 6 in Notes to Financial Statements. |
See Notes to Financial Statements.
16 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Multi-Cap Core Funds | Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating more than 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap funds typically have between 25% to 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Multi-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. | |
Russell Midcap® Value Index | Measures the performance of those Russell Midcap® Index companies with lower price-to-book ratios and lower forecasted growth values. | |
S&P 500® Index | The Standard & Poor’s (“S&P”) 500® Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. Equity performance. | |
S&P MidCap 400 Index | An unmanaged group of 400 domestic stocks chosen for their market size, liquidity and industry group representation. | |
ADR | American Depositary Receipt | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
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 by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | |||||||||||
Common Stock | |||||||||||
Diversified Banking Institutions | $ | – | $ | 964,821 | $ | – | |||||
Food – Miscellaneous/Diversified | 1,565,601 | 328,570 | – | ||||||||
Wireless Equipment | – | 470,310 | – | ||||||||
All Other | 95,748,893 | – | – | ||||||||
Repurchase Agreements | – | 10,100,000 | – | ||||||||
Total Investments in Securities | $ | 97,314,494 | $ | 11,863,701 | $ | – | |||||
Investments in Purchased Options: | $ | – | $ | 400,856 | $ | – | |||||
Other Financial Instruments(a) | $ | – | $ | (104,709) | $ | – | |||||
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 212,465 | |||
Janus Aspen Series | 17
Table of Contents
Notes to Schedule of Investments (continued)
Repurchase agreements held by the Portfolio are fully collateralized, and such collateral is in the possession of the Portfolio’s custodian or subcustodian. The collateral is evaluated daily to ensure its market value equals or 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.
18 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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 expenses incurred specifically on its behalf
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
20 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
22 | DECEMBER 31, 2009
Table of Contents
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
The Portfolio recognized realized gains/(losses) from written options contracts during the fiscal year ended December 31, 2009 as indicated in the table below:
Portfolio | Gains | ||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 909,324 | |||
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.
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
Written option activity for the fiscal year ended December 31, 2009 is indicated in the table below:
Number of | Premiums | |||||||
Put Options | Contracts | Received | ||||||
Janus Aspen Perkins Mid Cap Value Portfolio | ||||||||
Options outstanding at December 31, 2008 | 25 | $ | 71,448 | |||||
Options written | 4,056 | 1,331,545 | ||||||
Options closed | (2,304) | (692,968) | ||||||
Options expired | (1,004) | (502,651) | ||||||
Options exercised | (9) | (30,528) | ||||||
Options outstanding at December 31, 2009 | 764 | $ | 176,846 | |||||
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is
24 | DECEMBER 31, 2009
Table of Contents
normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Derivatives not accounted for as | Asset Derivatives | Liability Derivatives | ||||||||||
hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Options | Options investments, at value | $ | 400,856 | Options written, at value | $ | 104,709 | ||||||
Total | $ | 400,856 | $ | 104,709 | ||||||||
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (1,683,297 | ) | $ | – | $ | (1,683,297 | ) | ||||||||
Total | $ | – | $ | – | $ | (1,683,297 | ) | $ | – | $ | (1,683,297 | ) | ||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | (233,595 | ) | $ | – | $ | (233,595 | ) | ||||||||
Total | $ | – | $ | – | $ | (233,595 | ) | $ | – | $ | (233,595 | ) | ||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial
26 | DECEMBER 31, 2009
Table of Contents
institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 managers anticipate 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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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.
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
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 “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Average Daily | ||||||||
Net Assets | Base Fee Rate | |||||||
Portfolio | of the Portfolio | (%) (annual rate) | ||||||
Janus Aspen Perkins Mid Cap Value Portfolio | N/A | 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 previous table. 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 | ||||
Only the base fee rate applied until February 2007 for the Portfolio, at which time the calculation of the performance adjustment applied 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 is equal to the time that has elapsed since the performance-based fee structure took effect. As noted above, any applicable 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. 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 evenly each day throughout the month. The investment fee is paid monthly in arrears.
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 its benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) across each other class of shares of the Portfolio.
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 prospectus and statement 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 fiscal year ended December 31, 2009, the Portfolio recorded a positive Performance Adjustment of $113,634.
Janus Capital has agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the
28 | DECEMBER 31, 2009
Table of Contents
Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, the administrative services fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 1.24% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
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). Janus Capital owns approximately 78% of Perkins.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services. In addition, Janus Services receives from the Portfolio a fee at an annual rate of up to 0.10% of the average daily net assets of the Service Shares of the Portfolio to compensate Janus Services for providing, or arranging for the provision of record keeping, subaccounting, and administrative services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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.
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Post- | Other Book | Net Tax | ||||||||||||||||
Ordinary | Long-Term | Accumulated | October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | – | $ | – | $ | (9,934,617) | $ | (974,651) | $ | 149,403 | $ | 13,673,083 | ||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | Accumulated | |||||||||||||||
Portfolio | 2010 | 2017 | Capital Losses | ||||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | (640,042) | $ | (9,294,575) | $ | (9,934,617) | |||||||||||
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 640,042 | ||||||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 95,905,968 | $ | 16,241,004 | $ | (2,567,921) | |||||
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
30 | DECEMBER 31, 2009
Table of Contents
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 380,203 | $ | 2,166,998 | $ | 60,584 | $ | – | |||||||||
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 2,322,727 | $ | 6,150,751 | $ | – | $ | – | |||||||||
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
For each fiscal year ended December 31
Janus Aspen Perkins | ||||
Portfolio | Mid Cap Value Portfolio | |||
Institutional Shares | ||||
2009(1) | 0.95% | |||
2008(1) | 1.30% | |||
2007(1) | 0.92% | |||
2006(1) | 0.94% | |||
2005(1) | 0.87% | |||
Service Shares | ||||
2009(1) | 1.38% | |||
2008(1) | 1.64% | |||
2007(1) | 1.26% | |||
2006(1) | 1.30% | |||
2005(1) | 1.22% | |||
(1) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
Janus Aspen Series | 31
Table of Contents
Notes to Financial Statements (continued)
7. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Perkins Mid Cap Value Portfolio | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 1,746 | 848 | ||||||||
Reinvested dividends and distributions | 56 | 107 | ||||||||
Shares repurchased | (860) | (389) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 942 | 566 | ||||||||
Shares Outstanding, Beginning of Period | 1,327 | 761 | ||||||||
Shares Outstanding, End of Period | 2,269 | 1,327 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 1,428 | 2,037 | ||||||||
Reinvested dividends and distributions | 173 | 496 | ||||||||
Shares repurchased | (1,246) | (1,037) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 355 | 1,496 | ||||||||
Shares Outstanding, Beginning of Period | 5,315 | 3,819 | ||||||||
Shares Outstanding, End of Period | 5,670 | 5,315 |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 | $ | 68,542,166 | $ | 59,104,640 | $ | – | $ | – | ||||||
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at
32 | DECEMBER 31, 2009
Table of Contents
the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
Janus Aspen Series | 33
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Perkins Mid Cap Value Portfolio:
of Janus Aspen Perkins Mid Cap Value Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Perkins Mid Cap Value Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
34 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 35
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
36 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 37
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
38 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
Janus Aspen Series | 39
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
40 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 2,166,998 | ||||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | 100% | |||||||||
Janus Aspen Series | 41
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
42 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 43
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
44 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 45
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81122 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
(formerly named Janus Aspen Fundamental Equity Portfolio)
HIGHLIGHTS
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 9 | |
Statement of Operations | 10 | |
Statements of Changes in Net Assets | 11 | |
Financial Highlights | 12 | |
Notes to Schedule of Investments | 13 | |
Notes to Financial Statements | 15 | |
Report of Independent Registered Public Accounting Firm | 29 | |
Additional Information | 30 | |
Explanations of Charts, Tables and Financial Statements | 33 | |
Designation Requirements | 36 | |
Trustees and Officers | 37 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s managers in the Management Commentary are just that: opinions. They are a reflection of the managers’ best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the managers’ opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Janus Capital Management LLC (“Janus Capital”) has contractually agreed to waive the Portfolio’s total operating expenses, excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, taxes and extraordinary expenses, including, but not limited to, acquired fund fees and expenses, to certain limits until at least May 1, 2010. Expenses in the example reflect the application of this waiver. Had the waiver not been in effect, your expenses would have been higher. More information regarding the waiver is available in the Portfolio’s prospectuses.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Research Core Portfolio (unaudited)
Portfolio Snapshot Analyst-driven, team-refined investment process attempts to capture the value of our research and manage investment risk. We believe a portfolio reflecting our team’s best ideas can deliver superior risk-adjusted results. | Team Based Approach Led by Jim Goff Director of Research |
Performance Overview
For the 12-month period ended December 31, 2009, Janus Aspen Research Core Portfolio’s Institutional Shares and Service Shares returned 35.80% and 35.89%, respectively. The Portfolio’s primary benchmark, the S&P 500® Index, returned 26.46% and its secondary benchmark, the Russell 1000® Growth Index, returned 37.21%.
Economic Overview
Equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Most indices touched the low point for the period in mid-March as evidence of an above-average contraction in the U.S. economy continued to unfold. Amid signs of stabilization in the economy and global financial system, markets rebounded strongly for much of the period. Despite a brief and slight pullback in October, broad indices finished the period significantly higher. For the year, mid cap stocks easily outpaced small and large cap stocks, which performed similarly. Growth-style indices also outperformed value indices, as information technology was easily the best performing sector followed distantly by materials. Telecommunications and utilities were relative laggards. Commodities generally were higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December.
Contributors to Relative Performance
Crown Castle International Corp., a wireless tower company, reported strong results in its latest quarter, which we believe reflects strong demand in wireless data usage and growing market share for the company. We continue to believe the company is undervalued relative to the growth prospects we see for it. We also believe its debt load is manageable.
Anheuser-Busch InBev N.V. rallied strongly during the year, as the market became more comfortable with the global brewer’s financial position following InBev’s acquisition of Anheuser-Busch in 2008. Asset sales, equity and bond offerings and internally generated cash flow eased investor concerns. We believe management will continue to execute well.
Global power provider AES Corp. was also a top contributor during the year. We believe AES has attractive assets and the potential to improve returns on capital. In addition, its stock price at period end was trading at a discount to our view of the company’s fair value.
Detractors from Relative Performance
The detractors in the portfolio reflect names that we sold early in the year before the strong rally. We replaced these names with stocks we saw as better opportunities. Microsoft Corp. was our largest individual detractor. We sold our position early in the year
Discount retailer Wal-Mart Stores, Inc. also weighed on our relative performance. With our concerns over competitors’ lowering prices we decided to exit the name. T. Rowe Price Group, Inc. as with other asset managers, suffered declines early in 2009. While we continued to view the company as a high quality asset manager, we sold the name early in the period for other opportunities.
Outlook
We expect modest near-term growth for the U.S. economy given a number of structural challenges, including fiscal deficits and weak labor markets. The key risk to the economy and markets is the potential removal of the various stimulus measures that have supported the economy over the past year. We are waiting to see if there will be enough of a rebound in consumer and corporate demand to offset the reduced governmental intervention. We believe stock picking will become more relevant. In such an environment, we are favoring companies with strong balance sheets and with the potential to expand their competitive position by taking advantage of longer-term opportunities.
Thank you for your investment in Janus Aspen Research Core Portfolio.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Janus Aspen Research Core Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Crown Castle International Corp. | 2.23% | |||
Anheuser-Busch InBev N.V. | 2.12% | |||
AES Corp. | 1.89% | |||
JPMorgan Chase & Co. | 1.62% | |||
KLA-Tencor Corp. | 1.60% |
5 Bottom Performers – Holdings
Contribution | ||||
Microsoft Corp. | –0.41% | |||
Wal-Mart Stores, Inc. | –0.29% | |||
T. Rowe Price Group, Inc. | –0.28% | |||
Gilead Sciences, Inc. | –0.28% | |||
McDonald’s Corp. | –0.26% |
4 Top Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Technology | 8.01% | 15.84% | 16.04% | |||||||||
Communications | 6.62% | 8.72% | 8.29% | |||||||||
Energy | 6.51% | 16.65% | 16.64% | |||||||||
Consumer | 5.30% | 16.07% | 16.26% |
3 Bottom Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Health Care | 2.76% | 14.96% | 14.88% | |||||||||
Industrials | 4.91% | 14.36% | 14.38% | |||||||||
Financials | 4.98% | 13.40% | 13.49% |
* | The sectors listed above represent those covered by the seven analyst teams who comprise the Janus Research Team. |
Janus Aspen Series | 3
Table of Contents
Janus Aspen Research Core Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Illinois Tool Works, Inc. Diversified Operations | 4.0% | |||
JPMorgan Chase & Co. Diversified Banking Institutions | 3.9% | |||
EOG Resources, Inc. Oil Companies – Exploration and Production | 3.5% | |||
Abbott Laboratories Medical – Drugs | 3.4% | |||
Reckitt Benckiser Group PLC Soap and Cleaning Preparations | 3.3% | |||
18.1% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 2.6% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||||
One | Five | Ten | Since | Total Annual Fund | Net Annual Fund | ||||||||
Year | Year | Year | Inception* | Operating Expenses | Operating Expenses | ||||||||
Janus Aspen Research Core Portfolio – Institutional Shares | 35.80% | 2.10% | 0.27% | 8.66% | 1.98% | 1.20%(a) | |||||||
Janus Aspen Research Core Portfolio – Service Shares | 35.89% | 1.89% | 0.24% | 8.53% | 2.29% | 1.45%(b) | |||||||
S&P 500® Index | 26.46% | 0.42% | –0.95% | 4.47% | |||||||||
Russell 1000® Growth Index | 37.21% | 1.63% | –3.99% | 3.25% | |||||||||
Lipper Quartile – Institutional Shares | 1st | 1st | 2nd | 1st | |||||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Large-Cap Core Funds | 22/225 | 26/181 | 29/92 | 1/59 | |||||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
(a) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
(b) Janus Capital has contractually agreed to waive the Portfolio’s total annual fund operating expenses (excluding the distribution and shareholder servicing fee, brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain limit until at least May 1, 2010. The expense waiver shown reflects the application of such limit. Total returns shown include fee waivers, if any, and without such waivers, total returns would have been lower.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Research Core Portfolio (unaudited)
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. Contractual waivers agreed to by Janus Capital, where applicable, are included under “Net Annual Fund Operating Expenses.” All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance for more information about risks, portfolio holdings and other details.
The Portfolio may invest in derivatives which can be highly volatile and involve additional risks than if the underlying securities were held directly by the Portfolio. 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 the Portfolio owns.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
May 31, 1997 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
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 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.
As of May 1, 2009, Janus Aspen Fundamental Equity Portfolio changed its name to Janus Aspen Research Core Portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – May 1, 1997 |
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,227.50 | $ | 6.74 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.16 | $ | 6.11 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,229.70 | $ | 5.00 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.72 | $ | 4.53 | ||||||||
† | Expenses are equal to the annualized expense ratio of 1.20% for Institutional Shares and 0.89% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses include effect of contractual waivers by Janus Capital. |
6 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Research Core Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 99.2% | ||||||||||||
Advertising Sales – 1.7% | ||||||||||||
4,420 | Lamar Advertising Co. – Class A* | $ | 137,418 | |||||||||
Aerospace and Defense – 3.3% | ||||||||||||
11,102 | BAE Systems PLC** | 63,955 | ||||||||||
3,657 | Northrop Grumman Corp. | 204,243 | ||||||||||
268,198 | ||||||||||||
Aerospace and Defense – Equipment – 2.0% | ||||||||||||
2,313 | United Technologies Corp. | 160,545 | ||||||||||
Apparel Manufacturers – 0.4% | ||||||||||||
920 | Coach, Inc. | 33,608 | ||||||||||
Athletic Footwear – 1.2% | ||||||||||||
1,485 | NIKE, Inc. – Class B | 98,114 | ||||||||||
Brewery – 2.4% | ||||||||||||
3,784 | Anheuser-Busch InBev N.V.** | 195,639 | ||||||||||
2,736 | Anheuser-Busch InBev N.V. – VVPR Strip*,** | 20 | ||||||||||
195,659 | ||||||||||||
Building – Residential and Commercial – 0.9% | ||||||||||||
101 | NVR, Inc.* | 71,782 | ||||||||||
Cable Television – 0.8% | ||||||||||||
6,847 | British Sky Broadcasting Group PLC** | 61,656 | ||||||||||
Cellular Telecommunications – 0.4% | ||||||||||||
12,792 | Vodafone Group PLC** | 29,611 | ||||||||||
Commercial Banks – 0.9% | ||||||||||||
1,984 | ICICI Bank, Ltd. (ADR) | 74,817 | ||||||||||
Computers – 1.9% | ||||||||||||
741 | Apple, Inc.* | 156,247 | ||||||||||
Consumer Products – Miscellaneous – 2.0% | ||||||||||||
2,531 | Kimberly-Clark Corp. | 161,250 | ||||||||||
Containers – Metal and Glass – 1.2% | ||||||||||||
1,854 | Crown Holdings, Inc.* | 47,425 | ||||||||||
1,551 | Owens-Illinois, Inc.* | 50,982 | ||||||||||
98,407 | ||||||||||||
Cosmetics and Toiletries – 1.9% | ||||||||||||
1,844 | Colgate-Palmolive Co. | 151,485 | ||||||||||
Diversified Banking Institutions – 9.8% | ||||||||||||
17,080 | Bank of America Corp. | 257,225 | ||||||||||
7,085 | Barclays PLC** | 31,210 | ||||||||||
722 | Goldman Sachs Group, Inc. | 121,902 | ||||||||||
7,585 | JPMorgan Chase & Co. | 316,066 | ||||||||||
2,278 | Morgan Stanley | 67,429 | ||||||||||
793,832 | ||||||||||||
Diversified Operations – 4.6% | ||||||||||||
667 | Danaher Corp. | 50,158 | ||||||||||
6,738 | Illinois Tool Works, Inc. | 323,357 | ||||||||||
373,515 | ||||||||||||
E-Commerce/Services – 0.4% | ||||||||||||
1,560 | eBay, Inc.* | 36,722 | ||||||||||
Electric – Generation – 1.1% | ||||||||||||
6,804 | AES Corp.* | 90,561 | ||||||||||
Electronic Components – Miscellaneous – 0.7% | ||||||||||||
2,374 | Tyco Electronics, Ltd. (U.S. Shares)** | 58,282 | ||||||||||
Enterprise Software/Services – 2.1% | ||||||||||||
6,920 | Oracle Corp. | 169,817 | ||||||||||
Finance – Other Services – 0.7% | ||||||||||||
182 | CME Group, Inc. | 61,143 | ||||||||||
Independent Power Producer – 2.7% | ||||||||||||
9,201 | NRG Energy, Inc.* | 217,236 | ||||||||||
Internet Security – 0.9% | ||||||||||||
4,046 | Symantec Corp.* | 72,383 | ||||||||||
Life and Health Insurance – 1.9% | ||||||||||||
2,627 | AFLAC, Inc. | 121,498 | ||||||||||
3,234 | Prudential PLC** | 32,933 | ||||||||||
154,431 | ||||||||||||
Medical – Biomedical and Genetic – 2.4% | ||||||||||||
889 | Celgene Corp.* | 49,500 | ||||||||||
945 | Genzyme Corp.* | 46,314 | ||||||||||
2,329 | Gilead Sciences, Inc.* | 100,799 | ||||||||||
196,613 | ||||||||||||
Medical – Drugs – 6.4% | ||||||||||||
5,144 | Abbott Laboratories | 277,724 | ||||||||||
4,247 | Merck & Co., Inc. | 155,185 | ||||||||||
498 | Roche Holding A.G.** | 84,796 | ||||||||||
517,705 | ||||||||||||
Medical Products – 5.2% | ||||||||||||
3,314 | Baxter International, Inc. | 194,466 | ||||||||||
4,763 | Covidien PLC (U.S. Shares)** | 228,100 | ||||||||||
422,566 | ||||||||||||
Multimedia – 2.0% | ||||||||||||
11,875 | News Corp. – Class A | 162,569 | ||||||||||
Networking Products – 2.7% | ||||||||||||
9,047 | Cisco Systems, Inc.* | 216,585 | ||||||||||
Oil Companies – Exploration and Production – 7.3% | ||||||||||||
1,541 | Devon Energy Corp. | 113,264 | ||||||||||
2,932 | EOG Resources, Inc. | 285,283 | ||||||||||
2,377 | Occidental Petroleum Corp. | 193,368 | ||||||||||
591,915 | ||||||||||||
Oil Companies – Integrated – 3.3% | ||||||||||||
1,890 | Exxon Mobil Corp. | 128,879 | ||||||||||
2,930 | Petroleo Brasileiro S.A. (ADR) | 139,703 | ||||||||||
268,582 | ||||||||||||
Pipelines – 0.5% | ||||||||||||
815 | Kinder Morgan Management LLC* | 44,532 | ||||||||||
Real Estate Operating/Development – 0.8% | ||||||||||||
22,000 | CapitaLand, Ltd. | 65,221 | ||||||||||
Retail – Apparel and Shoe – 1.2% | ||||||||||||
2,401 | Gap, Inc. | 50,301 | ||||||||||
1,243 | Nordstrom, Inc. | 46,712 | ||||||||||
97,013 | ||||||||||||
Retail – Building Products – 0.4% | ||||||||||||
1,190 | Home Depot, Inc. | 34,427 | ||||||||||
Retail – Consumer Electronics – 0.6% | ||||||||||||
1,172 | Best Buy Co., Inc. | 46,247 | ||||||||||
Retail – Restaurants – 1.2% | ||||||||||||
1,522 | McDonald’s Corp. | 95,034 | ||||||||||
Semiconductor Equipment – 2.8% | ||||||||||||
6,372 | KLA-Tencor Corp. | 230,412 |
See Notes to Schedule of Investments and Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Research Core Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Soap and Cleaning Preparations – 3.3% | ||||||||||||
4,993 | Reckitt Benckiser Group PLC** | $ | 270,409 | |||||||||
Telecommunication Equipment – Fiber Optics – 1.2% | ||||||||||||
5,182 | Corning, Inc. | 100,064 | ||||||||||
Telecommunication Services – 0.6% | ||||||||||||
1,657 | Amdocs, Ltd. (U.S. Shares) | 47,274 | ||||||||||
Tobacco – 1.3% | ||||||||||||
5,339 | Altria Group, Inc. | 104,805 | ||||||||||
Toys – 1.2% | ||||||||||||
200 | Nintendo Co., Ltd.** | 47,441 | ||||||||||
1,717 | Nintendo Co., Ltd. (ADR)** | 51,201 | ||||||||||
98,642 | ||||||||||||
Transportation – Services – 2.6% | ||||||||||||
3,697 | United Parcel Service, Inc. – Class B | 212,097 | ||||||||||
Web Portals/Internet Service Providers – 1.2% | ||||||||||||
100 | Google, Inc. – Class A* | 61,998 | ||||||||||
2,165 | Yahoo!, Inc.* | 36,329 | ||||||||||
98,327 | ||||||||||||
Wireless Equipment – 5.1% | ||||||||||||
5,135 | Crown Castle International Corp.* | 200,470 | ||||||||||
4,709 | QUALCOMM, Inc. | 217,839 | ||||||||||
418,309 | ||||||||||||
Total Common Stock (cost $7,093,088) | 8,066,067 | |||||||||||
Money Market – 0.7% | ||||||||||||
55,000 | Janus Cash Liquidity Fund LLC, 0% (cost $55,000) | 55,000 | ||||||||||
Total Investments (total cost $7,148,088) – 99.9% | 8,121,067 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.1% | 11,607 | |||||||||||
Net Assets – 100% | $ | 8,132,674 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Belgium | $ | 195,659 | 2.4% | |||||
Brazil | 139,702 | 1.7% | ||||||
Guernsey | 47,274 | 0.6% | ||||||
India | 74,817 | 0.9% | ||||||
Ireland | 228,100 | 2.8% | ||||||
Japan | 98,642 | 1.2% | ||||||
Singapore | 65,222 | 0.8% | ||||||
Switzerland | 143,078 | 1.8% | ||||||
United Kingdom | 489,773 | 6.0% | ||||||
United States†† | 6,638,800 | 81.8% | ||||||
Total | $ | 8,121,067 | 100.0% |
†† | Includes Cash Equivalents (81.1% excluding Cash Equivalents) |
Forward Currency Contracts, Open
Currency Sold and | Currency | Currency | Unrealized | |||||||||
Settlement Date | Units Sold | Value in U.S. $ | Gain/(Loss) | |||||||||
British Pound 1/14/10 | 100,000 | $ | 161,450 | $ | 4,250 | |||||||
British Pound 1/21/10 | 34,000 | 54,890 | 2,213 | |||||||||
British Pound 2/4/10 | 6,000 | 9,686 | 84 | |||||||||
Euro 1/14/10 | 11,000 | 15,780 | 610 | |||||||||
Euro 1/21/10 | 55,000 | 78,901 | 3,255 | |||||||||
Japanese Yen 1/14/10 | 1,500,000 | 16,116 | 569 | |||||||||
Japanese Yen 1/21/10 | 1,500,000 | 16,117 | 1,281 | |||||||||
Japanese Yen 2/4/10 | 1,300,000 | 13,969 | 759 | |||||||||
Swiss Franc 1/21/10 | 43,000 | 41,613 | 1,097 | |||||||||
Total | $ | 408,522 | $ | 14,118 |
See Notes to Schedule of Investments and Financial Statements.
8 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
Research | ||||||
As of December 31, 2009 | Core | |||||
(all numbers in thousands except net asset value per share) | Portfolio(1) | |||||
Assets: | ||||||
Investments at cost | $ | 7,148 | ||||
Unaffiliated investments at value | $ | 8,066 | ||||
Affiliated money market investments | 55 | |||||
Cash | 4 | |||||
Receivables: | ||||||
Investments sold | 5 | |||||
Portfolio shares sold | 1 | |||||
Dividends | 13 | |||||
Non-interested Trustees’ deferred compensation | – | |||||
Due from adviser | 15 | |||||
Other assets | 1 | |||||
Forward currency contracts | 14 | |||||
Total Assets | 8,174 | |||||
Liabilities: | ||||||
Payables: | ||||||
Portfolio shares repurchased | – | |||||
Advisory fees | 4 | |||||
Transfer agent fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 1 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Non-interested Trustees’ deferred compensation fees | – | |||||
Accrued expenses and other payables | 34 | |||||
Total Liabilities | 41 | |||||
Net Assets | $ | 8,133 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 11,579 | ||||
Undistributed net investment income/(loss)* | 23 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (4,456) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 987 | |||||
Total Net Assets | $ | 8,133 | ||||
Net Assets – Institutional Shares | $ | 5,747 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 412 | |||||
Net Asset Value Per Share | $ | 13.96 | ||||
Net Assets – Service Shares | $ | 2,386 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 170 | |||||
Net Asset Value Per Share | $ | 14.01 |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Research | ||||||
For the fiscal year ended December 31, 2009 | Core | |||||
(all numbers in thousands) | Portfolio(1) | |||||
Investment Income: | ||||||
Interest | $ | – | ||||
Dividends | 112 | |||||
Dividends from affiliates | – | |||||
Foreign tax withheld | (2) | |||||
Total Investment Income | 110 | |||||
Expenses: | ||||||
Advisory fees | 43 | |||||
Transfer agent fees and expenses | 5 | |||||
Registration fees | 29 | |||||
Custodian fees | 20 | |||||
Audit fees | 26 | |||||
Non-interested Trustees’ fees and expenses | 1 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 5 | |||||
Printing fees | 16 | |||||
Legal fees | 14 | |||||
System fees | 32 | |||||
Other expenses | 3 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 194 | |||||
Expense and Fee Offset | – | |||||
Net Expenses | 194 | |||||
Less: Excess Expense Reimbursement | (110) | |||||
Net Expenses after Expense Reimbursement | 84 | |||||
Net Investment Income/(Loss) | 26 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (1,340) | |||||
Net realized gain/(loss) from options contracts | – | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 3,544 | |||||
Net Gain/(Loss) on Investments | 2,204 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 2,230 |
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
See Notes to Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Research | ||||||||||
Core | ||||||||||
For the fiscal years ended December 31 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 26 | $ | 60 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (1,340) | (3,071) | ||||||||
Net realized gain/(loss) from options contracts | – | (12) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 3,544 | (3,043) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 2,230 | (6,066) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (11) | (46) | ||||||||
Service Shares | (4) | (9) | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | (3,012) | ||||||||
Service Shares | – | (688) | ||||||||
Return of Capital | ||||||||||
Institutional Shares | N/A | (22) | ||||||||
Service Shares | N/A | (4) | ||||||||
Net Decrease from Dividends and Distributions | (15) | (3,781) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 516 | 1,652 | ||||||||
Service Shares | 520 | 1,108 | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 11 | 3,078 | ||||||||
Service Shares | 4 | 702 | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (1,487) | (3,814) | ||||||||
Service Shares | (409) | (775) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (845) | 1,951 | ||||||||
Net Increase/(Decrease) in Net Assets | 1,370 | (7,896) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 6,763 | 14,659 | ||||||||
End of period | $ | 8,133 | $ | 6,763 | ||||||
Undistributed net investment income/(loss)* | $ | 23 | $ | – |
* | See Note 5 in Notes to Financial Statements | |
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during each fiscal year ended December 31
Janus Aspen Research Core Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $10.30 | $25.77 | $23.40 | $21.31 | $18.44 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .07 | .10 | .08 | .04 | .02 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.62 | (8.61) | 2.50 | 2.09 | 2.87 | |||||||||||||||||
Total from Investment Operations | 3.69 | (8.51) | 2.58 | 2.13 | 2.89 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.03) | (.10) | (.06) | (.04) | (.02) | |||||||||||||||||
Distributions (from capital gains)* | – | (6.82) | (.15) | – | – | |||||||||||||||||
Return of Capital | N/A | (.04) | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | (.03) | (6.96) | (.21) | (.04) | (.02) | |||||||||||||||||
Net Asset Value, End of Period | $13.96 | $10.30 | $25.77 | $23.40 | $21.31 | |||||||||||||||||
Total Return | 35.80% | (42.17)% | 11.02% | 9.99% | 15.68% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $5,747 | $5,103 | $12,198 | $13,331 | $12,798 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $5,211 | $9,364 | $12,754 | $13,447 | $11,057 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 1.21% | 1.20% | 1.20% | 1.20% | 1.21% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.20% | 1.20% | 1.20% | 1.20% | 1.20% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.35% | 0.57% | 0.27% | 0.15% | 0.06% | |||||||||||||||||
Portfolio Turnover Rate | 56% | 129% | 124% | 51% | 62% |
Service Shares
For a share outstanding during each fiscal year ended December 31
Janus Aspen Research Core Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $10.34 | $25.86 | $23.50 | $21.44 | $18.59 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .07 | .08 | .02 | (.01) | – | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.63 | (8.66) | 2.51 | 2.09 | 2.85 | |||||||||||||||||
Total from Investment Operations | 3.70 | (8.58) | 2.53 | 2.08 | 2.85 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.03) | (.08) | (.02) | (.02) | – | |||||||||||||||||
Distributions (from capital gains)* | – | (6.83) | (.15) | – | – | |||||||||||||||||
Return of Capital | N/A | (.03) | N/A | N/A | N/A | |||||||||||||||||
Total Distributions and Other | (.03) | (6.94) | (.17) | (.02) | – | |||||||||||||||||
Net Asset Value, End of Period | $14.01 | $10.34 | $25.86 | $23.50 | $21.44 | |||||||||||||||||
Total Return | 35.76% | (42.29)% | 10.79% | 9.69% | 15.35% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $2,386 | $1,660 | $2,461 | $1,834 | $1,049 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $1,933 | $2,064 | $2,209 | $1,825 | $667 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets(2) | 1.13%(3) | 1.45% | 1.45% | 1.45% | 1.46% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets(2) | 1.13%(3) | 1.45% | 1.45% | 1.45% | 1.45% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.41% | 0.32% | 0.04% | (0.12)% | (0.21)% | |||||||||||||||||
Portfolio Turnover Rate | 56% | 129% | 124% | 51% | 62% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. | |
(2) | See Note 6 in Notes to Financial Statements. | |
(3) | Pursuant to a contractual agreement, Janus waived certain fees and expenses during the period. The Ratio of Gross Expenses to Average Net Assets and Ratio of Net Expenses to Average Net Assets would be 1.46% and 1.45%, respectively, without the waiver of fees and expenses. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Large-Cap Core Funds | Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. | |
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 | The Standard & Poor’s (“S&P”) 500® Index is 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 | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. | |
VVPR Strip | The Voter Verified Paper Record (VVPR) strip is a coupon which, if presented along with the dividend coupon of the ordinary share, allows the benefit of a reduced withholding tax on the dividends paid by the company. This strip is quoted separately from the ordinary share and is freely negotiable. |
* | Non-income producing security. | |
** | A portion of this security has been segregated by the custodian 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 following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Research Core Portfolio(1) | |||||||||||
Common Stock | |||||||||||
Aerospace and Defense | $ | 204,243 | $ | 63,955 | $ | – | |||||
Brewery | – | 195,659 | – | ||||||||
Cable Television | – | 61,656 | – | ||||||||
Cellular Telecommunications | – | 29,611 | – | ||||||||
Commercial Banks | – | 74,817 | – | ||||||||
Diversified Banking Institutions | 762,622 | 31,210 | – | ||||||||
Life and Health Insurance | 121,498 | 32,933 | – | ||||||||
Medical – Drugs | 432,909 | 84,796 | – | ||||||||
Oil Companies – Integrated | 128,879 | 139,703 | – | ||||||||
Real Estate Operating/Development | – | 65,221 | – | ||||||||
Soap and Cleaning Preparations | – | 270,409 | – | ||||||||
Toys | – | 98,642 | – | ||||||||
All Other | 5,267,304 | – | – | ||||||||
Money Market | – | 55,000 | – | ||||||||
Total Investments in Securities | $ | 6,917,455 | $ | 1,203,612 | $ | – | |||||
Other Financial Instruments(a): | $ | – | $ | 14,118 | $ | – | |||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. | |
(a) | Other financial instruments include futures, forward currency, written option, 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. |
Janus Aspen Series | 13
Table of Contents
Notes to Schedule of Investments (continued)
Aggregate collateral 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 as of December 31, 2009 is noted below.
Portfolio | Aggregate Value | ||||
Janus Aspen Research Core Portfolio(1) | $ | 1,155,252 | |||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
14 | DECEMBER 31, 2009
Table of Contents
Notes to Financial Statements
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 Research Core Portfolio (formerly named Janus Aspen Fundamental Equity 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. The Trust includes fourteen 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 and to qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (continued)
shares bears expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
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 REIT’s 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
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
16 | DECEMBER 31, 2009
Table of Contents
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements (continued)
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’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
18 | DECEMBER 31, 2009
Table of Contents
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
The Portfolio recognized realized gains/(losses) from written options contracts during the fiscal year ended December 31, 2009 as indicated in the table below:
Portfolio | Gain/(Loss) | ||||
Janus Aspen Research Core Portfolio(1) | $ | 150 | |||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
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.
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
Written option activity for the fiscal year ended December 31, 2009 is indicated in the table below:
Number of | Premiums | |||||||
Call Options | Contracts | Received | ||||||
Janus Aspen Research Core Portfolio(1) | ||||||||
Options outstanding at December 31, 2008 | – | $ | – | |||||
Options written | 8 | 966 | ||||||
Options closed | (5) | (645) | ||||||
Options expired | – | – | ||||||
Options exercised | (3) | (321) | ||||||
Options outstanding at December 31, 2009 | – | $ | – | |||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is
20 | DECEMBER 31, 2009
Table of Contents
normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Fair Value of Derivative Instruments as of December 31, 2009
Derivatives not accounted for as | Asset Derivatives | Liability Derivatives | ||||||||||
hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 14,118 | Forward currency contracts | $ | – | ||||||
Total | $ | 14,118 | $ | – |
The effect of Derivative Instruments on the Statement of Operations for the fiscal year ended December 31, 2009
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | 150 | $ | – | $ | 150 | ||||||||||
Foreign Exchange Contracts | – | – | – | (49,129 | ) | (49,129 | ) | |||||||||||||
Total | $ | – | $ | – | $ | 150 | $ | (49,129 | ) | $ | (48,979 | ) | ||||||||
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging instruments | Futures | Swaps | Options | Forward Currency Contracts | Total | |||||||||||||||
Equity Contracts | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Foreign Exchange Contracts | – | – | – | 31,590 | 31,590 | |||||||||||||||
Total | $ | – | $ | – | $ | – | $ | 31,590 | $ | 31,590 | ||||||||||
Please see the Portfolio’s Statement of Operations for the Portfolio’s “Net Realized and Unrealized Gain/(Loss) on Investments.”
The value of derivative instruments at period end and the effect of derivatives on the Statement of Operations are indicative of the Portfolio’s volume throughout the period.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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.
22 | DECEMBER 31, 2009
Table of Contents
Securities Lending
Under procedures adopted by the Trustees, the Portfolio may seek to earn additional income by lending securities to qualified parties (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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 investment personnel 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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
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 Research Core Portfolio(1) | All Asset Levels | 0.60 | ||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
Janus Capital has agreed until at least May 1, 2010 to reimburse the Portfolio by the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing (12b-1) fees applicable to Service Shares, brokerage commissions, interest, dividends, taxes and extraordinary expenses including, but not limited to, acquired fund fees and expenses, exceed an annual rate of 1.20% of the average daily net assets of the Portfolio. The Portfolio is not required to repay any such waived fees in future years to Janus Capital. Amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations, if applicable.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares at an annual rate of up to 0.25% of Service Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 9. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004. Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets
24 | DECEMBER 31, 2009
Table of Contents
on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown 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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Research Core Portfolio(1) | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 2,913,300 | $ | 2,859,300 | $ | 341 | $ | 55,000 | ||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
Undistributed | Undistributed | Other Book | Net Tax | |||||||||||||||||
Ordinary | Long-Term | Accumulated | Post-October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Research Core Portfolio(1) | $ | 23,060 | $ | – | $ | (4,326,435) | $ | (16) | $ | (81) | $ | 857,581 | ||||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
December 31, | December 31, | Accumulated | ||||||||||||
Portfolio | 2016 | 2017 | Capital Losses | |||||||||||
Janus Aspen Research Core Portfolio(1) | $ | (1,543,560) | $ | (2,782,875) | $ | (4,326,435) | ||||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Research Core Portfolio(1) | $ | 7,263,486 | $ | 1,194,373 | $ | (336,792) | |||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Research Core Portfolio(1) | $ | 15,177 | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Research Core Portfolio(1) | $ | 597,086 | $ | 3,157,202 | $ | 26,144 | $ | – | |||||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
6. | Expense Ratios |
The expense ratios listed in the Financial Highlights reflect expenses prior to any expense offsets (gross expense ratio) and after expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursement). Listed below are the gross expense ratios for the Portfolio that would have been in effect, absent the waiver of certain fees and offsets.
For each fiscal year ended December 31
Portfolio | Janus Aspen Research Core Portfolio(1) | |||
Institutional Shares | ||||
2009(2) | 2.67% | |||
2008(2) | 1.98% | |||
2007(2) | 1.48% | |||
2006(2) | 1.73% | |||
2005(2) | 1.44% |
26 | DECEMBER 31, 2009
Table of Contents
Portfolio | Janus Aspen Research Core Portfolio(1) | |||
Service Shares | ||||
2009(2) | 2.86% | |||
2008(2) | 2.29% | |||
2007(2) | 1.73% | |||
2006(2) | 2.00% | |||
2005(2) | 1.73% | |||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. | |
(2) | The effect of non-recurring costs assumed by Janus Capital (Note 4) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. |
7. | Capital Share Transactions |
For each fiscal year ended December 31 | Janus Aspen Research Core Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 46 | 80 | ||||||||
Reinvested dividends and distributions | 1 | 197 | ||||||||
Shares repurchased | (130) | (255) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (83) | 22 | ||||||||
Shares Outstanding, Beginning of Period | 495 | 473 | ||||||||
Shares Outstanding, End of Period | 412 | 495 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 46 | 63 | ||||||||
Reinvested dividends and distributions | – | 45 | ||||||||
Shares repurchased | (37) | (42) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 9 | 66 | ||||||||
Shares Outstanding, Beginning of Period | 161 | 95 | ||||||||
Shares Outstanding, End of Period | 170 | 161 |
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
8. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 Research Core Portfolio(1) | $ | 3,947,359 | $ | 4,617,466 | $ | – | $ | – | ||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
9. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws,
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
10. | Subsequent Event |
On December 11, 2009, the Board of Trustees of Janus Aspen Series approved a plan to liquidate and terminate the Portfolio. Effective April 28, 2010, the Portfolio will no longer be offered for sale and will be liquidated on or about April 30, 2010.
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, the date of issuance of the Portfolio’s financial statements, and determined that there were no other material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
28 | DECEMBER 31, 2009
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Research Core Portfolio:
of Janus Aspen Research Core Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Research Core Portfolio (formerly Janus Aspen Fundamental Equity Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
Janus Aspen Series | 29
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
30 | DECEMBER 31, 2009
Table of Contents
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
Janus Aspen Series | 31
Table of Contents
Additional Information (unaudited) (continued)
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
32 | DECEMBER 31, 2009
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
Janus Aspen Series | 33
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends 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.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses), realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual
34 | DECEMBER 31, 2009
Table of Contents
total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
Janus Aspen Series | 35
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Research Core Portfolio(1) | 100% | |||||||||
(1) | Formerly named Janus Aspen Fundamental Equity Portfolio. |
36 | DECEMBER 31, 2009
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
Janus Aspen Series | 37
Table of Contents
Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
38 | DECEMBER 31, 2009
Table of Contents
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
James P. Goff 151 Detroit Street Denver, CO 80206 DOB: 1964 | Executive Vice President Janus Aspen Research Core Portfolio | 11/07-Present | Vice President and Director of Research of Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
Janus Aspen Series | 39
Table of Contents
Notes
40 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 41
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81123 02-10 |
Table of Contents
2009 ANNUAL REPORT
Janus Aspen Series
(formerly named Janus Aspen Worldwide Growth Portfolio)
HIGHLIGHTS
• Portfolio management perspective
• Investment strategy behind your portfolio
• Portfolio performance, characteristics and holdings
Table of Contents
Table of Contents
Useful Information About Your Portfolio Report | 1 | |
Management Commentary and Schedule of Investments | 2 | |
Statement of Assets and Liabilities | 11 | |
Statement of Operations | 12 | |
Statements of Changes in Net Assets | 13 | |
Financial Highlights | 14 | |
Notes to Schedule of Investments | 16 | |
Notes to Financial Statements | 18 | |
Report of Independent Registered Public Accounting Firm | 32 | |
Additional Information | 33 | |
Explanations of Charts, Tables and Financial Statements | 36 | |
Designation Requirements | 39 | |
Trustees and Officers | 40 |
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Table of Contents
Useful Information About Your Portfolio Report (unaudited)
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.
Please keep in mind that the opinions expressed by the Portfolio’s manager in the Management Commentary are just that: opinions. They are a reflection of their best judgment at the time this report was compiled, which was December 31, 2009. As the investing environment changes, so could the manager’s opinions. These views are unique to each manager and aren’t necessarily shared by their fellow employees or by Janus in general.
Portfolio Expenses
We believe it’s important for our shareholders to have a clear understanding of Portfolio expenses and the impact they have on investment return.
The following is important information regarding the Portfolio’s Expense Example, which appears in the Portfolio’s Management Commentary within this Annual Report. Please refer to this information when reviewing the Expense Example for the Portfolio.
Example
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including redemption fees, where applicable (and any related exchange fees) and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares and Service II Shares only); and other Portfolio expenses. The 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-month period from July 1, 2009 to December 31, 2009.
Actual Expenses
The first line of the table in each example provides information about actual account values and actual expenses. You may use the information in this line, 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 first line 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 second line of the table in each example 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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption fees (where applicable) and any charges at the separate account level or contract level. These fees are fully described in the prospectus. Therefore, the second line of each table is 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.
Janus Aspen Series | 1
Table of Contents
Janus Aspen Worldwide Portfolio (unaudited)
Portfolio Snapshot We seek to invest in the best growth companies around the world: businesses that have strong and sustainable competitive advantages, high or improving returns on capital and attractive long-term growth. We invest with conviction when we believe that we have differentiated investment insights in an effort to deliver superior risk-adjusted results over the long term. | Laurent Saltiel portfolio manager |
Performance Overview
Janus Aspen Worldwide Portfolio’s Institutional Shares, Service Shares and Service II Shares returned 37.70%, 37.40% and 37.35%, respectively, over the 12-month period ended December 31, 2009, while its benchmark, the MSCI World IndexSM, returned 29.99%.
New Portfolio Manager
Laurent Saltiel, who has served as a portfolio manager at Janus since March of 2006 and as an analyst at the firm since September of 2002, was named as portfolio manager of Janus Aspen Worldwide Portfolio effective April 13, 2009. He succeeded Jason Yee, who left the firm. The Portfolio employs a global core growth style that is well aligned with the fundamental research produced by the seven Janus global sector teams. Mr. Saltiel increased the number of holdings (54 as of December 31, 2008) to a range of 70-100. In addition, many of the Portfolio’s historically large sector and country differences from the index were minimized in an effort to make stock selection the primary driver of excess returns.
Economic Overview
Global equity markets began the period in the midst of a significant sell-off, a continuation from the credit crisis that hit all capital markets severely in late 2008. Many indices hit the low point for the period in March as evidence of an above average contraction in the U.S. economy and economic weakness globally continued to unfold. Markets rallied through year-end with broad indices reaching their pre-October 2008 levels. Emerging markets strongly outperformed developed markets with the largest gains in Asia led by India. Russia and Brazil also led their respective regions higher. In developed markets, Europe and North America performed similarly and easily outgained Asia, which was weighed down by muted gains in Japan. In terms of sectors, materials and information technology were the strongest performers, while utilities and telecommunication services were relative laggards. Commodities generally were strongly higher during the year led by industrial metals and crude oil; natural gas finished the period with modest losses. Gold futures also touched record highs in December. The Dollar Index finished the period with losses, as U.S. currency lagged all major currencies except the Japanese yen.
Contributors to Relative Performance
Li & Fung, Ltd., a Hong Kong-based apparel outsourcing company, performed well during the downturn by opportunistically making attractive acquisitions and gaining market share, which supported our thesis. We believe the company can continue to gain market share, grow organically and reduce costs to improve margins.
Aggreko PLC was the second largest contributor to performance during the period. The U.K.-based company makes and ships large generators that can power sports stadiums, factories or even cities for a short length of time. We like Aggreko’s dominant market position and its exposure to emerging markets, particularly Africa, which has suffered from significant under-investment in power plants because of high capital costs and risks. Aggreko helps meet the short-term gap between supply and demand for power. We believe Aggreko has attractive long-term growth opportunities thanks to low penetration in a very large and growing market in which it faces weak competition.
U.S. computer and mobile device maker Apple, Inc. was also sharply higher during 2009. We believe Apple’s iPhone will continue to gain market share in the smart phone market, which we expect to grow as more users trade up from traditional mobile phones. We think many investors believe Apple already has a large market share in smart phones and are underestimating potential growth. We continue to see strong growth prospects for this business line.
2 | DECEMBER 31, 2009
Table of Contents
(unaudited)
Detractors from Relative Performance
UnitedHealth Group, Inc., a U.S.-based managed care company, was negatively impacted by the continued overhang of health care reform. The uncertainty led us to sell the position.
Yamada Denki Co., Ltd., the leading Japanese electronics retailer, has been hampered due to reduced consumer spending. We sold the position in favor of other opportunities.
Raffles Education Corp., Ltd., a Singapore-based education firm, was negatively impacted early in the year due to its investment in a China-based education firm, which reported that its CEO had inflated the company’s sales and cash balances. Raffles owned 30% of the firm, but the investment only contributed two percentage points to earnings and Raffles was not involved in managing the China-based firm. We feel Raffles should benefit from rising enrollments. In addition, with a number of its schools in China, we think the wealth effect in that country will increase interests in education for many Chinese. We think this is likely to be a trend given that Raffles’ students tend to be enrolled for two to three years.
Derivatives
Please see the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
Outlook
We are seeing signs that investor enthusiasm for riskier companies (those with low margins and heavily exposed to the economy) is coming to an end. These low-quality companies (in our view) have led the markets off the lows reached in March, and our lack of exposure has modestly detracted from our performance for the year. We feel the defensive and higher-quality names in the Portfolio will outperform. While global equity markets have rallied significantly, we are less optimistic as economic conditions in the U.S., Europe and Japan remain difficult. We believe unemployment will remain high for some time and sluggish economic growth is likely to persist for several years. However, we believe growth is re-accelerating in emerging markets such as China, India and Brazil, as these countries do not suffer from many of the issues in Western developed markets.
Thank you for your investment in Janus Aspen Worldwide Portfolio.
Janus Aspen Series | 3
Table of Contents
Janus Aspen Worldwide Portfolio (unaudited)
Janus Aspen Worldwide Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Li & Fung, Ltd. | 2.20% | |||
Aggreko PLC | 2.10% | |||
Apple, Inc. | 1.89% | |||
IG Group Holdings PLC | 1.21% | |||
Housing Development Finance Corp. | 1.15% |
5 Bottom Performers – Holdings
Contribution | ||||
UnitedHealth Group, Inc. | –1.00% | |||
Yamada Denki Co., Ltd. | –0.81% | |||
Raffles Education Corp., Ltd. | –0.64% | |||
SLM Corp. | –0.52% | |||
Willis Group Holdings, Ltd. | –0.51% |
5 Top Performers – Sectors*
Portfolio Weighting | Morgan Stanley Capital International | |||||||||||
Portfolio Contribution | (Average % of Equity) | World IndexSM Weighting | ||||||||||
Information Technology | 8.52% | 16.21% | 11.50% | |||||||||
Consumer Staples | 6.47% | 10.78% | 10.54% | |||||||||
Industrials | 5.53% | 9.30% | 10.48% | |||||||||
Financials | 5.30% | 18.27% | 19.28% | |||||||||
Consumer Discretionary | 4.28% | 15.02% | 9.31% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Morgan Stanley Capital International | |||||||||||
Portfolio Contribution | (Average % of Equity) | World IndexSM Weighting | ||||||||||
Utilities | 0.68% | 0.97% | 5.00% | |||||||||
Telecommunication Services | 0.92% | 0.90% | 4.72% | |||||||||
Materials | 2.33% | 9.40% | 6.79% | |||||||||
Energy | 3.03% | 4.47% | 11.55% | |||||||||
Health Care | 3.30% | 14.70% | 10.84% |
* | 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. |
4 | DECEMBER 31, 2009
Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2009
Aggreko PLC Commercial Services | 3.3% | |||
Celgene Corp. Medical – Biomedical and Genetic | 3.1% | |||
Monsanto Co. Agricultural Chemicals | 3.1% | |||
Japan Tobacco, Inc. Tobacco | 3.0% | |||
Admiral Group PLC Property and Casualty Insurance | 3.0% | |||
15.5% |
Asset Allocation – (% of Net Assets)
As of December 31, 2009
Emerging markets comprised 12.7% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2009
Janus Aspen Series | 5
Table of Contents
Janus Aspen Worldwide Portfolio (unaudited)
Performance
Average Annual Total Return – for the periods ended December 31, 2009 | Expense Ratios – for the fiscal year ended December 31, 2008 | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Worldwide Portfolio – Institutional Shares | 37.70% | 0.89% | –4.04% | 7.81% | 0.53% | ||||||
Janus Aspen Worldwide Portfolio – Service Shares | 37.40% | 0.64% | –4.29% | 7.53% | 0.78% | ||||||
Janus Aspen Worldwide Portfolio – Service II Shares | 37.35% | 0.65% | –4.29% | 7.53% | 0.75% | ||||||
Morgan Stanley Capital International World IndexSM | 29.99% | 2.01% | –0.24% | 5.89% | |||||||
Lipper Quartile – Institutional Shares | 2nd | 4th | 4th | 1st | |||||||
Lipper Ranking – Institutional Shares based on total returns for Variable Annuity Global Funds | 53/135 | 62/74 | 36/41 | 3/11 | |||||||
Visit janus.com/variable-insurance to view current performance and characteristic information | |||||||||||
Data presented represents past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.33JANUS(52687) or visit janus.com/variable-insurance for performance current to the most recent month-end.
For Service II Shares, a 1% redemption fee may be imposed on shares held for 60 days or less. Performance shown does not reflect this redemption fee and, if reflected, performance would have been lower.
The Portfolio’s expense ratios shown were determined based on average net assets as of the fiscal year ended December 31, 2008. The expense information shown may include “acquired fund” fees and expenses. (“Acquired Fund” means any underlying fund (including, but not limited to, exchange-traded funds) in which the Portfolio invests or has invested in during the period.) Further information is available in the prospectus. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
The Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period.
See important disclosures on the next page.
6 | DECEMBER 31, 2009
Table of Contents
(unaudited)
The Portfolio’s performance may be affected by risks that include those associated with investments in specific industries or countries. Additional risks to the Portfolio may include those associated with investing in foreign securities, emerging markets, initial public offerings (“IPOs”) and derivatives. Please see a Janus prospectus or janus.com/variable-insurance 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 Portfolio, and therefore the Portfolio’s performance, may decline in response to such risks.
The Portfolio may have significant exposure to emerging markets. In general, emerging market investments have historically been subject to significant gains and/or losses. As such, the Portfolio’s returns and NAV may be subject to volatility.
Janus Aspen Worldwide Portfolio held approximately 6.4% and 5.8% respectively, of its assets in Brazilian and Indian securities as of December 31, 2009 and the Portfolio may have experienced significant gains or losses due, in part, to its investments in Brazil and India. While holdings are subject to change without notice, the Portfolio’s returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in Brazil and India.
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 dividends from net investment income and distributions from capital gains. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption 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 and Service II Shares for periods prior to December 31, 1999 and December 31, 2001, respectively, are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expense of Service Shares and Service II 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.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads.
Lipper ranking is for the Institutional Share class only; other classes may have different performance characteristics.
September 30, 1993 is the date used to calculate the since-inception Lipper ranking, which is slightly different from when the Portfolio began operations since Lipper provides fund rankings as of the last day of the month.
There is no assurance that the investment process will consistently lead to successful investing.
The Portfolio’s holdings may differ significantly from the securities held in the index. The index is unmanaged and is not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See Notes to Schedule of Investments for index definitions.
As of May 1, 2009, Janus Aspen Worldwide Growth Portfolio changed its name to Janus Aspen Worldwide Portfolio.
See “Explanations of Charts, Tables and Financial Statements.”
* | The Portfolio’s inception date – September 13, 1993 |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Worldwide Portfolio (unaudited)
Portfolio Expenses
The examples below show you the ongoing costs (in dollars) of investing in your Portfolio and allow you to compare these costs with those of other mutual funds. Please refer to the section Useful Information About Your Portfolio Report for a detailed explanation of the information presented in these charts.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Institutional Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,207.70 | $ | 3.73 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.83 | $ | 3.41 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,206.40 | $ | 5.12 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||||
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||||||||||||
Expense Example – Service II Shares | (7/1/09) | (12/31/09) | (7/1/09-12/31/09)† | |||||||||||
Actual | $ | 1,000.00 | $ | 1,206.20 | $ | 5.12 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||||
† | Expenses are equal to the annualized expense ratio of 0.67% for Institutional Shares, 0.92% for Service Shares and 0.92% for Service II Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
8 | DECEMBER 31, 2009
Table of Contents
Janus Aspen Worldwide Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Common Stock – 98.2% | ||||||||||||
Aerospace and Defense – 0.5% | ||||||||||||
81,516 | TransDigm Group, Inc.* | $ | 3,871,195 | |||||||||
Agricultural Chemicals – 5.8% | ||||||||||||
294,472 | Monsanto Co. | 24,073,087 | ||||||||||
196,809 | Potash Corporation of Saskatchewan Inc. (U.S. Shares) | 21,353,777 | ||||||||||
45,426,864 | ||||||||||||
Agricultural Operations – 2.7% | ||||||||||||
13,642,810 | Chaoda Modern Agriculture Holdings Ltd. | 14,476,079 | ||||||||||
7,170,000 | China Green Holdings, Ltd. | 6,777,212 | ||||||||||
21,253,291 | ||||||||||||
Applications Software – 0.1% | ||||||||||||
42,602 | Nuance Communications, Inc.* | 662,035 | ||||||||||
Brewery – 1.1% | ||||||||||||
165,691 | Anheuser-Busch InBev N.V. | 8,566,527 | ||||||||||
Chemicals – Specialty – 1.3% | ||||||||||||
9,729,230 | Huabao International Holdings, Ltd. | 10,490,225 | ||||||||||
Commercial Services – 3.3% | ||||||||||||
1,749,002 | Aggreko PLC | 26,025,675 | ||||||||||
Commercial Services – Finance – 0.8% | ||||||||||||
24,310 | MasterCard, Inc. – Class A | 6,222,874 | ||||||||||
Computer Aided Design – 0.5% | ||||||||||||
91,821 | ANSYS, Inc.* | 3,990,541 | ||||||||||
Computer Services – 0.7% | ||||||||||||
135,325 | Accenture, Ltd. – Class A (U.S. Shares) | 5,615,988 | ||||||||||
Computers – 4.3% | ||||||||||||
79,554 | Apple, Inc.* | 16,774,756 | ||||||||||
250,516 | Research In Motion, Ltd. (U.S. Shares)* | 16,919,851 | ||||||||||
33,694,607 | ||||||||||||
Cosmetics and Toiletries – 1.7% | ||||||||||||
134,905 | Colgate-Palmolive Co. | 11,082,446 | ||||||||||
131,245 | Colgate Palmolive India, Ltd. | 1,857,561 | ||||||||||
12,940,007 | ||||||||||||
Distribution/Wholesale – 1.7% | ||||||||||||
3,267,450 | Li & Fung, Ltd. | 13,446,429 | ||||||||||
Diversified Banking Institutions – 5.4% | ||||||||||||
993,145 | Bank of America Corp. | 14,956,764 | ||||||||||
115,751 | Goldman Sachs Group, Inc. | 19,543,399 | ||||||||||
189,490 | JPMorgan Chase & Co. | 7,896,048 | ||||||||||
42,396,211 | ||||||||||||
Diversified Operations – 1.4% | ||||||||||||
2,039,065 | China Merchants Holdings International Co., Ltd. | 6,568,469 | ||||||||||
52,905 | Danaher Corp. | 3,978,456 | ||||||||||
10,546,925 | ||||||||||||
Educational Software – 1.8% | ||||||||||||
138,085 | Blackboard, Inc.* | 6,267,678 | ||||||||||
505,454 | Educomp Solutions Ltd. | 7,677,611 | ||||||||||
13,945,289 | ||||||||||||
Electric – Distribution – 0.7% | ||||||||||||
557,835 | Equatorial Energia S.A. | 5,746,859 | ||||||||||
Electric – Integrated – 0.7% | ||||||||||||
381,200 | Light S.A. | 5,682,240 | ||||||||||
Electric Products – Miscellaneous – 0.5% | ||||||||||||
77,629 | Bharat Heavy Electricals, Ltd. | 3,992,139 | ||||||||||
Electronic Connectors – 0.5% | ||||||||||||
88,190 | Amphenol Corp. – Class A | 4,072,614 | ||||||||||
Enterprise Software/Services – 2.8% | ||||||||||||
435,789 | Autonomy Corp. PLC* | 10,621,422 | ||||||||||
377,303 | Aveva Group PLC | 6,130,170 | ||||||||||
205,525 | Temenos Group A.G.* | 5,306,994 | ||||||||||
22,058,586 | ||||||||||||
Finance – Mortgage Loan Banker – 2.8% | ||||||||||||
381,865 | Housing Development Finance Corp. | 21,910,934 | ||||||||||
Finance – Other Services – 2.6% | ||||||||||||
1,117,740 | BM&F Bovespa S.A. | 7,759,660 | ||||||||||
11,805 | CME Group, Inc. | 3,965,890 | ||||||||||
1,391,653 | IG Group Holdings PLC | 8,467,779 | ||||||||||
20,193,329 | ||||||||||||
Food – Dairy Products – 0.3% | ||||||||||||
39,117 | Nestle India, Ltd. | 2,144,896 | ||||||||||
Food – Wholesale/Distribution – 1.0% | ||||||||||||
4,056,375 | Olam International, Ltd. | 7,603,452 | ||||||||||
Gold Mining – 1.8% | ||||||||||||
303,301 | Newmont Mining Corp. | 14,349,170 | ||||||||||
Hotels and Motels – 0.9% | ||||||||||||
3,880,000 | Shangri-La Asia, Ltd. | 7,257,107 | ||||||||||
Human Resources – 2.4% | ||||||||||||
1,543,644 | Capita Group PLC | 18,612,179 | ||||||||||
Industrial Gases – 0.5% | ||||||||||||
45,755 | Praxair, Inc. | 3,674,584 | ||||||||||
Investment Companies – 1.6% | ||||||||||||
2,538,465 | Man Group PLC | 12,482,219 | ||||||||||
Investment Management and Advisory Services – 0.5% | ||||||||||||
726,500 | GP Investments, Ltd. (BDR)* | 4,220,669 | ||||||||||
Medical – Biomedical and Genetic – 7.8% | ||||||||||||
114,710 | Alexion Pharmaceuticals, Inc.* | 5,600,142 | ||||||||||
433,793 | Celgene Corp.* | 24,153,595 | ||||||||||
78,775 | Genzyme Corp.* | 3,860,763 | ||||||||||
247,918 | Gilead Sciences, Inc.* | 10,729,891 | ||||||||||
398,045 | Vertex Pharmaceuticals, Inc.* | 17,056,228 | ||||||||||
61,400,619 | ||||||||||||
Medical – Drugs – 1.2% | ||||||||||||
84,283 | Novo Nordisk A/S | 5,398,123 | ||||||||||
23,711 | Roche Holding A.G. | 4,037,332 | ||||||||||
9,435,455 | ||||||||||||
Medical – Generic Drugs – 0.5% | ||||||||||||
73,510 | Teva Pharmaceutical S.P. (ADR) | 4,129,792 | ||||||||||
Medical Instruments – 1.4% | ||||||||||||
306,171 | St. Jude Medical, Inc.* | 11,260,969 | ||||||||||
Medical Products – 1.7% | ||||||||||||
64,318 | Baxter International, Inc. | 3,774,180 | ||||||||||
93,632 | Cochlear, Ltd. | 5,787,180 | ||||||||||
58,850 | Johnson & Johnson | 3,790,529 | ||||||||||
13,351,889 | ||||||||||||
See Note to Schedule of Investments and Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Worldwide Portfolio
Schedule of Investments
As of December 31, 2009
Shares | Value | |||||||||||
Multi-Line Insurance – 0.5% | ||||||||||||
77,470 | ACE, Ltd. (U.S. Shares) | $ | 3,904,488 | |||||||||
Oil – Field Services – 1.7% | ||||||||||||
307,537 | AMEC PLC | 3,902,347 | ||||||||||
569,805 | Petrofac, Ltd. | 9,484,686 | ||||||||||
13,387,033 | ||||||||||||
Oil and Gas Drilling – 0.5% | ||||||||||||
44,155 | Transocean, Ltd. (U.S. Shares) | 3,656,034 | ||||||||||
Oil Companies – Integrated – 1.0% | ||||||||||||
192,713 | Petroleo Brasileiro S.A. (U.S. Shares) | 8,169,104 | ||||||||||
Oil Field Machinery and Equipment – 0.5% | ||||||||||||
124,220 | Dresser-Rand Group, Inc.* | 3,926,594 | ||||||||||
Optical Supplies – 0.6% | ||||||||||||
26,379 | Alcon, Inc. (U.S. Shares) | 4,335,389 | ||||||||||
Pipelines – 2.2% | ||||||||||||
292,652 | Enterprise GP Holdings L.P. | 11,404,648 | ||||||||||
98,750 | Kinder Morgan Management LLC* | 5,395,700 | ||||||||||
16,800,348 | ||||||||||||
Printing – Commercial – 0.5% | ||||||||||||
66,100 | VistaPrint (U.S. Shares) | 3,745,226 | ||||||||||
Property and Casualty Insurance – 3.0% | ||||||||||||
1,226,029 | Admiral Group PLC | 23,378,980 | ||||||||||
Real Estate Management/Services – 0.6% | ||||||||||||
3,135,302 | Regus PLC | 4,617,993 | ||||||||||
Real Estate Operating/Development – 1.8% | ||||||||||||
3,616,565 | Hang Lung Properties, Ltd. | 14,129,061 | ||||||||||
Reinsurance – 2.0% | ||||||||||||
4,668 | Berkshire Hathaway, Inc. – Class B* | 15,339,048 | ||||||||||
Retail – Apparel and Shoe – 1.6% | ||||||||||||
69,922 | Hennes & Mauritz A.B. – Class B | 3,878,164 | ||||||||||
65,446 | Inditex S.A. | 4,058,237 | ||||||||||
1,496,000 | Ports Design, Ltd. | 4,613,296 | ||||||||||
12,549,697 | ||||||||||||
Retail – Restaurants – 0.4% | ||||||||||||
3,884,000 | Ajisen China Holdings, Ltd. | 3,310,577 | ||||||||||
Rubber/Plastic Products – 1.0% | ||||||||||||
417,079 | Jain Irrigation Systems Ltd. | 7,806,803 | ||||||||||
Schools – 5.7% | ||||||||||||
788,300 | Anhanguera Educacional Participacoes S.A.* | 11,189,924 | ||||||||||
104,560 | Capella Education Co.* | 7,873,368 | ||||||||||
532,940 | Estacio Participacoes S.A. | 7,541,071 | ||||||||||
210,395 | Grand Canyon Education, Inc.* | 3,999,609 | ||||||||||
376,300 | Kroton Educacional S.A. | 3,884,315 | ||||||||||
36,721,075 | Raffles Education Corp., Ltd.* | 10,491,852 | ||||||||||
44,980,139 | ||||||||||||
Semiconductor Equipment – 0.5% | ||||||||||||
115,154 | ASML Holding N.V. | 3,919,591 | ||||||||||
Tobacco – 5.8% | ||||||||||||
302,942 | British American Tobacco PLC | 9,823,940 | ||||||||||
7,061 | Japan Tobacco, Inc. | 23,839,016 | ||||||||||
238,444 | Philip Morris International, Inc. | 11,490,616 | ||||||||||
45,153,572 | ||||||||||||
Transportation – Services – 0.5% | ||||||||||||
116,035 | Expeditors International of Washington, Inc. | 4,029,896 | ||||||||||
Transportation – Truck – 0.5% | ||||||||||||
232,406 | DSV A/S* | 4,173,681 | ||||||||||
Vitamins and Nutrition Products – 1.0% | ||||||||||||
194,232 | Herbalife, Ltd. | 7,879,992 | ||||||||||
Wireless Equipment – 1.0% | ||||||||||||
100,643 | Crown Castle International Corp.* | 3,929,103 | ||||||||||
86,250 | QUALCOMM, Inc. | 3,989,925 | ||||||||||
7,919,028 | ||||||||||||
Total Common Stock (cost $632,455,084) | 769,786,658 | |||||||||||
Preferred Stock – 0.4% | ||||||||||||
Diversified Banking Institutions – 0.4% | ||||||||||||
227,590 | Bank of America, Corp. convertible, 10.0000% (cost $3,413,850) | 3,395,643 | ||||||||||
Warrant – 1.2% | ||||||||||||
Diversified Banking Institutions – 1.2% | ||||||||||||
713,989 | JP Morgan Chase & Co. – expires 10/28/18* (cost $7,675,382) | 9,517,473 | ||||||||||
Money Market – 0.1% | ||||||||||||
1,176,000 | Janus Cash Liquidity Fund LLC, 0% (cost $1,176,000) | 1,176,000 | ||||||||||
Total Investments (total cost $644,720,316) – 99.9% | 783,875,774 | |||||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.1% | 363,893 | |||||||||||
Net Assets – 100% | $ | 784,239,667 | ||||||||||
Summary of Investments by Country – (Long Positions)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 5,787,180 | 0.7% | |||||
Belgium | 8,566,527 | 1.1% | ||||||
Bermuda | 46,804,939 | 6.0% | ||||||
Brazil | 49,973,173 | 6.4% | ||||||
Canada | 38,273,627 | 4.9% | ||||||
Cayman Islands | 25,666,649 | 3.3% | ||||||
Denmark | 9,571,803 | 1.2% | ||||||
Hong Kong | 20,697,530 | 2.6% | ||||||
India | 45,389,944 | 5.8% | ||||||
Ireland | 5,615,988 | 0.7% | ||||||
Israel | 4,129,792 | 0.5% | ||||||
Japan | 23,839,016 | 3.1% | ||||||
Jersey | 14,102,679 | 1.8% | ||||||
Netherlands | 7,664,817 | 1.0% | ||||||
Singapore | 18,095,303 | 2.3% | ||||||
Spain | 4,058,237 | 0.5% | ||||||
Sweden | 3,878,164 | 0.5% | ||||||
Switzerland | 21,240,237 | 2.7% | ||||||
United Kingdom | 119,444,713 | 15.2% | ||||||
United States†† | 311,075,456 | 39.7% | ||||||
Total | $ | 783,875,774 | 100.0% |
†† | Includes Cash Equivalents (39.5% excluding Cash Equivalents) |
See Note to Schedule of Investments and Financial Statements.
10 | DECEMBER 31, 2009
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||
As of December 31, 2009 | Worldwide | |||||
(all numbers in thousands except net asset value per share) | Portfolio(1) | |||||
Assets: | ||||||
Investments at cost | $ | 644,720 | ||||
Unaffiliated investments at value | $ | 782,700 | ||||
Affiliated money market investments | 1,176 | |||||
Cash | 31 | |||||
Cash denominated in foreign currency(2) | 20 | |||||
Receivables: | ||||||
Investments sold | 1,003 | |||||
Portfolio shares sold | 136 | |||||
Dividends | 441 | |||||
Non-interested Trustees’ deferred compensation | 19 | |||||
Other assets | 44 | |||||
Total Assets | 785,570 | |||||
Liabilities: | ||||||
Payables: | ||||||
Investments purchased | 587 | |||||
Portfolio shares repurchased | 294 | |||||
Advisory fees | 327 | |||||
Transfer agent fees and expenses | 2 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 30 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | – | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Non-interested Trustees’ deferred compensation fees | 19 | |||||
Accrued expenses and other payables | 69 | |||||
Total Liabilities | 1,330 | |||||
Net Assets | $ | 784,240 | ||||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus)* | $ | 2,183,722 | ||||
Undistributed net investment income/(loss)* | 272 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions* | (1,538,915) | |||||
Unrealized appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 139,161 | |||||
Total Net Assets | $ | 784,240 | ||||
Net Assets – Institutional Shares | $ | 639,936 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 24,439 | |||||
Net Asset Value Per Share | $ | 26.18 | ||||
Net Assets – Service Shares | $ | 144,294 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,565 | |||||
Net Asset Value Per Share | $ | 25.93 | ||||
Net Assets – Service II Shares | $ | 10 | ||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized)** | 382 | |||||
Net Asset Value Per Share | $ | 26.00 |
* | See Note 5 in Notes to Financial Statements. | |
** | Shares Outstanding – Service II Shares are not in thousands. | |
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. | |
(2) | Includes cost of $19,656. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the fiscal year ended December 31, 2009 | Worldwide | |||||
(all numbers in thousands) | Portfolio(1) | |||||
Investment Income: | ||||||
Interest | $ | 37 | ||||
Dividends | 13,866 | |||||
Dividends from affiliates | 37 | |||||
Foreign tax withheld | (667) | |||||
Total Investment Income | 13,273 | |||||
Expenses: | ||||||
Advisory fees | 3,854 | |||||
Transfer agent fees and expenses | 7 | |||||
Registration fees | 31 | |||||
Custodian fees | 125 | |||||
Audit fees | 53 | |||||
Non-interested Trustees’ fees and expenses | 22 | |||||
Distribution fees and shareholder servicing fees – Service Shares | 285 | |||||
Distribution fees and shareholder servicing fees – Service II Shares | – | |||||
Other expenses | 154 | |||||
Non-recurring costs (Note 4) | – | |||||
Costs assumed by Janus Capital Management LLC (Note 4) | – | |||||
Total Expenses | 4,531 | |||||
Expense and Fee Offset | (1) | |||||
Net Expenses | 4,530 | |||||
Net Investment Income/(Loss) | 8,743 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (263,063) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 472,112 | |||||
Net Gain/(Loss) on Investments | 209,049 | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 217,792 |
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2009
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Worldwide | ||||||||||
For the fiscal years ended December 31 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2009 | 2008 | ||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 8,743 | $ | 11,992 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | (263,063) | (23,114) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and | ||||||||||
non-interested Trustees’ deferred compensation | 472,112 | (528,905) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 217,792 | (540,027) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net investment income* | ||||||||||
Institutional Shares | (7,919) | (9,710) | ||||||||
Service Shares | (1,484) | (1,495) | ||||||||
Service II Shares | – | – | ||||||||
Net realized gain/(loss) from investment transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Service II Shares | – | – | ||||||||
Net (Decrease) from Dividends and Distributions | (9,403) | (11,205) | ||||||||
Capital Share Transactions: | ||||||||||
Shares sold | ||||||||||
Institutional Shares | 19,864 | 24,728 | ||||||||
Service Shares | 32,824 | 27,528 | ||||||||
Service II Shares | – | – | ||||||||
Reinvested dividends and distributions | ||||||||||
Institutional Shares | 7,919 | 9,710 | ||||||||
Service Shares | 1,484 | 1,495 | ||||||||
Service II Shares | – | – | ||||||||
Shares repurchased | ||||||||||
Institutional Shares | (83,157) | (167,280) | ||||||||
Service Shares | (22,084) | (73,253) | ||||||||
Service II Shares | – | – | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (43,150) | (177,072) | ||||||||
Net Increase/(Decrease) in Net Assets | 165,239 | (728,304) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 619,001 | 1,347,305 | ||||||||
End of period | $ | 784,240 | $ | 619,001 | ||||||
Undistributed net investment income/(loss)* | $ | 272 | $ | 1,738 |
* | See Note 5 in Notes to Financial Statements | |
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
For a share outstanding during
each fiscal year ended December 31
each fiscal year ended December 31
Janus Aspen Worldwide Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $19.27 | $35.35 | $32.48 | $27.96 | $26.78 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .29 | .37 | .27 | .54 | .44 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 6.94 | (16.11) | 2.87 | 4.50 | 1.11 | |||||||||||||||||
Total from Investment Operations | 7.23 | (15.74) | 3.14 | 5.04 | 1.55 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.32) | (.34) | (.27) | (.52) | (.37) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.32) | (.34) | (.27) | (.52) | (.37) | |||||||||||||||||
Net Asset Value, End of Period | $26.18 | $19.27 | $35.35 | $32.48 | $27.96 | |||||||||||||||||
Total Return | 37.70% | (44.69)% | 9.66% | 18.24% | 5.87% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $639,936 | $522,295 | $1,119,569 | $1,208,155 | $1,464,300 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $558,029 | $826,712 | $1,207,006 | $1,271,755 | $1,767,226 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets | 0.63% | 0.53% | 0.67% | 0.61% | 0.61% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets | 0.63% | 0.53% | 0.67% | 0.61% | 0.61% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 1.35% | 1.26% | 0.70% | 1.59% | 1.33% | |||||||||||||||||
Portfolio Turnover Rate | 206% | 14% | 26% | 46% | 41% |
Service Shares
For a share outstanding during
each fiscal year ended December 31
each fiscal year ended December 31
Janus Aspen Worldwide Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $19.10 | $35.05 | $32.22 | $27.76 | $26.62 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .24 | .21 | .16 | .36 | .29 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 6.87 | (15.87) | 2.87 | 4.58 | 1.18 | |||||||||||||||||
Total from Investment Operations | 7.11 | (15.66) | 3.03 | 4.94 | 1.47 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.28) | (.29) | (.20) | (.48) | (.33) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.28) | (.29) | (.20) | (.48) | (.33) | |||||||||||||||||
Net Asset Value, End of Period | $25.93 | $19.10 | $35.05 | $32.22 | $27.76 | |||||||||||||||||
Total Return | 37.40% | (44.84)% | 9.39% | 17.97% | 5.57% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $144,294 | $96,699 | $227,723 | $209,951 | $201,382 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $114,103 | $159,561 | $230,284 | $195,343 | $206,310 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets | 0.88% | 0.78% | 0.92% | 0.86% | 0.86% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets | 0.88% | 0.78% | 0.92% | 0.86% | 0.86% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 1.08% | 1.01% | 0.46% | 1.29% | 1.11% | |||||||||||||||||
Portfolio Turnover Rate | 206% | 14% | 26% | 46% | 41% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2009
Table of Contents
Service II Shares
For a share outstanding during
each fiscal year ended December 31
each fiscal year ended December 31
Janus Aspen Worldwide Portfolio(1) | ||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $19.15 | $35.14 | $32.30 | $27.85 | $26.70 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | .22 | .28 | .16 | .36 | .30 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 6.91 | (15.98) | 2.88 | 4.58 | 1.19 | |||||||||||||||||
Total from Investment Operations | 7.13 | (15.70) | 3.04 | 4.94 | 1.49 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (.28) | (.29) | (.20) | (.49) | (.34) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (.28) | (.29) | (.20) | (.49) | (.34) | |||||||||||||||||
Net Asset Value, End of Period | $26.00 | $19.15 | $35.14 | $32.30 | $27.85 | |||||||||||||||||
Total Return | 37.40% | (44.82)% | 9.40% | 17.92% | 5.63% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $10 | $7 | $13 | $12 | $10 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $8 | $10 | $13 | $11 | $10 | |||||||||||||||||
Ratio of Gross Expenses to Average Net Assets | 0.87% | 0.75% | 0.92% | 0.86% | 0.86% | |||||||||||||||||
Ratio of Net Expenses to Average Net Assets | 0.87% | 0.75% | 0.92% | 0.86% | 0.85% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 1.10% | 1.04% | 0.45% | 1.26% | 1.12% | |||||||||||||||||
Portfolio Turnover Rate | 206% | 14% | 26% | 46% | 41% |
* | See Note 5 in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments
Lipper Variable Annuity Global Funds | Funds that invest at least 25% of their portfolios in securities traded outside of the United States and that may own U.S. securities as well. | |
Morgan Stanley Capital International World IndexSM | Is a market capitalization weighted index composed of companies representative of the market structure 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 | |
BDR | Brazilian Depositary Receipt | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American Stock Exchange. |
* | Non-income producing security. |
16 | DECEMBER 31, 2009
Table of Contents
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 December 31, 2009. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2009)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Worldwide Portfolio(1) | |||||||||||
Common Stock | |||||||||||
Agricultural Operations | $ | – | $ | 21,253,291 | $ | – | |||||
Brewery | – | 8,566,527 | – | ||||||||
Chemicals – Specialty | – | 10,490,225 | – | ||||||||
Commercial Services | – | 26,025,675 | – | ||||||||
Cosmetics and Toiletries | 11,082,446 | 1,857,561 | – | ||||||||
Distribution/Wholesale | – | 13,446,429 | – | ||||||||
Diversified Operations | 3,978,456 | 6,568,469 | – | ||||||||
Educational Software | 6,267,678 | 7,677,611 | – | ||||||||
Electric – Distribution | – | 5,746,859 | – | ||||||||
Electric – Integrated | – | 5,682,240 | – | ||||||||
Electric Products – Miscellaneous | – | 3,992,139 | – | ||||||||
Enterprise Software/Services | – | 22,058,586 | – | ||||||||
Finance – Mortgage Loan Banker | – | 21,910,934 | – | ||||||||
Finance – Other Services | 3,965,890 | 16,227,439 | – | ||||||||
Food – Dairy Products | – | 2,144,896 | – | ||||||||
Food – Wholesale/Distribution | – | 7,603,452 | – | ||||||||
Hotels and Motels | – | 7,257,107 | – | ||||||||
Human Resources | – | 18,612,179 | – | ||||||||
Investment Companies | – | 12,482,219 | – | ||||||||
Investment Management and Advisory Services | – | 4,220,669 | – | ||||||||
Medical – Drugs | – | 9,435,455 | – | ||||||||
Medical – Generic Drugs | – | 4,129,792 | – | ||||||||
Medical Products | 7,564,709 | 5,787,180 | – | ||||||||
Oil – Field Services | – | 13,387,033 | – | ||||||||
Oil Companies – Integrated | – | 8,169,104 | – | ||||||||
Property and Casualty Insurance | – | 23,378,980 | – | ||||||||
Real Estate Management/Services | – | 4,617,993 | – | ||||||||
Real Estate Operating/Development | – | 14,129,061 | – | ||||||||
Retail – Apparel and Shoe | – | 12,549,697 | – | ||||||||
Retail – Restaurants | – | 3,310,577 | – | ||||||||
Rubber/Plastic Products | – | 7,806,803 | – | ||||||||
Schools | 11,872,977 | 33,107,162 | – | ||||||||
Semiconductor Equipment | – | 3,919,591 | – | ||||||||
Tobacco | 11,490,616 | 33,662,956 | – | ||||||||
Transportation – Truck | – | 4,173,681 | – | ||||||||
All Other | 308,174,314 | – | – | ||||||||
Preferred Stock | – | 3,395,643 | – | ||||||||
Warrant | – | 9,517,473 | – | ||||||||
Money Market | – | 1,176,000 | – | ||||||||
Total Investments in Securities | $ | 364,397,086 | $ | 419,478,688 | $ | – | |||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Janus Aspen Series | 17
Table of Contents
Notes to Financial Statements
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 Worldwide Portfolio (formerly named Janus Aspen Worldwide Growth 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. The Trust includes fourteen 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 three classes of shares: Institutional Shares, Service Shares and Service II Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans. Service Shares and Service II Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants. For Service II Shares, a redemption fee of 1% may be imposed on interests in separate accounts or plans held 60 days or less.
Janus Capital Management LLC (“Janus Capital”) invested initial seed capital in the amount of $10,000 for the Portfolio – Service II Shares on December 31, 2001.
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 within the investment management industry.
Investment Valuation
Securities are valued at the last sales price or the official closing price for securities traded on a principal securities exchange (U.S. or foreign) and on the NASDAQ National Market. Securities traded on over-the-counter 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. Short-term securities with maturities of 60 days or less may be valued at amortized cost, which approximates market value. 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. The evaluated bid price supplied by the pricing service is an evaluation that reflects such factors as security prices, yields, maturities and ratings. Short positions shall be valued in accordance with the same methodologies, except that in the event that a last sale price is not available, the latest ask price shall be used instead of a bid price. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect as of the daily close of the New York Stock Exchange (“NYSE”). When market quotations are not readily available or deemed unreliable, or events or circumstances that may affect the value of portfolio securities held by the Portfolio are identified between the closing of their principal markets and the time the net asset value (“NAV”) is determined, securities may be valued at fair value as determined in good faith under procedures established by and under the supervision of the Portfolio’s Trustees. 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 non-significant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a non-valued security and a restricted or non-public security. The Portfolio may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the NYSE. Restricted and illiquid securities are valued in accordance with procedures established by the Portfolio’s Trustees.
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
18 | DECEMBER 31, 2009
Table of Contents
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 expenses incurred specifically on its behalf and, in addition, each class 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.
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.
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 market 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). Dividends and net realized capital gains distributions from the Portfolio may be automatically reinvested into additional shares of the Portfolio, based on the discretion of the shareholder.
Federal Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Portfolio intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.
In accordance with the Financial Accounting Standards Board (“FASB”) guidance, the Portfolio adopted the provisions of “Income Taxes”. These provisions require an evaluation of tax positions taken (or expected to be taken) in the course of preparing the Portfolio’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Portfolio recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Statement of Operations.
These provisions require management of the Portfolio to analyze all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Portfolio did not have a liability for any unrecognized tax benefits. The Portfolio has no examinations in progress and 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 guidance, the Portfolio utilizes the “Fair Value Measurements and Disclosures” 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
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
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.
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.
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 December 31, 2009 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” and “Level 3 Valuation Reconciliation of Assets” (if applicable) in the Notes to Schedule of Investments.
In April 2009, FASB issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the “Valuation Inputs Summary” on the Notes to Schedule of Investments. Management believes applying this guidance does not have a material impact on the financial statements.
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.
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 cost of the derivative. The Portfolio may not use any derivative to gain exposure to an asset or class of assets 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 are generally 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 credit risk, currency risk, leverage risk, liquidity risk, and index risk.
Derivatives may generally be traded over-the-counter (“OTC”) or on an exchange. Exchange-traded derivatives, such as futures contracts, are regulated and the terms of the options are standardized. Derivatives traded OTC, such as swap contracts, 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 counterparty 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
20 | DECEMBER 31, 2009
Table of Contents
OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Equity-Linked Structured Notes
The Portfolio may invest in equity-linked structured notes. Equity-linked structured notes are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked structured notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked structured notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. 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 foreign currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Unrealized appreciation/(depreciation) on open forward currency contracts is recorded as an asset or a liability on the Statement of Assets and Liabilities (if applicable). 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 (if applicable).
Forward currency contracts held by the Portfolio are fully collateralized by other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The collateral is evaluated daily to ensure its market value equals or exceeds the current market value of the corresponding forward currency contracts. Such collateral is in the possession of the Portfolio’s custodian.
Futures Contracts
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, market 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 (if applicable). 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 (if applicable), 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 (if applicable). Such collateral is in the possession of the Portfolio’s custodian or with the counterparty broker.
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.
Options Contracts
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 may purchase or write covered and uncovered put and call options on futures contracts and on portfolio securities for hedging purposes or as a substitute for an
Janus Aspen Series | 21
Table of Contents
Notes to Financial Statements (continued)
investment. The Portfolio is subject to interest rate risk, liquidity risk, market risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use option 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 may also invest in long-term equity anticipation securities, which are long-term option contracts that can be maintained for a period of up to three years. 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 market 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 over-the-counter 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 over-the-counter 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 (if applicable). Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value” (if applicable).
Realized gains and losses are reported as “Net realized gain/(loss) from options contracts” on the Statement of Operations (if applicable).
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.
Other Options
In addition to the option strategies described above, the Portfolio may purchase and sell a variety of options with non-standard payout structures or other features (“exotic options”). Exotic options are traded OTC and typically have price movements that can vary markedly from simple put or call options. The risks associated with exotic options are that they cannot be as easily priced and may be subject to liquidity risk. While some exotic options have fairly active markets others are mostly thinly traded instruments. Some options are pure two-party transactions and may have no liquidity. The Portfolio may treat such
22 | DECEMBER 31, 2009
Table of Contents
instruments as illiquid and will limit its investments in such instruments to no more than 15% of the Portfolio’s net assets, when combined with all other illiquid investments of the Portfolio. A Portfolio may use exotic options to the extent that they are consistent with the Portfolio’s investment objective and investment policies, and applicable regulations.
The Portfolio may purchase and sell exotic options that have values which are determined by the correlation of two or more underlying assets. These types of options include but are not limited to outperformance options, yield curve options or other spread options.
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 market 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 contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities (if applicable). Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations (if applicable).
Various types of swaps such as credit default (funded and unfunded), equity, interest rate, and total return swaps are described below.
Credit default swaps are a specific kind of counterparty agreement that allows the transfer of third-party credit risk from one party to the other. The Portfolio is subject to credit risk in the normal course of pursuing its investment objective through its investments in credit default swap contracts. The Portfolio may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. With a credit default swap, one party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. The Portfolio’s maximum risk of loss from counterparty risk, either as a protection seller or as a protection buyer (undiscounted), is the notional value of the contract. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty.
Funded (notional value of contract paid up front) or unfunded (notional value only paid in case of default) credit default swaps are based on an index of credit default swaps (“CDXs”) or other similarly structured products. CDXs are designed to track segments of the credit default swap market and provide investors with exposure to specific reference baskets of issuers of bonds or loans. These instruments have the potential to allow an investor to obtain the same investment exposure as an investor who invests in an individual credit default swap, but with the potential added benefit of diversification. The CDX reference baskets are normally priced daily and rebalanced every six months in conjunction with leading market makers in the credit industry. The liquidity of the market for CDXs is normally subject to liquidity in the secured loan and credit derivatives markets. A Portfolio investing in CDXs is normally only permitted to take long positions in these instruments.
Equity swaps involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index).
Interest rate swaps involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments).
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 equity swaps, interest rate swaps and 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
Janus Aspen Series | 23
Table of Contents
Notes to Financial Statements (continued)
Portfolio to cover the Portfolio’s exposure to the counterparty.
In accordance with FASB guidance, the Portfolio adopted the provisions for “Derivatives and Hedging”, which require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. There were no derivatives held by the Portfolio during the fiscal year ended December 31, 2009.
3. | Other Investments and Strategies |
Additional Investment Risk
Unforeseen events in the equity and fixed-income markets may at times result in an unusually high degree of volatility in the markets, both domestic and international. These events and the resulting market upheavals may have an adverse effect on the Portfolio such as a decline in the value and liquidity of many securities held by the Portfolio, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in net asset value, and an increase in Portfolio expenses. Such unforeseen events may make it unusually difficult to identify both investment risks and opportunities and could limit or preclude the Portfolio’s ability to achieve its investment objective. The market’s behavior may at times be unpredictable. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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 their 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 Management LLC (“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.
Exchange-Traded Funds
The Portfolio may invest in exchange-traded funds, which generally are index-based investment companies that hold substantially all of their assets in securities representing their specific index. As a shareholder of another investment company, the Portfolio would bear its pro rata portion of the other investment company’s expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations.
Exchange-Traded Notes
The Portfolio may invest directly in exchange-traded notes (“ETNs”), which are senior, unsecured, unsubordinated debt securities whose returns are linked to a particular index and provide exposure to the total returns of various market indices, including indices linked to stocks, bonds, commodities and currencies. This type of debt security differs from other types of bonds and notes. ETN returns are based upon the performance of a market index minus applicable fees; no periodic coupon payments are distributed and no principal protections exist. ETNs do not pay cash distributions. Instead, the value of dividends, interest, and investment gains are captured in the Portfolio’s total return. The Portfolio will invest in these securities when desiring exposure to debt securities or commodities. When evaluating ETNs for investment, Janus Capital will consider the potential risks involved, expected tax efficiency, rate of return, and credit risk. When the Portfolio invests in ETNs, it will bear its proportionate share of any fees and expenses borne by the ETN. There may be restrictions on the Portfolio’s right to redeem its investment in an ETN, which is meant to be held until maturity. The Portfolio’s decision to sell its ETN holdings may be limited by the availability of a secondary market.
24 | DECEMBER 31, 2009
Table of Contents
Initial Public Offerings
The Portfolio may invest in initial public offerings (“IPOs”). IPOs and other investment techniques may have a magnified performance impact on a portfolio with a small asset base. The Portfolio may not experience similar performance as its assets grow.
Interfund Lending
As permitted by the Securities and Exchange Commission (“SEC”) or the 1940 Act and rules promulgated thereunder, the Portfolio may be party to interfund lending agreements between the Portfolio and other Janus Capital sponsored mutual funds and certain pooled investment vehicles, which permit them to borrow or lend cash at a rate beneficial to both the borrowing and lending funds. Outstanding borrowings from all sources totaling 10% or more of the borrowing Portfolio’s total assets must be collateralized at 102% of the outstanding principal value of the loan; loans of less than 10% may be unsecured.
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 (typically brokers or other financial institutions) who need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage activities. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. Janus Capital makes efforts to balance the benefits and risks from granting such loans.
The Portfolio does not have the right to vote on securities while they are being lent; however, the Portfolio may attempt to call back the loan and vote the proxy if time permits. 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 permitted by the SEC. Cash collateral may be invested as permitted by the 1940 Act and rules promulgated thereunder.
Deutsche Bank AG (the “Lending Agent”) may also invest the cash collateral in investments in non-affiliated money market funds or accounts, mutually agreed to by the Portfolio and the Lending Agent, that comply with Rule 2a-7 of the 1940 Act relating to money market funds.
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 upon this mark-to-market evaluation.
The borrower pays fees at the Portfolio’s direction to the Lending Agent. The Lending Agent may retain a portion of the interest earned on the cash collateral invested. The cash collateral invested by the Lending Agent is disclosed on the Schedule of Investments (if applicable). The lending fees and the Portfolio’s portion of the interest income earned on cash collateral are included on the Statement of Operations (if applicable).
The Securities Lending Program was suspended and effective November 19, 2008, the Portfolio no longer had any securities on loan. Management continues to review the program and may resume securities lending.
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
Janus Aspen Series | 25
Table of Contents
Notes to Financial Statements (continued)
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 sales of stocks, futures, swaps, structured notes, 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 other securities, which are denoted on the accompanying Schedule of Investments (if applicable). The Portfolio is also required to pay the lender of the security any dividends or interest that accrues 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 on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments such as option 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 “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Average Daily | ||||||||
Net Assets | Base Fee Rate (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Worldwide Portfolio(1) | All Asset Levels | 0.60 | ||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
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 previous table. 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 Worldwide Portfolio(1) | MSCI World IndexSM | ||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Only the base fee rate applied until February 2007 for the Portfolio, at which time the calculation of the performance adjustment applied 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 is equal to the time that has elapsed since the performance-based fee structure took effect. As noted above, any applicable 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. 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
26 | DECEMBER 31, 2009
Table of Contents
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 evenly each day throughout the month. The investment fee is paid monthly in arrears.
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 its benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) across each other class of shares of the Portfolio.
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 prospectus and statement 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 fiscal year ended December 31, 2009, the Portfolio recorded a negative Performance Adjustment of $178,894.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent and receives certain out-of-pocket expenses for transfer agent services.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares and Service II Shares have adopted a Distribution and Shareholder Servicing Plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Portfolio in connection with the distribution of Service Shares and Service II Shares at an annual rate of up to 0.25% of Service Shares’ and Service II Shares’ average daily net assets. 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 a Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year is less than the payments made during a calendar year, the Portfolio will be reimbursed for the difference.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Such officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer. Effective January 1, 2006, the Portfolio began reimbursing Janus Capital for a portion of the compensation paid to the Chief Compliance Officer and certain compliance staff of the Trust. Total compensation of $84,699 was paid by the Trust during the fiscal year ended December 31, 2009. The Portfolio’s portion is reported as part of “Other Expenses” on 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 December 31, 2009 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 fiscal year ended December 31, 2009 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. No deferred fees were distributed to any Trustee under the Deferred Plan during the fiscal year ended December 31, 2009.
For the fiscal year ended December 31, 2009, Janus Capital assumed $7,572 of legal, consulting and Trustee costs and fees incurred by the portfolios in the Trust and Janus Investment Fund together with the Trust (the “Funds”) in connection with the regulatory and civil litigation matters discussed in Note 8. These non-recurring costs were allocated to all Funds based on the Funds’ respective net assets as of July 31, 2004.
Janus Aspen Series | 27
Table of Contents
Notes to Financial Statements (continued)
Additionally, all future non-recurring costs will be allocated to the Funds based on the Funds’ respective net assets on July 31, 2004. These “Non-recurring costs” and “Costs assumed by Janus Capital” are shown on the Statement of Operations.
A 1.00% redemption fee may be imposed on Service II Shares of the Portfolio held for 60 days or less. This fee is paid to the Portfolio rather than Janus Capital, and is designed to deter excessive short-term trading and to offset the brokerage commissions, market impact, and other costs associated with changes in the Portfolio’s asset level and cash flow due to short-term money movements in and out of the Portfolio. The redemption fee is accounted for as an addition to Paid-in Capital. No redemption fees were received by the Portfolio for the fiscal year ended December 31, 2009
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 (if applicable). The transfer agent fee offsets received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations (if applicable). Custodian offsets received reduce “Custodian fees” on the Statement of Operations (if applicable). 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 terms and conditions of an SEC exemptive order and the provisions of the 1940 Act, the Portfolio may participate in an affiliated or non-affiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or non-affiliated 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 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 fiscal year ended December 31, 2009, the Portfolio recorded distributions from affiliated investment companies as affiliated dividend income, and had the following affiliated purchases and sales:
Purchases | Sales | Dividend | Value | |||||||||||
Shares/Cost | Shares/Cost | Income | at 12/31/09 | |||||||||||
Janus Aspen Worldwide Portfolio(1) | ||||||||||||||
Janus Cash Liquidity Fund LLC | $ | 348,028,950 | $ | 347,179,950 | $ | 37,143 | $ | 1,176,000 | ||||||
Janus Institutional Money Market Fund – Institutional Shares(2) | 10,145 | 238,873 | – | – | ||||||||||
$ | 348,039,095 | $ | 347,418,823 | $ | 37,143 | $ | 1,176,000 | |||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. | |
(2) | Fund was liquidated April 30, 2009. |
5. | Federal Income Tax |
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
In 2009, the Portfolio incurred “Post-October” losses during the period from November 1, 2009 through December 31, 2009. These losses will be deferred for tax purposes and recognized in 2010.
Other book to tax differences may consist of deferred compensation, derivatives and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses. 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.
28 | DECEMBER 31, 2009
Table of Contents
Undistributed | Undistributed | Other Book | Net Tax | |||||||||||||||||
Ordinary | Long-Term | Accumulated | Post-October | to Tax | Appreciation/ | |||||||||||||||
Portfolio | Income | Gains | Capital Losses | Deferral | Differences | (Depreciation) | ||||||||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 491,156 | $ | – | $ | (1,537,146,191) | $ | (199,725) | $ | (13,823) | $ | 137,385,993 | ||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2009, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows the expiration dates of the carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2009
For the year ended December 31, 2009
December 31, | December 31, | December 31, | December 31, | Accumulated | |||||||||||||||||||
Portfolio | 2010 | 2011 | 2016 | 2017 | Capital Losses | ||||||||||||||||||
Janus Aspen Worldwide Portfolio(1) | $ | (989,588,014) | $ | (253,061,503) | $ | (4,371,577) | $ | (290,125,097) | $ | (1,537,146,191) | |||||||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
During the fiscal year ended December 31, 2009, the following capital loss carryover expired as indicated in the table:
Capital Loss | ||||||||||||||
Portfolio | Carryover Expired | |||||||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 334,040,452 | ||||||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2009 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 | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 646,489,781 | $ | 142,871,759 | $ | (5,485,766) | |||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
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. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to paid-in capital.
For the fiscal year ended December 31, 2009
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 9,402,890 | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
For the fiscal year ended December 31, 2008
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 11,205,435 | $ | – | $ | – | $ | – | |||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Janus Aspen Series | 29
Table of Contents
Notes to Financial Statements (continued)
6. | Capital Share Transactions |
Janus Aspen Worldwide Portfolio(1) | ||||||||||
For each fiscal year ended December 31 (all numbers in thousands) | 2009 | 2008 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 904 | 932 | ||||||||
Reinvested dividends and distributions | 338 | 407 | ||||||||
Shares repurchased | (3,905) | (5,907) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (2,663) | (4,568) | ||||||||
Shares Outstanding, Beginning of Period | 27,102 | 31,670 | ||||||||
Shares Outstanding, End of Period | 24,439 | 27,102 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 1,472 | 929 | ||||||||
Reinvested dividends and distributions | 64 | 64 | ||||||||
Shares repurchased | (1,032) | (2,429) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 504 | (1,436) | ||||||||
Shares Outstanding, Beginning of Period | 5,061 | 6,497 | ||||||||
Shares Outstanding, End of Period | 5,565 | 5,061 | ||||||||
Transactions in Portfolio Shares – Service II Shares(2) | ||||||||||
Shares sold | – | – | ||||||||
Reinvested dividends and distributions | 5 | 5 | ||||||||
Shares repurchased | – | – | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 5 | 5 | ||||||||
Shares Outstanding, Beginning of Period | 377 | 372 | ||||||||
Shares Outstanding, End of Period | 382 | 377 | ||||||||
(1) Formerly named Janus Aspen Worldwide Growth Portfolio. | ||||||||||
(2) Transactions in Portfolio Shares – Service II Shares are not in thousands. |
7. | Purchases and Sales of Investment Securities |
For the fiscal year ended December 31, 2009, the aggregate cost of purchases and proceeds from sales of investment securities (excluding short-term securities and options contracts) 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 Worldwide Portfolio(1) | $ | 1,352,549,423 | $ | 1,339,053,531 | $ | – | $ | – | ||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
8. | Pending Legal Matters |
In the fall of 2003, the Securities and Exchange Commission (“SEC”), the Office of the New York State Attorney General (“NYAG”), the Colorado Attorney General (“COAG”), and the Colorado Division of Securities (“CDS”) announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators’ investigations into Janus Capital’s frequent trading arrangements.
A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the “Court”) for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court, one of which still remains, and which was brought by a putative class of shareholders of Janus Capital Group
30 | DECEMBER 31, 2009
Table of Contents
Inc. (“JCGI”) asserting claims on behalf of the shareholders against JCGI and Janus Capital (First Derivative Traders et al. v. Janus Capital Group Inc. et al., U.S. District Court, District of Maryland, MDL 1586, formerly referred to as Wiggins, et al. v. Janus Capital Group, Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818).
In the Wiggins case, a Motion to Dismiss was previously granted and the matter was dismissed in May 2007. Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. In May 2009, the Fourth Circuit reversed the order of dismissal and remanded the case back to the Court for further proceedings. In October 2009, Janus filed a petition for a writ of certiorari with the United States Supreme Court to review the judgment of the United States Court of Appeals for the Fourth Circuit. On January 11, 2010, the Supreme Court asked the United States Solicitor General to file a brief on the question of whether Janus’ petition should be granted. As a result of these developments at the Supreme Court, the Court has stayed all further proceedings until the Supreme Court rules on Janus’ petition for a writ of certiorari. In addition to the Wiggins case, on January 20, 2010, the Court entered orders dismissing the remaining claims asserted against Janus Capital and its affiliates by fund investors in Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518 (a derivative claim involving alleged frequent trading practices).
In addition to the lawsuits described above, the Auditor of the State of West Virginia (“Auditor”), in his capacity as securities commissioner, initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). In September 2006, JCGI and Janus Capital filed their answer to the Auditor’s summary order instituting proceedings as well as a Motion to Discharge Order to Show Cause. On July 31, 2009, Janus filed a “Notice that Matter is Deemed Concluded.” At this time, no further proceedings are scheduled in this matter.
Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds.
9. | Subsequent Event |
In May 2009, in accordance with the FASB guidance, the Portfolio adopted the provision of “Subsequent Events,” which provides guidance to establish general standards of accounting for and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or are available to be issued. The guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the basis for that date. Management has evaluated whether any events or transactions occurred subsequent to December 31, 2009 through February 16, 2010, 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.
Janus Aspen Series | 31
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Janus Aspen Worldwide Portfolio:
of Janus Aspen Worldwide Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Worldwide Portfolio (formerly Janus Aspen Worldwide Growth Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 16, 2010
32 | DECEMBER 31, 2009
Table of Contents
Additional Information (unaudited)
Proxy Voting Policies and Voting Record
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 Aspen Series, none of whom has ever been affiliated with Janus Capital (“Independent Trustees”), oversee the management of each Portfolio and, as required by law, determine annually whether to continue the investment advisory agreement for each Portfolio and the subadvisory agreements for the two Portfolios that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Portfolio, the Trustees received and reviewed a substantial amount of information provided by Janus Capital and the respective subadvisers in response to requests of the Independent Trustees and their independent legal counsel. They also received and reviewed a considerable amount of information and analysis provided by their independent fee consultant. Throughout their consideration of the agreements, the Independent Trustees were advised by their independent legal counsel. The Independent 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 11, 2009, 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 Portfolio 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 Portfolio, and the subadvisory agreement for each subadvised Portfolio, for the period from February 1, 2010 through February 1, 2011, 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.
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 Portfolios, taking into account the investment objective and strategy of each Portfolio 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 Portfolios. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment management services to the Portfolios. The Trustees also considered other services provided to the Portfolios by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions, serving as the Portfolios’ administrator, monitoring adherence to the Portfolios’ investment restrictions, producing shareholder reports, 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 Portfolios and with applicable securities laws and regulations.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Portfolio were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Portfolios whose
Janus Aspen Series | 33
Table of Contents
Additional Information (unaudited) (continued)
performance lagged that of their peers for certain periods, the quality of those services had been consistent with or superior to quality norms in the industry and the Portfolios 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 Portfolios effectively and had demonstrated its continuing ability to attract well-qualified personnel.
Performance of the Portfolios
The Trustees considered the performance results of each Portfolio over various time periods. They reviewed information comparing each Portfolio’s performance with the performance of comparable funds and peer groups identified by Lipper, and with the Portfolio’s benchmark index. They concluded that the performance of many Portfolios was good to very good under current market conditions. Although the performance of some Portfolios lagged that of their peers for certain periods, the Trustees also concluded that Janus Capital had taken or was taking appropriate steps to address those instances of under-performance.
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Portfolio in comparison to similar information for other comparable funds as provided by Lipper. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and administrative) fees for most of the Portfolios, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by Lipper.
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. They concluded that the compensation methodology provided a good alignment of the interests of the portfolio managers with the interests of Portfolio shareholders.
The Trustees also reviewed management fees charged by Janus Capital to its separate account clients and to non-affiliated funds subadvised by Janus Capital (for which Janus Capital 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 Portfolios having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Portfolios, Janus Capital performs significant additional services for the Portfolios that it does not provide to those other clients, including administrative services, oversight of the Portfolios’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Portfolios, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the spread between the average fee rates charged to the Portfolios and the fee rates that Janus Capital charged to its separate account clients was significantly smaller than the average spread for such fee rates of other advisers, based on publicly available data and research conducted by the Trustees’ independent fee consultant.
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Portfolio, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Portfolios 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 Portfolios 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 Portfolio in relation to the services rendered was not unreasonable.
The Trustees concluded that the management fees and other compensation payable by each Portfolio to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Portfolios, 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 and the fees Janus Capital and the subadvisers charge to other clients. The Trustees also concluded that the overall expense ratio of each Portfolio 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
34 | DECEMBER 31, 2009
Table of Contents
the Fund and any expense limitations agreed to 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 Portfolios increase. They noted that, although most Portfolios pay advisory fees at a fixed rate as a percentage of net assets, without any breakpoints, the management fee rate paid by each Portfolio, after any contractual expense limitations, was below the mean management fee rate of the Portfolio’s peer group identified by Lipper; and, for those Portfolios whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Portfolios because they have not reached adequate scale. Moreover, as the assets of many of the Portfolios have declined in the past few years, the Portfolios 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 several Portfolios that have caused or will cause the effective rate of advisory fees payable by such a Portfolio to vary depending on the investment performance of the Portfolio relative to its benchmark index over the measurement period; and a few Portfolios have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Portfolios 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 Portfolios. Based on all of the information they reviewed, the Trustees concluded that the current fee structure of each Portfolio was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Portfolio of economies of scale at the current asset level of the Portfolio.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Portfolios. They recognized that two affiliates of Janus Capital separately serve the Portfolios 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 Portfolios on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Portfolio 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 Portfolio. 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 Portfolio therefor, the Portfolio 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 Portfolios and that the Portfolios 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 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 Portfolios.
After full consideration of the above factors, as well as other factors, the Trustees, each of whom is an Independent Trustee, concluded at their December 11, 2009 meeting that the proposed continuation of the investment advisory agreement and, if applicable, the subadvisory agreement for each Portfolio for another year was in the best interest of the respective Portfolios and their shareholders.
Janus Aspen Series | 35
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited)
Financial Statements (unaudited)
1. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio (from inception) with one or more widely used market indices. The hypothetical example does not represent the returns of any particular investment.
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 also quoted for the Portfolio. 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.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized and unsubsidized ratios for the past fiscal year. 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/or Janus Services and reflects the Portfolio’s subsidized expense ratio. Both the total annual fund operating expenses ratio and net annual fund operating expenses ratio are based on average net assets as of the six-month period ended December 31, 2009. The ratios also include expenses indirectly incurred by the Portfolio as a result of investing in other investment companies or pooled investments, which are not reflected in the “Financial Highlights” of this report. As a result, these ratios may be higher or lower than those shown in the “Financial Highlights” in this report. All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses.
2. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the industry concentrations and 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 in which the company is incorporated. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Bloomberg L.P.
2a. Forward Currency Contracts
A table listing forward currency contracts follows the Portfolio’s Schedule of Investments (if applicable). Forward currency contracts are agreements to deliver or receive a preset amount of currency at a future date. Forward currency contracts are used to hedge against foreign currency risk in the Portfolio’s long-term holdings.
The table provides the name of the foreign currency, the settlement date of the contract, the amount of the contract, the value of the currency in U.S. dollars and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the change in currency exchange rates from the time the contract was opened to the last day of the reporting period.
2b. Futures
A table listing futures contracts follows the Portfolio’s Schedule of Investments (if applicable). Futures contracts are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. Futures are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, the principal amount, value and the amount of unrealized gain or loss. The amount of unrealized gain or loss reflects the marked-to-market amount for the last day of the reporting period.
2c. Options
A table listing written options contracts follows the Portfolio’s Schedule of Investments (if applicable). Written options contracts are contracts that obligate a Portfolio to sell or purchase an underlying security at a fixed price,
36 | DECEMBER 31, 2009
Table of Contents
upon exercise of the option. Options are used to hedge against adverse movements in securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the expiration date, exercise price, value and premiums received.
3. | 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 stocks 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 (assets minus liabilities) by the number of shares outstanding.
4. | Statement of Operations |
This statement details the Portfolio’s income, expenses, gains and losses on securities and currency transactions, and appreciation or depreciation of current Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from stocks 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 increase or decrease in the value of securities held in the Portfolio. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. An 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.
5. | 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, distributions 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 performance. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends in cash, money is taken out of the Portfolio to pay the distribution. If investors reinvest their dividends, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to the “Reinvested dividends and distributions,” you will notice that dividend distributions had little effect on the Portfolio’s net assets. This is because the majority of Janus investors reinvest their distributions.
The reinvestment of dividends is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. “Redemption Fees” (if applicable) refers to the fee paid to the Portfolio for shares held for 90 days or less by a shareholder. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
6. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods. Not only does this table provide you with total return, it also reports total distributions, asset size, expense 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 per share, which comprises dividends and interest income earned on securities held by the Portfolio. Following is the total of gains/(losses),
Janus Aspen Series | 37
Table of Contents
Explanations of Charts, Tables and
Financial Statements (unaudited) (continued)
Financial Statements (unaudited) (continued)
realized and unrealized. Dividends and distributions are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the average annual total return reported the last day of the period. The total return may include adjustments in accordance with generally accepted accounting principles. As a result, the total return may differ from the total return reflected for shareholder transactions.
Also included are the expense ratios, or the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios vary across Portfolios within the Trust for a number of reasons, including the differences in management fees, the frequency of dividend payments and the extent of foreign investments, which entail greater transaction costs.
The Portfolio’s expenses may be reduced through expense-reduction arrangements. These arrangements may include the use of balance credits or transfer agent fee offsets. The Statement of Operations reflects total expenses before any such offset, the amount of the offset and the net expenses. The expense ratios listed in the Financial Highlights reflect total expenses prior to any expense offset (gross expense ratio) and after the expense offsets (net expense ratio). Both expense ratios reflect expenses after waivers (reimbursements), if applicable.
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 a 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, the nature of the Portfolio’s investments and the investment style of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio is turned over in a 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 portfolio is traded every six months.
38 | DECEMBER 31, 2009
Table of Contents
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2009:
Foreign Taxes Paid and Foreign Source Income
Portfolio | Foreign Taxes Paid | Foreign Source Income | ||||||||
Janus Aspen Worldwide Portfolio(1) | $ | 615,120 | $ | 10,825,980 | ||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Worldwide Portfolio(1) | 40% | |||||||||
(1) | Formerly named Janus Aspen Worldwide Growth Portfolio. |
Janus Aspen Series | 39
Table of Contents
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. The retirement age for Trustees is 72. The Trust’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 52 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
TRUSTEES
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Managing Director, Holos Consulting LLC. Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 52 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 4 funds); and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Jerome S. Contro 151 Detroit Street Denver, CO 80206 DOB: 1956 | Trustee | 11/05-Present | General partner of Crosslink Capital, a private investment firm (since 2008). Formerly, partner of Tango Group, a private investment firm (1999-2008). | 52 | None | |||||
John W. McCarter, Jr. 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 6/02-Present | President, Trustee Emeritus, and Chief Executive Officer of The Field Museum of Natural History (Chicago, IL) (since 1996). | 52 | Chairman of the Board and Director of Divergence Inc. (biotechnology firm); Director of W.W. Grainger, Inc. (industrial distributor); Trustee of WTTW (Chicago public television station) and the University of Chicago; Regent, Smithsonian Institution; and Member Board of Governors, Argonne National Laboratory. | |||||
Dennis B. Mullen 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 9/93-Present | Chief Executive Officer of Red Robin Gourmet Burgers, Inc. (since 2005). Formerly, private investor. | 52* | Chairman of the Board (since 2005) and Director of Red Robin Gourmet Burgers, Inc.; and Director of Janus Capital Funds Plc (Dublin-based, non-U.S. funds). |
* Mr. Mullen also serves as director of Janus Capital Funds Plc, consisting of 17 funds. Including Janus Capital Funds Plc and the 52 funds comprising the Janus funds, Mr. Mullen oversees 69 funds.
40 | DECEMBER 31, 2009
Table of Contents
TRUSTEES (continued)
Principal Occupations | Number of Portfolios | |||||||||
Positions Held | Length of | During the Past | in Fund Complex | Other Directorships | ||||||
Name, Address, and Age | with the Trust | Time Served | Five Years | Overseen by Trustee | Held by Trustee | |||||
James T. Rothe 151 Detroit Street Denver, CO 80206 DOB: 1943 | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, LP (SBA SBIC Fund focusing on investment in public equity firms); and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004); and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 52 | Director of Red Robin Gourmet Burgers, Inc. | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Corporate Vice President and General Manager of MKS Instruments -HPS Products, Boulder, CO (a manufacturer of vacuum fittings and valves) and PMFC Division, Andover, MA (manufacturing pressure measurement and flow products). | 52 | None | |||||
Martin H. Waldinger 151 Detroit Street Denver, CO 80206 DOB: 1938 | Trustee | 9/93-Present | Private investor and Consultant to California Planned Unit Developments (since 1994). Formerly, CEO and President of Marwal, Inc. (homeowner association management company). | 52 | None | |||||
Linda S. Wolf 151 Detroit Street Denver, CO 80206 DOB: 1947 | Trustee | 12/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 52 | Director of Wal-Mart, The Field Museum of Natural History (Chicago, IL), Children’s Memorial Hospital (Chicago, IL), Chicago Council on Global Affairs, and InnerWorkings (U.S. provider of print procurement solutions). | |||||
Janus Aspen Series | 41
Table of Contents
Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office*and | Principal Occupations | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | During the Past Five Years | |||
Laurent Saltiel 151 Detroit Street Denver, CO 80206 DOB: 1969 | Executive Vice President and Portfolio Manager Janus Aspen Worldwide Portfolio | 4/09-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. Formerly, Research Analyst (2002-2009) for Janus Capital. | |||
Robin C. Beery 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Executive Vice President, Chief Marketing Officer, and Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc. and Janus Capital; Executive Vice President and Head of Intermediary Distribution, Global Marketing and Product of Janus Distributors LLC and Janus Services LLC; Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, President (2002-2007) and Director (2000-2007) of The Janus Foundation; President (2004-2006) and Vice President and Chief Marketing Officer (2003-2004) of Janus Services LLC; and Senior Vice President (2003-2005) of Janus Capital Group Inc. and Janus Capital. | |||
Stephanie Grauerholz-Lofton 151 Detroit Street Denver, CO 80206 DOB: 1970 | Chief Legal Counsel and Secretary Vice President | 1/06-Present 3/06-Present | Vice President and Assistant General Counsel of Janus Capital, and Vice President and Assistant Secretary of Janus Distributors LLC. Formerly, Assistant Vice President of Janus Capital and Janus Distributors LLC (2006). | |||
David R. Kowalski 151 Detroit Street Denver, CO 80206 DOB: 1957 | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; and Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC. Formerly, Chief Compliance Officer of Bay Isle Financial LLC (2003-2008) and INTECH Investment Management LLC (2003-2005); Vice President of Janus Capital (2000-2005) and Janus Services LLC (2004-2005); and Assistant Vice President of Janus Services LLC (2000-2004). | |||
Jesper Nergaard 151 Detroit Street Denver, CO 80206 DOB: 1962 | Chief Financial Officer Vice President, Treasurer, and Principal Accounting Officer | 3/05-Present 2/05-Present | Vice President of Janus Capital. Formerly, Director of Financial Reporting for OppenheimerFunds, Inc. (2004-2005). |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period.
42 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 43
Table of Contents
Notes
44 | DECEMBER 31, 2009
Table of Contents
Notes
Janus Aspen Series | 45
Table of Contents
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.
Core
Janus core funds seek investments in more stable and predictable companies. These funds look for a strategic combination of steady growth and for certain funds, some degree of income.
Fixed Income
Janus bond 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
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.
Risk-Managed
Our risk-managed 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
Janus value funds invest in companies they believe are poised for a turnaround or are trading at a significant discount to fair value. The goal is to gain unique insight into a company’s true value and identify and evaluate potential catalysts that may unlock shareholder value.
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 or recommending to clients for investment. For a prospectus containing this and other information, please call Janus at 1-877-335-2687 or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
This is for information purposes only. Janus Capital Group Inc., does not guarantee that the information supplied is accurate, complete or timely or make any warranties with regards to the results obtained from its use.
Janus Distributors LLC 151 Detroit Street, Denver, CO 80206 (1/10)
Investment products offered are: NOT FDIC-INSURED MAY LOSE VALUE NO BANK GUARANTEE
C-0110-046 | 2-28-10 109-02-81112 02-10 |
Table of Contents
Item 2 | - | Code of Ethics |
As of the end of the period covered by this Form N-CSR, the Registrant has adopted a Code of Ethics (as defined in Item 2(b) of Form N-CSR), which is posted on the Registrant’s website: janus.com. Registrant intends to post any amendments to, or waivers from (as defined in Item 2 of Form N-CSR), such code on janus.com within five business days following the date of such amendment or waiver.
Item 3 | - | Audit Committee Financial Expert |
Janus Aspen Series’ Board of Trustees has determined that the following members of Janus Aspen Series’ Audit Committee are “audit committee financial experts,” as defined in Item 3 to Form N-CSR: Jerome S. Contro (Chairman), John W. McCarter, Jr. and Dennis B. Mullen who are all “independent” under the standards set forth in Item 3 to Form N-CSR.
Item 4 | - | Principal Accountant Fees and Services |
The following table shows the amount of fees that PricewaterhouseCoopers LLP (“Auditor”), Janus Aspen Series’ (the “Fund”) auditor, billed to the Fund during the Fund’s last two fiscal years. For the reporting periods, the Audit Committee approved in advance all audit services and non-audit services that Auditor provided to the Fund, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the “pre-approval exception”). The pre-approval exception for services provided directly to the Fund waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by the Fund to Auditor during the fiscal year in which the services are provided; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before the audit is completed.
Services that the Fund’s Auditor Billed to the Fund
Fiscal Year Ended | Audit Fees | Audit-Related | Tax Fees | All Other Fees | ||||||||||||
December 31 | Billed to Fund | Fees Billed to Fund | Billed to Fund | Billed to Fund | ||||||||||||
2009 | $ | 492,250 | $ | 0 | $ | 87,050 | $ | 0 | ||||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
2008 | $ | 363,463 | $ | 0 | $ | 81,875 | $ | 0 | ||||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
The above “Audit Fees” were billed for amounts related to the audit of the Fund’s financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. The above “Tax Fees” were billed for amounts related to tax compliance, tax planning, tax advice, and corporate actions review.
Table of Contents
Services that the Fund’s Auditor Billed to the Adviser
and Affiliated Fund Service Providers
and Affiliated Fund Service Providers
The following table shows the amount of fees billed by Auditor to Janus Capital Management LLC (the “Adviser”), and any entity controlling, controlled by or under common control with the Adviser (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
The table also shows the percentage of fees, if any, subject to the pre-approval exception. The pre-approval exception for services provided to Adviser and any Affiliated Fund Service Provider (other than audit, review or attest services) waives the pre-approval requirement if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid to Auditor by the Fund, the Adviser and Affiliated Fund Service Providers during the fiscal year in which the services are provided that would have to be pre-approved by the Audit Committee; (B) the Fund did not recognize the services as non-audit at the time of the engagement; and (C) the services are promptly brought to the Audit Committee’s attention, and the Committee (or its delegate) approves the services before the Fund’s audit is completed.
Audit-Related | All Other Fees | |||||||||||
Fees Billed to | Tax Fees Billed to | Billed to Adviser | ||||||||||
Adviser and | Adviser and | and Affiliated | ||||||||||
Fiscal Year Ended | Affiliated Fund | Affiliated Fund | Fund Service | |||||||||
December 31 | Service Providers | Service Providers | Providers | |||||||||
2009 | $ | 413,937 | $ | 0 | $ | 0 | ||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % | ||||||
2008 | $ | 339,818 | $ | 0 | $ | 0 | ||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % |
Table of Contents
The above “Audit-Related Fees” were billed for amounts related to semi-annual financial statement disclosure review and internal control examination.
Non-Audit Services
The following table shows the amount of fees that Auditor billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee is required to pre-approve non-audit services that Auditor provides to the Adviser and any Affiliated Fund Service Provider, if the engagement relates directly to the Fund’s operations and financial reporting (except for those subject to the pre-approval exception described above). The Audit Committee requested and received information from Auditor about any non-audit services that Auditor rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating Auditor’s independence.
Total Non-Audit Fees | ||||||||||||||||
billed to Adviser and | ||||||||||||||||
Affiliated Fund Service | Total Non-Audit | |||||||||||||||
Providers (engagements | Fees billed to | |||||||||||||||
related directly to the | Adviser and | |||||||||||||||
Total | operations and | Affiliated Fund | ||||||||||||||
Non-Audit Fees | financial reporting of | Service Providers | ||||||||||||||
Fiscal Year Ended | Billed to the Fund | the Fund) | (all other engagements) | Total of (A), (B) | ||||||||||||
December 31 | (A) | (B) | (C) | and (C)1 | ||||||||||||
2009 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
2008 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
1. | The Audit Committee also considered amounts billed by Auditor to all other Control Affiliates in evaluating Auditor’s independence. |
Table of Contents
Pre-Approval Policies
The Fund’s Audit Committee Charter requires the Fund’s Audit Committee to pre-approve any engagement of Auditor (i) to provide Audit or Non-Audit Services to the Fund or (ii) to provide non-audit services to Adviser or any Affiliated Fund Service Provider, if the engagement relates directly to the operations and financial reporting of the Fund, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X. The Chairman of the Audit Committee or, if the Chairman is unavailable, another member of the Audit Committee who is an independent Trustee, may grant the pre-approval. All such delegated pre- approvals must be presented to the Audit Committee no later than the next Audit Committee meeting.
Item 5 | - | Audit Committee of Listed Registrants |
Not applicable.
Item 6 | - | Investments |
(a) | Please see Schedule of Investments contained in the Reports to Shareholders included under Item 1 of this Form N-CSR. | ||
(b) | Using credible information that is available to the public, the Funds have not divested from any securities of any issuers that conduct or have direct investments in certain business operations in Sudan. |
Item 7 | - | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
Not applicable.
Item 8 | - | Portfolio Managers of Closed-End Management Investment Companies |
Not applicable.
Item 9 | - | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers |
Not applicable.
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 was no change in the Registrant’s internal control over financial reporting during Registrant’s second fiscal quarter of |
Table of Contents
the period covered by this report that has materially affected, or is 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 by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached as Ex99.CERT. | ||
(a)(3) | Not applicable to open-end companies | ||
(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. The certification furnished pursuant to this paragraph is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. |
Signatures
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.
Janus Aspen Series | ||||
By: | /s/ Robin C. Beery | |||
Robin C. Beery, | ||||
President and Chief Executive Officer of Janus Aspen Series (Principal Executive Officer) | ||||
Date: February 26, 2010
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.
By: | /s/ Robin C. Beery | |||
Robin C. Beery, | ||||
President and Chief Executive Officer of Janus Aspen Series (Principal Executive Officer) | ||||
Date: February 26, 2010
By: | /s/ Jesper Nergaard | |||
Jesper Nergaard, | ||||
Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer of Janus Aspen Series (Principal Accounting Officer and Principal Financial Officer) | ||||
Date: February 26, 2010